Home CryptocurrencyAltcoin NBA’s Dapper Lab’s Top Shot Moments Qualify as Securities, US Judge Says

NBA’s Dapper Lab’s Top Shot Moments Qualify as Securities, US Judge Says

by SuperiorInvest

NBA Top Shot Moments non-fungible tokens (NFTs) can be considered a security because they meet the requirements of United States securities laws, according to court filings dated February 22.

The ruling comes after federal judge Victor Marreo denied Dapper Labs CEO Roham Gharegozlou’s motion to dismiss a class action lawsuit alleging that his NBA Top Shot NFTs are securities. After rejecting the motion, the court authorized the continuation of the case. Dapper Labs now has 21 days to respond to the court’s decision.

For the verdict, the judge reviewed the Howey test, which determines whether NFTs qualified as an investment contract subject to U.S. securities laws, according to court filings. A transaction that is designated as an investment contract is considered a security.

“The Court’s conclusion that what Dapper Labs offered was an investment contract under Howey is a narrow one. Not all NFTs offered or sold by any company will constitute a security, and each system must be evaluated on a case-by-case basis.”

Judge Victor Marreo also ruled that:

“Rather, it is the specific scheme by which Dapper Labs offers Moments that creates a sufficient legal relationship between the investors and the promoter to enter into an investment contract, namely a security, under Howey.”

The class action was filed in May 2021 by plaintiff Jeeun Friel for allegedly selling NFTs as unregistered securities. They also allege that NBA Top Shot intentionally prevented collectors from withdrawing funds after “months on end” to artificially inflate the market value of the platform. Dapper Labs did not immediately respond to Cointelegraph’s request for comment.

The NBA’s best shot, according to Dapper Labs generated over $230 million in NFT revenue as of February 2021, Cointelegraph reported.

The decision comes amid a wider debate over whether various digital assets should be considered securities. On February 9, the US Securities and Exchange Commission (SEC) announced $30 million settlement with crypto exchange Kraken about its betting services. Authority is too examining traditional Wall Street investing advisers offering custody of digital assets to their clients without proper qualifications.

Most recently the SEC announced a $1.4 million settlement with former NBA player Paul Pierce for allegedly promoting the token project on social media.

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