Based on a Cointelegraph post, following a federal judge’s decision to permit a case against Dapper Labs’ NBA Top Shot non-fungible tokens (NFTs as securities) to proceed, the chief legal officer of The Blockchain Association asserts that it would be “absurd” for a court in the United States to recognize digital assets on private blockchains as securities.
Lawyers’ opinions on NFTs as securities
After federal judge Victor Marreo rejected a motion to dismiss a 2021 lawsuit accusing Dapper Labs of marketing NFTs as securities, US attorney Jake Chervinsky made a statement. Chervinsky was one of many attorneys who emphasized on Twitter that the judge’s denial of the request only meant that it was “facially plausible,” not that a decision had been made regarding the lawsuit. “The judge didn’t decide anything. He allowed the case to proceed past a motion to dismiss because the securities claims were at least ‘plausible,’ an extremely low bar and not a final ruling at all,” he said.
Jesse Hynes, another U.S. attorney, commented on the move in a tweet on February 22. He noted that since the plaintiff just needs to provide sufficient evidence for the case to proceed, motions to dismiss are hardly successful. “The judge ruled in the Dapper case that the plaintiff pled enough evidence that IF ALL THE ALLEGATIONS ARE TRUE, that there is a securities violation.” He explained.
Another American attorney, James Murphy, sometimes known as “MetaLawMan,” pointed out that the court’s decision to deny the request to dismiss was “essential” to the claims that Dapper Labs issued the NBA Top Shot Moments NFTs on a privately operated blockchain. Because XRP operates on a public blockchain, MetaLawMan asserted that this is potentially a “net benefit” for Ripple in its lawsuit against the U.S. Securities Exchange Commission (SEC).
Plaintiff Jeeun Friel filed the class-action lawsuit against defendant Dapper Labs in May 2021, alleging that Dapper Labs offered NFTs as securities while they were unregistered.
Will the court regulate NFTs as securities?
On February 22, Marreo rejected the motion to dismiss the case. According to him, the plan under which Dapper Labs offers the NFTs may establish a sufficient legal connection between investors and themselves, satisfying the Howey test’s requirements for an investment contract. However, the final decision in this case, however, is unlikely to set a precedent for NFTs since, as Marreo stated, the court will not consider all NFTs as securities and that each token necessitates a case-by-case evaluation.
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