The chief legal officer of the Blockchain Association says it “would be absurd” for a court in the United States to rule that digital assets on private blockchains are securities, following a federal judge’s decision to allow a lawsuit against The best NBA Dapper Labs NFT shots in play.
US Attorney Jake Chervinsky spoke out after federal judge Victor Marreo denied a motion to dismiss a 2021 lawsuit that accused Dapper Labs of selling non-fungible tokens (NFTs) as unregistered securities.
Chervinsky was one of many attorneys on Twitter who reiterated that the judge’s denial of the motion did not mean the lawsuit had been ruled on, only that it was “facially credible.”
“The judge hasn’t decided anything.” He allowed the case to proceed through the motion to dismiss because the securities claims were at least ‘plausible,’ an extremely low bar and not at all a final decision,” he explained.
“This dispute aside, it would be absurd if all valuable digital assets stored in centralized databases were securities.”
“This would make every major video game developer, ticketing platform, travel rewards program, etc. a public reporting company regulated by the SEC,” he explained.
It is not true.
The judge didn’t decide anything. He allowed the case to proceed through the motion to dismiss because the securities claims were at least “plausible,” an extremely low bar and not a final decision at all.
Do I really have to say “basketball cards are not securities”??? https://t.co/W1yYVcW1Ki
— Jake Chervinsky (@jchervinsky) February 22, 2023
Another US attorney, Jesse Hynes, did too weighed to the motion in a Feb. 22 Twitter post, saying that motions to dismiss are “rarely successful” because the plaintiff only needs to present enough evidence for the case to proceed.
“The judge ruled in the Dapper case that the plaintiff presented sufficient evidence that IF ALL THE ALLEGATIONS ARE TRUE, a securities violation has occurred.”
“We will now go into discovery to find out what the real facts are. Once that is done, Dapper will likely file a motion for summary judgment,” the lawyer added.
Meanwhile, another US attorney, James Murphy – known as “MetaLawMan” – noted that allegations that Dapper Labs released NBA Top Shot Moments NFTs on privately run blockchain was a “substantial” factor in the court’s decision to deny the motion to dismiss the lawsuit.
4/ The judge cited the fact that Top Shots trade on a private blockchain operated by the Issuer as a key factor in his decision.@XRP trades on a public blockchain.
For this reason, Top Shot’s opinion could be considered a net positive for Ripple.
Not a legal opinion, just a tweet.
— MetaLawMan (@MetaLawMan) February 22, 2023
This prompted MetaLawMan to suggest that this “could be seen as a net positive”. Ripple in its own case against the US Securities Exchange Commission (SEC) because XRP is issued on a public blockchain.
Related: Dapper Labs Suspends Russian Accounts After New EU Sanctions
The class action was filed in May 2021 by plaintiff Jeeun Friel, which claimed that Dapper Labs was selling NFTs as unregistered securities.
Judge Marreo denied the motion to dismiss the lawsuit on February 22. He said that the particular system that Dapper Labs is offering Moments NFTs may create a sufficient legal relationship between investors and themselves that meets the criteria of an investment contract under the Howey test.
However, his unlikely final ruling on the case would set a precedent for digital assets, or NFTs, as Judge Marreo said that not all NFTs will constitute securities and that each case will need to be considered on a case-by-case basis.
Shortly after his release, FLOW token issued by Dapper Labs down 6.4% from $1.24 to $1.16 in 15 minutes. However, the FLOW token has since returned to $1.29, according to on CoinGecko.
