Labeling Private NFTs As Securities Is Unreasonable, Says Lawyer

The ongoing dispute over Dapper Labs’ NBA Top Shots NFTs status has sparked comments from lawyers and observers. The case started with a class action lawsuit filed by plaintiff Jeeun Friel in May 2021, alleging that Dapper Labs’ NBA Top Shots NFTs were unregistered securities.

After the last court appearance, several lawyers have been making comments regarding Judge Victor Marreo’s ruling. Blockchain Association’s chief legal officer Jake Chervinsky and other lawyers lambasted a post misinterpreting the judge’s decision on the case.

Are Dapper Labs’ Basketball NFTs Securities?

The court will decide whether NBA Top Shots are securities, as the lawsuit regarding the NFT collections has been on since May 2021. Plaintiff Jeeun Friel sued Dapper Labs for offering unregistered securities as tokenized National Basketball Association NFTs through its NBA Top Shot marketplace.

It came after the platform experienced an overwhelming influx of buyers and sellers for the said collectibles. As such, Dapper Labs’ site became down, and customers could not redeem withdrawals. Angry customers claimed that Dapper Labs delayed their withdrawals purposefully. 

At the time, customers flooded Twitter and all channels available with complaints and lamentations, seeking to pull their funds from the platform. Then came Jeeun Friel’s lawsuit, demanding justice on Dapper for offering unregistered securities.

The debate remains as federal judge Marrero denied Dapper Labs’ motion to dismiss the case in the last court proceeding. Many think the judge’s decision is absurd, believing the NBA Top Shots NFTs are far from being securities. 

But while commenting on the latest proceeding, the Blockchain Association’s chief legal officer, Jake Chervinsky, defended the judge’s stance, saying the update was false.

In his statement, the lawyer noted that judge Marreo’s denial of the motion does not mean that he has made a ruling on the case. In Chervinsky’s opinion, the judge did not give a final decision but allowed the case to proceed since the securities claims were plausible. 

Jake Chervinsky added that asides from the current dispute, a US court ruling valuable digital assets stored on centralized databases as securities would be an irrational decision.

US Lawyer Thinks Judge Marreo’s Legal Opinion On Dapper’s NFTs Could Be Positive For XRP

In another tweet, US lawyer Jesse Hynes commented on the motion. Hynes noted that motions to dismiss are not often successful when there are plausible reasons for the case to proceed. He explained that the judge denied the motion because the plaintiff brought enough evidence, and if all allegations were true, then there was a securities violation. 

Hynes further stated that the next step in the case is to examine the facts, after which Dapper Labs may file a motion for summary judgment. 

Meanwhile, another US lawyer, James Murphy, whose pseudonym is MetaLawMan on Twitter, commented on the Dapper case. Murphy noted that the claims around the NBA Top Shot NFTs on a private blockchain were the basis for the court’s decision to deny the dismissal motion. According to MetaLawMan, the judge said that the alleged NFTs traded on a private blockchain.

However, the lawyer thinks the judge’s opinion could be positive for Ripple’s court battle with SEC since XRP trades on a public blockchain.

Judge Marreo denied the motion to dismiss the case citing that Dapper’s NFTs established enough legal relationship between the firm and investors, meeting the Howey Test criteria. However, he also hinted that the final ruling would not create a precedent for NFTs.

Featured image from Pexels, charts from TradingView.com