Will US Court Rule Private NFTs As Securities?

The comments from the hosts of lawyers come following Judge Victor Marreo suggesting that Dapper Labs’ NBA Top Shot Moments NFT might constitute a security.

The chief legal officer of the Blockchain Association has expressed that “it would be absurd” for a US court to declare digital assets on private blockchains as securities.
This statement follows a federal judge's ruling that permits a lawsuit against Dapper Labs's NBA Top Shot non-fungible tokens (NFTs) to proceed.

U.S. attorney Jake Chervinsky commented after federal judge Victor Marreo denied a motion to dismiss a 2021 lawsuit accusing Dapper Labs of selling NFTs as unregistered securities.

Chervinsky was among a number of lawyers on Twitter to reiterate that the judge’s denial of the motion does not mean a ruling has been made on the lawsuit, only that it was “facially plausible.”

“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 explained.

“This dispute aside, it would be absurd if all valuable digital assets stored on centralized databases were securities.”

“This would turn every major video game developer, event ticketing platform, travel rewards program, etc. into a public reporting company regulated by the SEC,” he went on to explain.

U.S. lawyer, Jesse Hynes, also weighed in on the motion in a February 22 tweet, stating that motions to dismiss are “rarely ever successful” because the plaintiff only needs to plead enough evidence for the case to proceed.

“The judge ruled in the Dapper case that the plaintiff pleaded enough evidence that IF ALL THE ALLEGATIONS ARE TRUE, that there is a securities violation.”

“Now we go into discovery to learn what the real facts are. Once that is done Dapper will likely file for a motion for Summary Judgment,” the lawyer added.

Meanwhile, another U.S. lawyer, James Murphy — known as “MetaLawMan” — noted that the allegations that Dapper Labs issued the NBA Top Shot Moments NFTs on a privately-run blockchain were a “fundamental” factor behind the court’s decision to reject the motion to dismiss.


This brought MetaLawMan to suggest that this “could be considered a net positive” for Ripple in its case against the U.S. Securities Exchange Commission (SEC), because XRP is issued on a public blockchain.

In May 2021, plaintiff Jeeun Friel initiated a class-action lawsuit against Dapper Labs, alleging that the company sold NFTs as unregistered securities. On Feb. 22, Judge Marreo rejected the motion to dismiss the lawsuit, reasoning that Dapper Labs' method of offering NFTs could establish a legal association between investors and the company, meeting the criteria for an investment contract as per the Howey test.

It is improbable that the final decision in this case will establish a standard for NFTs, as Judge Marreo clarified that not all NFTs would be considered securities, and each case would require a specific evaluation.