Dapper Labs’ NBA-branded “Top Shot” non-fungible giveaway can be protected, a federal judge ruled Wednesday. The decision and dismissal motion comes a year and a half after a class-action lawsuit was filed against Dapper Labs and its CEO, Roham Gharegozlu, in New York. The lawsuit alleges that Gharegozlu and Dapper Labs violated federal securities laws by offering a collection of non-fungible tokens (NFTs) – NBA Top Shot Moments – without first registering with the Securities and Exchange Commission ( SEC) United States. “The court finds that the plaintiffs’ allegations make any presumption under Howey sound and survives the defendants’ claims for violation of sections 5 and 12 of the Securities Act. ,” District Judge Victor said. Marrero, of the Southern District of New York. . The Supreme Court of the United States conducted the aforementioned Judge Howey test to determine whether certain transactions qualify as “investment contracts”.

According to the decision, Dapper Labs’ FLOW tokens – although not necessarily secure in themselves – are “essential to all of the features involved.”
“The plaintiffs alleged that without FLOW tokens, no transactions on the Flow Blockchain could be supported. This is because the “proof-of-stake” system used by Flow Blockchain requires FLOW to support it and incentivize miners to support transactions. In this respect, the value of FLOW creates value for time through network verification and the ability and price of each transaction,” said the Judge. Dapper Labs filed a motion to dismiss the lawsuit in September, arguing that the collection of digital basketball cards is not proprietary.
“Football cards are not names. Pokemon cards are not names. Football cards are not safe. Common sense says so. The law says so. The court says so,” Dapper Labs’ lawyers argued.
However, Judge Marrero disagreed in his ruling on Wednesday, which denied Dapper Labs’ request to dismiss the case. In that decision, the judge passed the Howey test.
The judge said he had found that the first issue, investment, was “well-argued”, noting that neither party had any objections to the issue. Regarding the second prong, if there is a merger, the judge discussed the definition of “computing” investors’ money, pointing to the principles such as the Securities and Exchange Commission court against Kik Interactive and Telegram, and the US Department of Justice case contrary. Maxim Zaslavsky.

“The court is satisfied that [plaintiff’s complaint] sufficiently states that you are sufficiently united to survive a motion to dismiss,” the judge wrote. Marrero added that “Consumer News is connected to the success of Dapper Labs” because Dapper Labs controls the Blockchain Flow and the online store where the time is sold and sold. .
The judge also pointed to the plaintiffs’ claim that Dapper Labs had money from the sale of the season for the purpose of raising money and maintaining the value of the FLOW logo. “The logical conclusion to draw from these allegations is that the capital of Dapper Labs is raised from the contributions of the time used to create and maintain Flow Blockchain,” said the Judge.
Other considerations support the judge’s conclusion, he wrote. In the third issue, if there is an expectation of profit, the judge said that Dapper Labs “erroneous” the law by saying that there must be a “promise” of “continuing” profit, which the court The appeal said that was not the case.
“In relation to the allegations here, the Court finds that the public statements of the defendants have made consumers expect a profit,” the judge wrote, using a screenshot of tweets. of Top Shot as an example. He added: “The allegations of the claimants, including those outlined above, are sufficient to support the conclusion that the prime time was purchased for investment purposes.”
The final judgment of the test, other attempts, also seem to be met, the judge said.
“As detailed above, it is logical that the value of time is derived almost entirely from Dapper Labs’ continuous exploitation of Flow Blockchain, which increases price perception (and therefore affects profits) but, perhaps more dangerous, seems to give consumers the ability to trade at all. The Defendants’ failure to believe in blockchain technology supports the Deadly Time for their claims in this case,” he wrote.