NBA Top Shot creator Dapper Labs has finally settled the class action lawsuit, agreeing to pay $4 million.
Disgruntled consumers alleged that Top Shot NFTs were unlawful securities, leading Dapper Labs to agree to pay $4 million to the plaintiffs for their damages and incurred costs, as stated in Monday’s court filings.
Roham Gharegozlou, the CEO of Dapper, said that with the settlement, anyone wanting to claim that Top Shot NFTs are securities will be barred once the settlement is approved. This legal certainty is important and enables Dapper Labs to concentrate on creating great experiences for the users.
It was a major blow to the lawsuit last February when a federal judge permitted the case to go forward. The judge also analyzed Top Shot NFTs as potentially qualifying as securities because they are on the Flow blockchain by Dapper Labs.
The judge also pointed out that Flow was a “private” blockchain, not like Bitcoin or Ethereum, which caused doubts in control and implied value growth statements of Dapper.
Despite Dapper’s portrayal of Flow as decentralized, the settlement includes demands for business adjustments, such as transferring FLOW tokens for the Ecosystem Reserve to the Flow Foundation, enabling third-party marketplaces for Top Shot NFTs, and enhancing withdrawal handling.
This case started in 2021 when the digital asset market was booming, and the legal status of NFTs was questioned. Unlike other digital tokens, NFTs have not received the same level of rejection as securities in most cases, despite regulatory crackdowns.
There was an agreement that the Flow blockchain operates like a public, decentralized network. This means digital collectibles sold on this network, such as NBA Top Shot moments, wouldn’t be classified as securities in the same way trading cards aren’t considered securities.
Gharegozlou said, “These were the main allegations we wanted to prove, and continuing to litigate would have been a distraction from our core mission.”
Altogether, the settlement by Dapper Labs removes legal questions about NBA Top Shot NFTs, enabling the firm to shift its attention to improving the experience of its users. It also captures current and emerging regulatory concerns and shifts in practice observed within the crypto asset industry.
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