US judge dismisses Dapper Labs’ NBA Top Shot NFT lawsuit
A US district judge has rejected Dapper Lab’s motion to dismiss a lawsuit against it. The lawsuit concerns NBA Top Shot NFTs and claims that the latter is a security.
The NBA Top Shot NFTs, one of the more popular collectibles on the market, may face some legal issues as a judge in the United States believes it may fail the Howey test. US District Judge Victor Marrero denied a motion to dismiss a lawsuit against Dapper Labs, which alleged that NBA Top Shot NFTs are securities.
In a nutshell, the court document says the claim that NBA Top Shot NFTs could be a security is “plausible.” The court document describes the idea clearly, saying,
“Nevertheless, given the purposive nature of Howey, the Court finds that Plaintiffs’ allegations make each consideration under Howey facially plausible and survive Defendants’ motion to dismiss the alleged violation of Sections 5 and 12 of the Securities Act.”
It does not say that they are actually securities, but that the argument is worth pursuing. It also makes no statement as to whether NFTs are securities in general. As such, there doesn’t seem to be much to worry about just yet.
Lawsuits will move forward
Commenting on the denial of the motion, Dapper Labs said the judge denied the motion. The studio emphasized that the judge did not say the plaintiffs were right. It pointed to other collectibles, such as baseball cards, that are not considered securities.
With the motion denied, the lawsuit will continue. From this point on, the case will become more interesting and perhaps have consequences for the NFT market. The question of whether crypto-assets are securities is a significant concern of the community. It will be the subject of many discussions this year.
NBA Top Shot NFT’s ‘plausibly’ a certainty, according to judge
The Howey test determines whether a financial instrument is a security by running it through four checks. These determine whether it is an investment contract. The controls themselves are whether it is an investment of money, in a joint enterprise, has an expectation of profit, and is derived from the efforts of others.
The judge stated that the promotion of NBA Top Shot NFTs could probably meet these criteria. He noted that the word profit was not used, but that emojis such as rocket ships and money bags effectively did the same.
In other words, the NFT collection straddled the line between a normal NFT collection and an investment contract – at least this is what the court case says. The court proceedings will provide further information about the nature of the case and legal interpretation.
Disclaimer
BeInCrypto has reached out to the company or person involved in the story for an official statement on the latest development, but has yet to hear back.
