The District Court for the Southern District of New York will proceed with the case against Dapper Labs. The court recognized the NBA-branded NFT collection Top Shot as security while preparing for the case. This could set a precedent.
District Judge Victor Marrero granted the go-ahead to the class action against Dapper Labs, implicitly recognizing that NFTs from the NBA Top Shot are securities. Dapper Labs CEO Roham Gharegozlu’s motion to dismiss the class action lawsuit was denied with this wording. The Block reports this.
The court applied the Howey Test, which allegedly proved there was an investment contract in the token distribution of the NBA Top Shot collection. However, the judge stressed that the decision in the lawsuit against Dapper Labs was an isolated case, and the court wouldn’t consider other NFT collections to be securities. “Each scheme must be assessed on a case-by-case basis,” Marrero said.
Although the court only denied the motion to dismiss the case, the community was stirred by the news that the NFT collection would be treated as a security. Thus, Jake Chervinsky, Chief Policy Officer at Blockchain Association, called the judge’s actions “absurd.” He said that approach assumed that any asset of any value, be it a character in an online game or an online ticket to an event, was a security. According to Chervinsky, this regulatory approach puts all companies issuing any kind of asset at risk.
American Attorney Jesse Hynes said the hype around the case is clearly premature. The judge only denied a motion to dismiss the case because the plaintiff “pleaded enough evidence” and the defendant failed to present enough evidence to rebut. Hynes said that happens quite often, and motions to dismiss were “rarely ever successful” because the court only considered the evidence presented without delving into its veracity.
Yet, another U.S. Lawyer, James Murphy, is confident that the court’s decision will benefit the crypto industry. According to Murphy, the process against Dapper Labs could positively affect another, more important process, SEC vs. Ripple. The point is that NFTs from the Top Shot collection are created on a private blockchain network, while XRP is built on a public one.
See more about the NBA Top Shot Moments in a special article by CP Media.
