NFTs
Dapper Labs Reaches $4 Million Settlement in NBA Top Shot NFT Lawsuit
Dapper Labs, the company behind Best shot in the NBA and other prominent collectibles from the chain, settled a year-long class action lawsuit lawsuit with dissatisfied customers who argued that Top Shot NFTs constituted securities offered illegally, court documents revealed on Monday.
As part of the settlement, Dapper will pay $4 million to plaintiffs in the lawsuit, said company CEO Roham Gharegozlou. Decrypt. These funds include monetary relief for plaintiffs’ claims and will also cover attorneys’ fees.
In exchange, if the settlement is approved, the plaintiffs will lose any future right to claim that Top Shot NFTs are securities, according to Gharegozlou.
“The agreement provides legal clarity and frees the Dapper Labs team to focus on its core mission – delivering unparalleled experiences to its core users,” the executive said.
Last February, a federal judge ruled— in a major setback for Dapper — that the lawsuit could proceed given that Top Shot NFTs “plausibly” met the definition of a securities offering.
Key to the judge’s conclusion was the fact that Top Shot NFTs live Flow, a blockchain network originally developed by Dapper. The judge considered Flow a “private” blockchain, in contrast to networks like Bitcoin or Ethereumthat are not controlled by any entity.
Furthermore, the judge found that statements made by Dapper and its representatives, including Gharegozlou, implied that the value of collectibles would increase over time.
The company insisted on the past—and Gharegozlou stated today—that Flow is sufficiently decentralized and not under the control of Dapper, as the network is maintained by the independent Flow Foundation.
The Dapper co-founder added, however, that the class action plaintiffs demanded “certain business changes” from the company as a condition of the settlement. These demands, which have been accepted by Dapper, include the company relinquishing any FLOW tokens in its possession to the Flow Foundation.
Other demands, such as that third-party marketplaces besides Dapper be allowed to transact Top Shot NFTs and that the company process withdrawals in a more timely manner, were already resolved years ago.
When the lawsuit was first filed in 2021—the height of the digital asset boom—marked one of the first tests of the security status of NFTs. Since then, large swaths of the crypto fungible token market come under fire by American regulators.
Except in sporadic circumstances that characterize private factsNFTs appear to have – at least for now – avoided this asset class-wide repudiation.
Edited by Andrew Hayward