Nfts
Dapper Labs Reaches Settlement in NFT Securities Lawsuit
Dapper Labs has reached a tentative settlement with a group of investors who sued the non-fungible token (NFT) company and its co-founder and CEO Roham Gharegozlou for allegedly violating federal securities laws.
The settlement, if approved by Judge Victor Marrero of the Southern District of New York (SDNY), will end a legal battle that lasted nearly three years.
In 2021, the class action plaintiffs accused Dapper Laboratories flagship product, NBA Top Shot Moments, from being unregistered titles. They argued that the value of NFTs would increase with the overall popularity of the project and claimed that Dapper Labs was preventing investors from cashing out for long periods of time, thereby keeping the value locked to the platform. At the time, Moments could not be bought or sold on external NFT platforms.
Dapper Labs’ lawyers have consistently denied that their NFTs are securities, comparing them to digital basketball cards. The settlement agreement would prohibit the plaintiffs from asserting that their NFTs are securities in exchange for a $4 million settlement fund. This fund will cover payments to class members, attorneys’ fees, and settlement administration costs.
According to Gharegozlou, Dapper Labs also agreed to implement several business changes, including mandatory employee training on compliance with federal securities laws and ethical marketing practices, as well as increasing payment terms and withdrawal. Additionally, the company has agreed to transfer control of its remaining assets. FLOW Tokens to the Flow Foundation to ensure the decentralization of the Flow ecosystem.
Although the settlement was reached with investors and not regulators, Gharegozlou described the agreement as a positive step toward greater legal clarity regarding the classification of NFTs. “We continue to push for clearer regulation to show that consumer NFTs are not financial products and should be regulated under well-established consumer protection regimes at the state level,” he said. -he declares. Gharegozlou also mentioned ongoing efforts to advocate for federal legislation that clearly exempts consumer product NFTs, such as NBA Top Shot, from federal financial regulation.
Gharegozlou added that the company is unaware of any regulators, including the United States Securities and Exchange Commission (SECOND), asserting that NFT Moments are securities. Fortune reported in April that the SEC had investigated Dapper Labs but closed the investigation in September 2023.