The Creators Of NBA Top Shot Are Facing A Class-Action Lawsuit, Accused Of Selling Unregistered Securities

Dapper Labs is facing a class-action lawsuit for selling unregistered securities. They are a company behind many well-known NFT collectible’s and they company created NBA Top Shot. A class-action lawsuit was first filed against them in 2021 and they filed to dismiss it, but the judge decided that the case would move forward. The company was valued at an impressive 7.6 billion at the time, but it seems that there’s more to the story than meets the eye. 

For those unfamiliar with NBA Top Shot, users got the website to buy digital cards that represent ‘Moments’. They are simply just short clips of memorable moments in the NBA. Cards can than be bought and sold with other players and the value of the cards can go up and down over time.

Follow along next as we dive into the logistics of this lawsuit and what the judge has ruled to happen.

CORRECTION: A federal judge ruled that Dapper Labs' offering of NBA Top Shot Moment NFTs are plausibly securities, and allowed a suit against the company to move forward.@nikhileshde @cheyenneligon report:https://t.co/Kwyo3GIErz pic.twitter.com/DBpnsP7Vlz

— CoinDesk (@CoinDesk) February 22, 2023

Are NBA Top Shot’s legit, or have people been scammed online once again?

One of the main issues in the case is what differs and NFT from a ‘Moment’ in NBA Tp Shot, and what differs the ‘Moment’ from typical trading cards? Dapper Labs created a system called FLOW which was put in place as something to be able to validate transactions.

However, the fact that they use the Flow blockchain means they are able to control some of the value of certain ‘Moments’. The judge went into a hypothetical saying that if Dapper Labs were to go bankrupt, then all ‘Moments’ value would hit zero.

The NBA Top Shots terms of use also states that the ‘Moments’ have no inherit value outside of the Flow blockchain. If Top Shot users want to sell their collectibles they have to go through the official secondary marketplace. Demand’s for NFT’s and similar collectibles have dropped recently, but this case with Top Shot will stand as an example for cases like this moving forward.

Repercussions will be felt around the industry because of this; especially for companies that use private blockchains.