A federal judge, Victor Marrero, ruled Wednesday that NBA Top Shot non-fungible tokens (NFTs) issued by Dapper Labs can meet the requirements to be considered an unregistered security. The case arose in 2021 when an NBA Top Shot collector sued Dapper Labs, claiming that the NBA Top Shot NFTs, known as “Moments” issued via the Flow blockchain, are securities.
The judge’s ruling allows the Friel v. Dapper Labs case to proceed
United States District Court Judge Victor Marrero agreed with the plaintiffs who filed a lawsuit against Dapper Labs on February 22, 2023, noting that NBA Top Shot NFTs may likely be unregistered securities in the eyes of the law. On May 13, 2021, Jeeun Friel sued Dapper Labs for selling Top Shot NFTs without registering with the US Securities and Exchange Commission (SEC). Dapper Labs tried to get the court to dismiss the case, but Marrero rejected the company’s motion.
Marrero’s ruling simply allows the case to proceed based on the judge’s opinion that NBA Top Shot NFTs can be considered a security. Marrero said the ruling does not apply to the sale and distribution of FLOW, the Flow blockchain’s native crypto-asset. However, the Howey test was applied to the NBA Top Shot “Moments” NFTs, and the Howey analysis is what supports the referee’s decision.
“Although the literal word ‘profit’ is not included in any of the tweets, the ‘rocket ship’ emoji, ‘stock chart’ emoji and ‘money bags’ emoji objectively mean one thing: a financial return on investment,” Marrero said in the lawsuit .” The court is convinced that Dapper Labs’ plan to sell Moments plausibly reflects horizontal community by being “intertwined with interest in Dapper Labs,” its nascent new blockchain, and the token that “rules it all.”
Dapper Labs Responds to Judge Marrero’s Ruling on NBA Top Shot NFTs
On Wednesday, Dapper Labs commented about the lawsuit and the judge’s recent decision. “Today’s ruling in the Friel v. Dapper Labs case — which the court described as a ‘close call’ — merely denied our motion to dismiss the complaint at the pleadings stage,” the company said on Twitter.
“The judge did not conclude that the plaintiffs were right, and it is not a final decision on the merits of the case. Courts have repeatedly held that consumer goods — including art and collectibles such as basketball cards — are not “securities” under federal law. We’re sure the same is true for moments and other collectibles, digital or otherwise,” Dapper Labs added.
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Art, basketball cards, collectibles, consumer goods, Dapper Labs, Dapper Labs’ scheme, Digital, dismissal, federal judge, final decision, financial return, Flow blockchain, Friel v. Dapper Labs, horizontal community, Howey Test, investment, Jeeun Friel, Lawsuit , merits , moments , NBA Top Shot , NBA Top Shot collector , NFT Market , NFTs , non-fungible tokens , complaint stage , SEC , Securities , USSecurities and Exchange Commission , unregistered security , Victor Marrero
What do you think the implications of this ruling could be for the NFT market as a whole? Let us know what you think about this topic in the comments section below.
Jamie Redman
Jamie Redman is the news editor at Bitcoin.com News and a financial technology journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.
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