​Dapper Labs Ruling Could Spell Trouble for Other Centralized | Crypto Bubble

​Dapper Labs Ruling Could Spell Trouble for Other Centralized NFT Projects, Experts Say

A recent legal decision may offer some much-needed – though not much-liked – clarity on the regulatory landscape ahead for non-fungible tokens (NFT) that may define how centralized companies proceed in entering Web3.

The federal judge in New York overseeing a class-action lawsuit against Dapper Labs ruled Wednesday to deny the company’s motion to dismiss the suit, writing that the plaintiffs’ claims that Dapper Labs’ NBA-branded Top Shot Moments NFTs are securities – and that selling them without first registering with the U.S. Securities and Exchange Commission (SEC) was a violation of federal securities laws – are “plausible.”

In his 64-page Wednesday ruling, U.S. District Court Judge Victor Marrero of the Southern District of New York considered Dapper Labs’ NFT collection under the four prongs of the Howey test, a 90-year-old method devised by the U.S. Supreme Court to determine whether certain transactions qualify as “investment contracts.”

Marrero stated that the plaintiffs adequately argued that the Top Shot NFTs met each of the four prongs of the Howey Test. The fourth prong – that the profits expected from an investment must be derived from the efforts of others – was particularly important to Marrero’s analysis.

Because Dapper Labs controls the Flow blockchain the NFT collection is built on as well as the marketplace where the NFTs are bought and sold, Marrero suggested that the financial viability of the project was dependent on Dapper Labs’ continued success.