Dapper Labs, the company behind NBA Overhand Shot and other important collectibles on chain, settled a year-long class action lawsuit trial with unhappy customers who claimed that Top Shot NFT made up of illegally offered securities, court documents revealed Monday.
As part of the settlement, Dapper will pay $4 million to the plaintiffs, company CEO Roham Gharegozlou said. Decrypt. These funds include monetary relief for plaintiffs’ claims and will also cover legal costs.
In exchange, if the settlement is approved, the plaintiffs will lose any future rights to claim that Top Shot NFTs are securities, according to Gharegozlou.
“The settlement provides legal clarity and allows the Dapper Labs team to focus on its core mission: delivering unparalleled experiences to its core users,” the executive said.
Last February, a federal judge governed– representing a major setback for Dapper – that the lawsuit could proceed, given that the Top Shot NFTs “plausibly” met the definition of a securities offering.
Key to the judge’s conclusion was the fact that Top Shot NFTs live on To flow, a blockchain network initially developed by Dapper. The judge considered Flow to be a “private” blockchain, unlike networks like Bitcoin Or Ethereumwhich are not controlled by any entity.
Additionally, the judge found that statements made by Dapper and its representatives, including Gharegozlou, implied that the value of collectibles would increase over time.
The company insisted in the past— and Gharegozlou argued today — that Flow is sufficiently decentralized and not under Dapper’s control, given that the network is maintained by the independent Flow Foundation.
The Dapper co-founder added, however, that the class-action plaintiffs were demanding “certain business changes” within the company as a condition of the settlement. These requests, which were accepted by Dapper, include the company relinquishing all FLOW tokens in its possession allocated to the ecosystem reserve to the Flow Foundation.
Other demands, such as that third-party marketplaces other than Dapper be allowed to conduct Top Shot NFT transactions and that the company process withdrawals faster, were already met years ago.
When the complaint was first filed in 2021— the height of the digital asset boom — this marked one of the first tests of the security status of NFTs. Since then, large swathes of the fungible crypto token market have fall under fire by American regulators.
Except sporadic circumstances featuring special factsNFTs appear to have – at least for now – avoided such asset class-wide repudiation.
Edited by Andrew Hayward. This article has been updated to clarify the plaintiffs’ requests.
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