Dapper Labs must defend itself against a lawsuit claiming NFT Top Shot is a security after a judge refused to dismiss the case on Wednesday.
The lawsuit, which was filed in 2021, said Top Shot Moments, a collection of NFTs featuring short clips of NBA highlights, are securities that must be registered with the Securities and Exchange Commission, according to Bloomberg.
The collection, created in partnership with the NBA and NBA Players Association, is becoming popular as non-fungible tokens become more popular in 2021. NFT is built on top of Dapper Labs’ Flow Blockchain, and some are sold and resold. hundreds of thousands of dollars.
Dapper Labs had asked for the case to be dismissed in September, saying the plaintiffs could not “build a federal securities case on the basketball card,” according to Reuters. But on Wednesday, U.S. District Judge Victor Marrero said the plaintiffs had presented a strong enough argument for the case to move forward, according to Bloomberg.
“Today’s order – which the court called a ‘close call’ – only denied the defendants’ motion to dismiss the complaint at the pleading stage of the case. It does not conclude the plaintiffs are correct, and it is not a final decision on the merits of the case,” said the spokesperson Dapper Labs in the claim to fortune.
Perhaps countering Dapper Labs’ argument is the fact that Top Shot NFT is limited to the Flow blockchain, and, according to the judge, depends on the company’s “continued existence”.
“Dapper Labs maintains private control over Flow Blockchain, which significantly, if not completely, dictates the use and value of Moments,” the judge wrote in his decision, one of the first to address the question of whether NFTs are securities, a repeated claim. imposed on cryptocurrencies.
Last week, the SEC told New York-based crypto firm Paxos that it planned to sue the company over its stablecoin, Binance USD (BUSD), which the agency alleged was an unregistered security.
As for the case against Dapper Labs, the company said it hopes to defend its position in court.
“Courts have repeatedly found that consumer goods—including art and collectibles like basketball cards—are not securities under federal law,” a company spokesperson said. fortune. “We believe it is the same with Moments and other collections, digital or otherwise.”
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