The popular NBA Top Shot NFT trading cards may be treated as securities for regulatory purposes in the US after a judge allowed a lawsuit against Top Shot’s maker to proceed.
Top Shot creator Dapper Labs has been sued by a buyer of NFTs, who alleges that the creator’s failure to register them with the Securities and Exchange Commission (SEC) harmed him and other buyers.
US District Court Judge Victor Marrero has now allowed the trial to proceed, rejecting Dapper Labs’ request to dismiss the lawsuit. According to Judge Marrero, the so-called Howe test, often used to determine whether something is a security, indicates that the NBA Top Shot NFTs may in fact be securities.
“Nearly Survived”
In a comment posted on Twitter on Wednesday, Dapper Labs said the court described the decision as a “close call,” while emphasizing that it was “not a final ruling on the merits of the case.”
“Courts have repeatedly held that consumer goods – including art and collectibles like basketball cards – are not “securities” under federal law. We believe the same is true for Moments and other collectibles, digital or otherwise, Said the Dapper Labs team.
The Top Shot NFT collection is released on the Flow blockchain, a network that brands itself as an “eco-friendly,” open and permissionless network with over 11,000 developers building on it.
In his remarks to the lawsuit, the judge referred to Flow as a “private” network. This suggests that the blockchain is highly centralized in the judge’s eyes, and that assets issued on it are likely to be classified as securities.
Not surprisingly, Dapper Labs dismisses the notion that Flow is a centralized network, stating on its website that less than a third of the network’s consensus nodes are “run by a single entity.”
The NBA Top Shot NFT Collection is one of the most popular trading card-themed NFT collections today. Each unique NFT portrays a different iconic moment from basketball history. Digital Trading Cards Hit the Market in Late 2021 and Collectables became an instant hit,
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