Federal Judge Victor Marrero ruled on Wednesday that NBA Top Shot non-fungible tokens (NFTs) issued by Dapper Labs may meet the requirements for being considered unregistered securities. The court ruled that the NFTs may meet the requirements to be considered unregistered securities. The lawsuit arose in 2021 when an NBA Top Shot collector sued Dapper Labs, alleging that the NBA Top Shot NFTs, called “moments,” issued via the Flow blockchain were securities.
The judge’s ruling permits the case of Friel v. Dapper Labs to continue
U.S. District Court Judge Victor Marrero agreed with the plaintiffs who filed suit against Dapper Labs on February 22, 2023, noting that the NBA Top Shot NFT could plausibly be an unregistered security in terms of law. on May 13, 2021. Jeeun Friel sued Dapper Labs for selling Top Shot NFTs without registering them with the SEC; Dapper Labs attempted to have the court dismiss the case, but Marrero denied its motion.
Marrero’s ruling allows the lawsuit to continue simply based on the judge’s opinion that the NBA Top Shot NFT could be considered a security; Marrero ruled that the sale and distribution of FLOW, the native crypto asset of the Flow blockchain, would not be subject to the states that this ruling does not apply. However, the Howey Test applies to the NBA Top Shot “Moments” NFTs, and the Howey analysis supports the judge’s decision.
“While the literal word ‘profit’ is not included in any of the tweets, the ‘rocket ship’ emoji, the ‘stock chart’ emoji, and the ‘money bag’ emoji objectively mean one thing: a financial return on an investment,” Marrero said in his court filing ” The court is persuaded that Dapper Labs’ plan to sell moments “plausibly reflects horizontal commonality by being intertwined with Dapper Labs, its burgeoning new blockchain, and its interest in the ‘move everything’ token.”
Dapper Labs Responds to Judge Marrero’s Ruling on NBA Top Shot NFT
On Wednesday, Dapper Labscommentedon the lawsuit and the judge’s recent decision.” Today’s order in the Friel v. Dapper Labs case – which the court said was a “close call” – only denied our motion to dismiss the complaint at the pleading stage of the case, the company said on Twitter.
“The judge did not conclude that the plaintiffs were correct and did not make a final ruling on the merits of the case. Courts have repeatedly held that consumer goods, including art and collectibles like basketball cards, are not “securities” under federal law. We believe the same applies to moments and other collectibles (digital or otherwise),” Dapper Labs added.
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