Dapper Labs Just Had A Really Bad Day

Hey Peeps!

 

On February 22nd, Dapper Labs suffered a huge blow as their Motion to Dismiss the class-action lawsuit against them was denied by United States District Judge Victor Marrero.

Judge Marrero specifically stated that "it is the particular scheme by which Dapper Labs offers Moments that creates the sufficient legal relationship between investor and promoter to establish an investment contract, and thus a security, under Howey". 

This class-action lawsuit originates from a filing made in 2021 by an unhappy customer against NBA TopShot, that has now turned into a landmark case for NFTs and Dapper Labs. 
 

The Howey Test is a process, created by the U.S. Supreme Court, that determines whether or not a transaction qualifies as an "investment contract", which would then make it a security. 

The Supreme Court's ruling in the 1946 case, SEC v. W.J. Howey Co., solidified that an "investment contract" is:

• An investment of money
• In a common enterprise
• With the expectation of profit
• To be derived from the efforts of others

“If, hypothetically, Dapper Labs went out of business and shut down the Flow blockchain, the value of all Moments would drop to zero. That is the critical causal connection that other collectibles cases lack. That Dapper Labs created and maintains a private blockchain is fundamental to the Court’s conclusion."
- Victor Marrero, United States District Judge  

 

It is important to not that Judge Marrero did also go on to state that "not all NFTs offered or sold by any company will constitute a security, and each scheme must be assessed on a case-by-case basis".

So at the very least, this means that the United States courts are not viewing all NFTs as securities, which should be a momentary sigh of relief for the industry. 

However, I must admit that I think this could be a prelude to a push against NFTs, once the SEC and other regulatory agencies are done bullying Staking services. 
 

"We are restructuring the Dapper Labs organization to improve our focus and efficiency, strengthening our position in the market and better serving our communities. As part of this restructure, we made the difficult decision to part ways with 20% of full time employees."
- Roham Gharegozlou, Founder of Dapper Labs

 

Also, later in the day, Dapper Labs announced, via blog post, they were laying off 20% of their staff as the company attempts to restructure the organization.

This is the second layoff by Dapper Labs in just the last four months, as Dapper fired another 22% of it's workforce back in November of 2022.

To provide reassurance to staff and customers, Roham Gharegozlou states that "Dapper Labs remains in a strong cash position with no outstanding debt" and that the company is "tremendously excited about several major launches coming up this year". 
 

Other than NBA TopShot, Dapper Labs has also created the popular NFT collection platforms NFL All Day, UFC Strike, and CryptoKitties. 

I am a fan of NBA TopShot, NFL All Day, and UFC Strike, so I am a little worried about what might happen in the future with the court case.

If these NFT Moments are deemed to be securities, I worry about what would happen to all the NFTs I have collected on the platforms. 
 
What are your thoughts on this news?
Are you concerned about the future of Dapper Labs?
Do you think an NFT qualifies as a security?
 
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