Dapper Labs case successfully settled: confirms Flow as a decentralized blockchain, NBA Top Shot NFTs are not securities
The case of "Friel vs. Dapper Labs" has been successfully settled, and NBA Top Shot Moments are not securities under U.S. federal law.Author: PANews
In 2021, the Flow blockchain and NBA Top Shot developer Dapper Labs were sued for allegedly selling NFTs as unregistered securities. The lead plaintiff, Jeeun Friel, claimed in the lawsuit that "NBA Top Shot Moments" are a form of security, arguing that their value increases with the project's success, and therefore Dapper Labs should have registered with the U.S. Securities and Exchange Commission, which it did not, thus violating U.S. securities laws.
After a lengthy litigation process, a significant milestone has recently been reached in the case: Dapper Labs has successfully reached a settlement agreement with the plaintiffs.
Roham Gharegozlou, co-founder and CEO of Dapper Labs, stated, "Dapper Labs is pleased with the outcome of this settlement agreement, marking an important step forward for Dapper Labs and the Flow community. In short, the legal clarity not only allows Dapper Labs to focus on its core mission of continuously providing better service experiences for users but also gives the vibrant community of developers, partners, and entrepreneurs on the Flow blockchain greater freedom to confidently create groundbreaking Web 3 applications for consumers worldwide."
It is worth mentioning that the case also confirmed that Flow is a fully decentralized, permissionless, and public blockchain that is not controlled by Dapper Labs. Flow will continue to work towards building an on-chain world that allows individual users to own their data, digital assets, and online identities, aiming to ensure that digital communities can thrive in an open and decentralized environment. On the Flow blockchain, creators can build content for the community without bearing the risks of platform dependency, helping people explore Web 3 easily and safely.
Legal Clarity Paves the Way for Dapper Labs' Continued Growth and Innovation
Dapper Labs is the creator of the Flow blockchain, a decentralized blockchain designed for the next generation of digital assets, applications, and games. Dapper Labs' mission is to make Web3 accessible to everyone in a simple and secure manner while promoting innovation and building a thriving digital community.
With the successful settlement of this case, it not only solidifies Dapper Labs' commitment to innovation and decentralization in the digital collectibles space but also further indicates that the NBA Top Shot Moments it offers are not securities under U.S. federal law. As legal clarity strengthens, it paves the way for Dapper Labs' continued growth and innovation.
In fact, during the previous litigation process, NBA Top Shot still made significant progress. Data provided by Dapper Labs shows that since January 1, 2024, over 27,000 independent collectors have purchased collectible packs or Moments on NBA Top Shot; since November 2023, the user conversion rate on NBA Top Shot has increased fivefold (note: user conversion refers to the conversion of visitors to first-time purchasers); in Q4 2023, the number of independent collectors spending over $1,000 weekly on NBA Top Shot was 135, which grew to 241 in Q1 2024, an increase of 78%. Additionally, Dapper Labs launched Fast Break, a daily game using NBA Top Shot Moments, which resonated greatly with the community, with thousands of active players interacting with NBA and WNBA game events daily. Notably, in April of this year, a 1-of-1 Moment of NBA San Antonio Spurs star Victor Wembanyama was successfully sold for $145,000.
Other Key Points in the Settlement Agreement
1. Decentralization: The Flow blockchain operates as a fully decentralized public blockchain, ensuring it can continue to run without Dapper Labs, providing a robust and independent ecosystem for users and developers.
2. Market Expansion: Since March 17, 2022, four new markets have been authorized to showcase and sell NBA Top Shot Moments, with full support from the NBA and the NBA Players Association, providing collectors with more flexibility and opportunities to trade and enjoy NBA's "highlight moments."
3. Enhanced User Experience: The payment and withdrawal systems for NBA Top Shot Moments have been optimized, thanks to collaborations with Checkout.com and Fortress Blockchain Technologies, Inc., allowing users to process withdrawals within 2-10 business days.
4. Compliance and Education Commitment: Dapper Labs has implemented a mandatory annual training program for all employees, emphasizing the importance of compliance with U.S. federal securities laws and ethical marketing practices, ensuring project transparency, legality, and safeguarding community interests.
5. Flow Token and Ecosystem Growth: The remaining Flow tokens will be transferred to the Flow Foundation wallet, and Dapper Labs will relinquish control of the tokens to support the continued growth and decentralization of the Flow ecosystem.
