According to a lawsuit filed in 2021 against Dapper Labs, the creator of NBA Top Shot, the NFT moments may be unregistered securities, a claim that seems to have gained support from the judge.
Dapper’s attempt to dismiss the lawsuit was rejected by United States District Court Judge Victor Marrero, who stated that the NFTs available on Dapper’s platform seem to meet the criteria for a security.
By applying the Howey Test, a significant US Supreme Court case, Marrero concluded in his ruling that NBA Top Shot NFT collectibles on Dapper’s platform possibly fulfill the requirements of a security. Consequently, the lawsuit against Dapper Labs will proceed.
In response to the ruling, Dapper Labs issued a statement to Decrypt, stating that the decision only rejected their attempt to dismiss the lawsuit and did not confirm the plaintiffs’ claims or provide a final verdict on the case’s substance, according to a spokesperson.
Dapper Labs’ statement asserts that federal law has frequently established that items purchased for personal consumption, such as collectibles like basketball cards or artwork, are not considered securities by the courts. The company is optimistic that the same principle applies to digital collectibles like NBA Top Shot moments and plans to defend its stance in court vigorously.
The judge’s decision implies that the plaintiff’s assertions are plausible, as he characterizes the Flow blockchain, which underpins Top Shot and other NFT projects and platforms, as a “private” network, distinct from public blockchains such as Bitcoin.