Dapper Labs has reached a $4 million settlement to end a class-action lawsuit against the company, confirming that NBA Top Shot non-fungible tokens (NFTs) are not securities. CEO Roham Gharegozlou announced this.
Settlement has been reached
A June 3 New York court document shows that Dapper Labs has reached a settlement with a group of investors who sued the company in 2021. The investors alleged that Dapper Labs sold unregistered securities through its NBA Top Shot Moments NFTs.
In a June 4 statement, Gharegozlou emphasized that the legal findings in the case showed that the NFTs were on “a decentralized public network,” making them “not securities in the same way that trading cards are not.”
“These were the main allegations we wanted to refute. Continuing with the lawsuit would have been a distraction from our core mission,” he added.
Under the settlement agreement, Dapper Labs is willing to pay $4 million if the plaintiffs, led by Jeeun Friel, agree to stop claiming the NFTs were securities.
Business changes are also being implemented
Dapper Labs will also be making business changes to ensure the Flow blockchain is sufficiently decentralized and outside of their control. This involves transferring the remaining Flow tokens they own to the Flow Foundation.
In addition, the company will implement a mandatory annual employee training program covering federal securities laws.
The settlement must still be approved by District Judge Victor Marrero. In February 2023, he denied Dapper’s request to dismiss the case after ruling that the NFTs could be considered securities under the Howey test, a legal framework for classifying securities.
Class-action lawsuit has been ongoing since 2021
Dapper Labs faced the class-action lawsuit in 2021 that argued the NBA NFTs were securities because their value would increase with the project’s popularity.
Dapper’s lawyers denied this claim, comparing the NFTs to trading cards such as baseball or Pokémon cards.
The investors also alleged that Dapper prevented them from selling the NFTs on other marketplaces. According to the latest settlement agreement, Dapper Labs stopped doing this in March 2022 by allowing other marketplaces to trade the tokens.
Source: https://newsbit.nl/dapper-labs-betaalt-4-miljoen-schikking-en-bevestigt-nba-top-shot-nfts-zijn-geen-effecten/
