Victor Marreo, the judge handling Dapper Lab’s NBA Top Shot class action lawsuit, has said that its NFTs might be securities. The ruling happened on Wednesday as the judge denied a motion from Roham Gharegozlou, Dapper Labs CEO to dismiss the lawsuit claiming the NFTs were not securities.
By denying the motion, the judge allowed the case to proceed, and now Dapper Labs has 21 days to respond to the court’s decision. To make the decision, the judge reviewed the Howey Test, a method used by the SEC to determine whether a transaction qualifies as an “investment contract” or not. If the NFTs qualified as investment contracts, then they can be classed as securities.
Court filings note that; “ultimately, the Court’s conclusion that what Dapper Labs offered was an investment contract under Howey is narrow. Not all NFTs offered or sold by any company will constitute security, and each scheme must be assessed on a case-by-case basis.”
However, “the particular scheme by which Dapper Labs offers Moments that creates the sufficient legal relationship between investors and promoter to establish an investment contract, and this is a security, under Howey,” influenced the judge’s decision.
The Ruling Doesn’t Declare NBA Top Shot NFTs As Securities
Despite the ruling, it doesn’t mean NBA Top Shot NFTs are securities. At least that is the opinion of Jake Chervinsky, a US attorney. In a tweet, he notes the judge didn’t declare the NFTs to be securities or not:
This is false.
The judge didn’t decide anything. He allowed the case to proceed past a motion to dismiss because the securities claims were at least “plausible,” an extremely low bar and not a final ruling at all.
Do I really have to say “basketball cards are not securities”??? https://t.co/W1yYVcW1Ki
— Jake Chervinsky (@jchervinsky) February 22, 2023
He goes on to add, “This dispute aside, it would be absurd if all valuable digital assets stored on centralized databases were securities.”
This class action lawsuit against Dapper Labs was filed in May 2021 by plaintiff Jeeun Friel, who accused the company of selling NFTs as unregistered securities.
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Basil is an avid fan of blockchain technology and all its innovations, and he is passionate about sharing this narrative with his audience. He has spent over five years in the crypto space, specializing in research and creating Web3 content for various media outlets around the globe.