Dapper Labs, the company behind NBA Top Shot and other popular on-chain collectibles, has settled a years-long class action lawsuit. lawsuit Court documents were released Monday with disgruntled customers claiming Top Shot NFTs constitute illegally offered securities.
As part of the settlement, Dapper will pay $4 million to the plaintiffs in the lawsuit, company CEO Roham Gharegozlou said. decryption. The funds will include monetary relief for plaintiffs’ claims and will also cover legal costs.
In return, if the settlement is approved, the plaintiffs will lose any future rights to claim that Top Shot NFTs are securities, per Gharegozlou.
“This agreement provides legal clarity and allows the Dapper Labs team to focus on its core mission, providing an unparalleled experience for our core users,” executives said.
Last February, a federal judge rule—a major setback for Dapper—and given that Top Shot NFTs “obviously” met the definition of a securities offering, allowing the lawsuit to proceed.
The key to the judge’s ruling was that Top Shot NFTs would continue to exist. flow, a blockchain network originally developed by Dapper. The judge deemed Flow a “private” blockchain, unlike networks like Bitcoin or Ethereum that are not controlled by any one entity.
The judge also determined that statements by Dapper and its representatives, including Gharegozlou, implied that the value of the collectibles would increase over time.
The company has argued in the past that Flow is sufficiently decentralized and not controlled by Dapper, given that the network is maintained by the independent Flow Foundation, and Gharegozlou has now insisted on this.
But the Dapper co-founder added that plaintiffs in the class action lawsuit had demanded “certain business changes” from the company as conditions of the settlement. These demands, accepted by Dapper, include the company transferring all FLOW tokens allocated in the Ecosystem Reserve to the Flow Foundation.
Other requirements, such as allowing Top Shot NFTs to be traded on third-party marketplaces other than Dapper and requiring the company to process withdrawals in a more timely manner, were already addressed years ago.
When the lawsuit was first filed in 2021—the heyday of the digital asset boom—was one of the first tests of the security posture of NFTs. Since then, the cryptocurrency fungible token market has grown tremendously. burn by U.S. regulators.
Except in sporadic situations special factsNFTs appear to have avoided such asset class-wide rejection, at least for now.
Edited by Andrew Hayward. This article has been updated to clarify the plaintiff’s claims.
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