Dapper Labs, the company behind NBA Top Shot and other prominent collectibles in the chain, has settled a years-long class action court case with disgruntled customers claiming Top Shot NFTs constituted illegally offered securities, court documents revealed Monday.
As part of the settlement, Dapper will pay out $4 million to the lawsuit’s plaintiffs, the company’s CEO Roham Gharegozlou said. Declutter. These funds include financial compensation for the plaintiffs’ claims, and will also cover legal costs.
If the settlement is approved, the plaintiffs will in return lose any future right to claim that Top Shot NFTs are securities, Gharegozlou said.
“The settlement provides legal clarity and frees the Dapper Labs team to focus on its core mission: delivering unparalleled experiences for its core users,” he said.
Last February, a federal judge arrived ruled— a major setback for Dapper — that the lawsuit could proceed as 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 on Current, a blockchain network originally developed by Dapper. The judge considered Flow a “private” blockchain, unlike networks like Bitcoin or Ethereum, which are not controlled by a single entity.
Furthermore, the judge found that statements made by Dapper and its representatives, including Gharegozlou, had suggested that the collectibles would increase in value over time.
The company has insisted in the past — and Gharegozlou maintains today — that Flow is sufficiently decentralized and not under Dapper’s control, as the network is maintained by the independent Flow Foundation.
However, the Dapper co-founder added that the class action lawsuit plaintiffs were demanding “certain business changes” at the company as a condition of the settlement. These demands, which have been accepted by Dapper, include relinquishing all FLOW tokens in the company’s possession to the Flow Foundation.
Other demands, such as that third-party marketplaces besides Dapper be allowed to handle Top Shot NFTs and that the company process withdrawals in a more timely manner, were addressed years ago.
When the lawsuit was first filed in 2021– the heyday of the digital asset boom – it was one of the first tests of the security status of NFTs. Since then, large parts of the crypto-fungible token market have changed come under fire by US regulators.
Unless sporadic circumstances arise special factsNFTs appear to have avoided – at least for now – such an industry-wide rejection of asset classes.