NBA Top Shot NFTs Ruled Securities by U.S. Federal Judge

• NBA Top Shot NFTs are deemed securities by U.S. Federal Judge Victor Marrero in a case filed by Jeeun Friel against Dapper Labs in May 2021.
• The lawsuit argued that Flow blockchain is private and thus qualifies as securities, which the judge agreed with.
• The ruling is based on the Howey Test, which says that digital cards can “gain value over time” and that the intellectual property belongs to the co-founders of Dapper Labs.

NBA Top Shot NFTs Deemed Securities

A U.S. Federal Judge has ruled that NBA Top Shot Non-Fungible Tokens (NFTs) qualify as unregistered securities according to the Howey Test. In a lawsuit filed back in May 2021 by Jeeun Friel from Virginia against Dapper Labs, Judge Victor Marrero rejected the motion from the Web3 company to throw out the pending class-action lawsuit which blamed Dapper Labs for „preventing holders from cashing out in time.“

Howey Test Aplication

The ruling was based on statements made by Roham Gharegozlou, CEO of Dapper Labs, who said that digital cards can “gain value over time” and that the intellectual property belongs to co-founders of Dapper Labs and not publically accessible via a decentralized network like Bitcoin (BTC). This satisfies what is known as the Howey test—an evaluation used to determine whether something qualifies as an investment contract or security—and thus led Judge Marrero to conclude that NBA Top Shot NFTs should be considered unregistered securities.

Background Information

The case was brought about after Dapper Lab’s website was temporarily shut down due to unexpectedly high demand for their sports memorabilia NFTs back in 2021, preventing buyers from selling their digital assets at all times. The controversy further intensified when it was discovered earlier this year that Flow blockchain —the platform powering NBA Top Shot—resembles a private network rather than a public blockchain like Bitcoin (BTC).

Reactions From Both Sides

Dapper Labs strongly disagreed with such an assertion while representatives of NBA Top Shot maintained that Flow blockchain had been in community hands since mid-2021 when it marginally increased its decentralized pool of node validators. On top of this, lawyers for Dapper Labs argued that such findings would have wide implications for other sectors outside of crypto if accepted by the court; however this was ultimately dismissed by Judge Marrero who stated his decision applied only within specific context surrounding NBA Top Shots NFT marketplace and did not reflect any wider implications regarding other NFT projects or tokens using different blockchains/protocols than those associated with Flow (FLOW).


All things considered, despite being met with considerable criticism initially when first announced last summer, it appears Jeeun Friel’s case against Dapper Labs has been given new life thanks to Judge Victor Marrero’s ruling which states unequivocally —at least concerning NBA Top Shots NTF marketplace—that these digital assets appear to be unregistered securities according to existing US regulations regarding investment contracts/securities laws.