Blockchain Association chief legal officer says “it would be absurd” for a U.S. court to rule that digital assets on private blockchains are securities after a federal judge ruled to allow a lawsuit against Dapper Labs’ NBA Top Shots NFTs .
US Attorney Jake Chervinsky was speaking after federal judge Victor Marreo denied a motion to dismiss a 2021 lawsuit accusing Dapper Labs of selling non-fungible tokens (NFTs) as unregistered securities.
Chervinsky was among a number of attorneys on Twitter who reiterated that the judge’s denial of the motion did not mean a decision had been made on the lawsuit, only that it was “superficially plausible.”
“The judge didn’t decide anything. He allowed the case to proceed beyond a motion to dismiss because the securities claims were at least ‘plausible’, an extremely low bar and no final decision at all,” he explained.
“That dispute aside, it would be absurd if all valuable digital assets stored in centralized databases were securities.”
“This would turn every major video game developer, event ticketing platform, travel rewards program, etc. into an SEC-regulated public reporting company,” he explained.
Another US attorney, Jesse Hynes, also commented on the motion in a February 22 Twitter post, noting that motions to dismiss “rarely ever succeed” because the plaintiff only needs to present enough evidence to justify the motion case to continue.
“The judge ruled in the Dapper case that the plaintiff presented sufficient evidence that IF ALL THE ALLEGATIONS ARE TRUE, a securities breach existed.”
“Now we go into discovery to find out what the true facts are. Once that is done, Dapper will likely file a motion for summary judgment,” the attorney added.
Meanwhile, another US attorney, James Murphy – known as “MetaLawMan” – noted that claims that Dapper Labs issued the NBA Top Shot Moments NFT on a privately held blockchain were a “fundamental” factor in the decision of the The court were to dismiss the motion to dismiss.
This led MetaLawMan to believe that this “could be viewed as a net positive” for Ripple in its own case against the US Securities Exchange Commission (SEC) since XRP is issued on a public blockchain.
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The class action lawsuit against Dapper Labs was filed in May 2021 by plaintiff Jeeun Friel, who alleged that Dapper Labs was selling NFTs as unregistered securities.
Judge Marreo denied the motion to dismiss the lawsuit on February 22. He said the particular scheme by which Dapper Labs offers the Moments NFT may create a sufficient legal relationship between investors and themselves to meet the Howey Test’s investment treaty criteria.
However, it is unlikely that the final ruling in this case would set a precedent for NFTs, as Judge Marreo said not all NFTs are securities and that each case must be assessed on a case-by-case basis.
Shortly after the release, the FLOW token issued by Dapper Labs fell 6.4% from $1.24 to $1.16 in 15 minutes. However, FLOW token has since recovered to $1.29, according to CoinGecko.
