Dapper Labs, the company behind NBA Top Shot, has reached a $4 million settlement in a class action lawsuit. The lawsuit was filed in 2021 and claimed that Top Shot NFTs were unregistered securities.
Quick Take
- Dapper Labs settles a $4 million class action lawsuit.
- The settlement resolves claims that Top Shot NFTs were securities.
- Dapper will relinquish control of FLOW tokens.
- Changes include allowing third-party marketplaces and improving withdrawal processes.
According to the court filing, the $4 million settlement will cover monetary relief for plaintiffs and legal fees. In return, the plaintiffs will forfeit any future claims that Top Shot NFTs are securities. This resolution provides legal clarity for Dapper Labs. It will allow the company to focus on its mission of enhancing user experiences.
The lawsuit gained momentum last February when a federal judge ruled that the case could proceed. The judge found that Top Shot NFTs “plausibly” met the definition of a securities offering, primarily because they live on Flow, a blockchain developed by Dapper Labs.
Unlike decentralized networks like Bitcoin and Ethereum, Flow was deemed a “private” blockchain by Dapper. The CEO of Dapper Labs, Roham Gharegozlou stated
“The settlement provides legal clarity and frees the Dapper Labs team up to focus on its core mission, delivering unparalleled experiences for its core users.”
He suggested that the collectibles would increase in value over time. Therefore, this also influenced the judge’s decision. Despite these setbacks, Dapper Labs maintained that Flow is decentralized, and managed by the independent Flow Foundation.
As part of the settlement, Dapper Labs agreed to several business changes. Now, top Shot NFTs can be transacted on third-party marketplaces after relinquishing control to the Flow Foundation. Moreover, the company committed to processing withdrawals and previous complaints more promptly.
The Impact of Dapper Labs’ Settlement on the NFT Market
This settlement comes at a time when the NFT market is under scrutiny by regulators. The lawsuit against Dapper Labs was one of the first significant legal tests of the security status of NFTs.
Since then, numerous aspects of the crypto market have faced regulatory challenges. However, NFTs have avoided widespread classification as securities. The resolution of this case may set a precedent for how similar cases are handled in the future.
This case highlights the need for clear guidelines and regulatory frameworks in the NFT space. For Dapper Labs, this settlement allows them to move forward without the dark cloud of legal uncertainties. The company can now concentrate on expanding its NFT offerings and improving user experiences.
Dapper Labs aims to maintain trust and transparency within its community by addressing the plaintiffs’ demands and making necessary changes. This case resolves a critical legal challenge and provides clarity for future developments.
