Are NBA Top Shot NFT moments unregistered securities? That’s what a lawsuit filed against Top Shot creator Dapper Labs in 2021 alleges—and the judge apparently agrees.

United States District Court Judge Victor Marrero today denied Dapper’s request to dismiss the suit, writing that the NFTs offered on Dapper's platform indeed appear to satisfy the requirements of a security.

In his ruling, Marrero used the Howey Test—referring to a landmark U.S. Supreme Court case—and determined that the NBA Top Shot NFT collectibles platform plausibly meet the stipulations of a security. As a result, the lawsuit against Dapper Labs will move forward.


Dapper Labs commented on the ruling in a statement sent to Decrypt.

“Importantly, today’s order only denied the defendants’ motion to dismiss the complaint. It did not conclude the plaintiffs were right, and it is not a final ruling on the merits of the case,” the spokesperson wrote.

“Courts have repeatedly found that consumer goods—including art and collectibles like basketball cards—are not securities under federal law,” Dapper’s statement continues. “We are confident the same holds true for moments and other collectibles, digital or otherwise, and look forward to vigorously defending our position in court as the case continues.”

The judge’s ruling suggests that the plaintiff’s arguments are reasonable in part because he describes the Flow blockchain—which powers Top Shot and other NFT projects and platforms—as a “private” network as opposed to a public one like the Bitcoin blockchain.

Dapper Labs would likely disagree with that assertion, however. The company indeed created the Flow blockchain to support NBA Top Shot and other projects, but it’s meant to be an open and permissionless network that has increasingly decentralized its pool of node operators. In late 2021, Dapper representatives asserted that Flow is now “controlled by the community.”


The judge believes that there’s sufficient evidence to suggest otherwise, however, and further points to Dapper’s control over the NBA Top Shot platform itself, along with control over the underlying IP by the NBA and National Basketball Players Association (NBPA).

The ruling further points to statements by Dapper Labs and CEO Roham Gharegozlou regarding the market value of moments, and the potential for Top Shot NFTs to maintain and even gain in value over time. It also notes that in early 2021, when NBA Top Shot buckled under the stress of user demand, that NFT holders could not access the marketplace and sell their owned assets.

However, Marrero is careful to not suggest that his view on NBA Top Shot would not necessarily apply broadly to all NFTs.

“Ultimately, the Court’s conclusion that what Dapper Labs offered was an investment contract under Howey is narrow,” he wrote. “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.”

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