- Dapper Labs has reached a tentative settlement with investors over allegations of violating federal securities laws
- The agreement aims to resolve a nearly three-year legal dispute involving NBA Top Shot Moments
- The settlement is pending approval by a District Court judge
Dapper Labs, the prominent web3 company behind NBA Top Shot, has reached a tentative settlement with investors who accused the firm and its CEO, Roham Gharegozlou, of violating federal securities laws. The agreement, pending approval by District Court Judge Victor of the Southern District of New York (SDNY), aims to resolve a nearly three-year legal dispute which began when holders claimed that NBA Top Shot Moments were unregistered securities.
Dapper Labs Denied Accusations
The class action was filed in 2021, with plaintiffs arguing that the value of the Top Shot NFTs was tied to the overall popularity of the project. They also alleged that Dapper Labs restricted investors from cashing out for extended periods and barred the trading of Moments on external NFT platforms at the time of the lawsuit.
Dapper Labs’ legal team consistently denied these allegations, maintaining that the NFTs were akin to digital basketball cards and not securities.
The proposed settlement includes a $4 million fund to compensate class members, cover attorneys’ fees, and manage settlement administration costs. Gharegozlou told Coindesk that this fund would ensure fair compensation for the plaintiffs while also supporting legal expenses.
Changes Afoot After Settlement
In addition to the financial settlement, Dapper Labs has committed to several business changes. These include mandatory employee training programs on compliance with federal securities laws and ethical marketing practices, as well as improvements in payment and withdrawal speeds. The company also agreed to transfer any remaining FLOW tokens to the Flow Foundation to further decentralize the Flow ecosystem.
Gharegozlou expressed optimism about the settlement, describing it as a “great start” toward clearer legal definitions regarding NFTs and their classification. He emphasized the company’s ongoing efforts to seek regulatory clarity and push for legislation that distinguishes consumer NFTs from financial products:
We are continuing to push for more overarching regulatory clarity to showcase that consumer NFTs are not financial products and, as such, should be regulated under well-established consumer protection regimes at the state level.
Gharegozlou added that Dapper Labs is unaware of any regulatory body, including the US Securities and Exchange Commission (SEC), that has classified Moments NFTs as securities.
It was revealed two months ago that the SEC had investigated Dapper Labs for an undisclosed reason but closed the case in September 2023, with the company unaware that it had been investigated.
