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Dapper Labs Settles Class Action Lawsuit Over NBA Top Shot
Dapper Labs, the company behind NBA Top Shot and other popular on-chain collectibles, has reached a settlement in a long-standing class action lawsuit with dissatisfied customers. The customers argued that Top Shot NFTs were illegally offered securities, according to court filings revealed on Monday.
As part of the settlement, Dapper Labs will pay out $4 million to the plaintiffs. This sum includes monetary relief for the claims made by the plaintiffs and will also cover legal fees associated with the case.
If the settlement is approved, the plaintiffs will forfeit any future right to claim that Top Shot NFTs are securities. This agreement aims to provide legal clarity and allow Dapper Labs to focus on its primary goal of delivering exceptional experiences to its users, stated the company’s CEO, Roham Gharegozlou.
Legal Background and Implications
Previously, in a significant ruling last February, a federal judge allowed the lawsuit to proceed, noting that Top Shot NFTs could plausibly be considered a securities offering. The judge’s decision was influenced by the fact that Top Shot NFTs are hosted on the Flow blockchain, developed by Dapper Labs. The judge categorized Flow as a “private” blockchain, unlike decentralized networks such as Bitcoin or Ethereum.
Furthermore, the judge highlighted statements from Dapper and its representatives suggesting that the collectibles would appreciate in value over time. Despite this, Gharegozlou has maintained that Flow is decentralized and not controlled by Dapper, as it is overseen by the independent Flow Foundation.
Terms of the Settlement
As part of the settlement, the plaintiffs demanded certain changes at Dapper Labs, which the company has agreed to implement. These changes include Dapper relinquishing any FLOW tokens in its possession allocated for the Ecosystem Reserve to the Flow Foundation.
Other demands, such as allowing third-party marketplaces to transact Top Shot NFTs and processing withdrawals more promptly, had already been addressed by the company in previous years.
The lawsuit, initiated in 2021 during the peak of the digital asset boom, was one of the first challenges to the security status of NFTs. While various segments of the crypto token market have faced scrutiny from American regulators, NFTs have largely avoided widespread classification as securities.
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