Yesterday’s ruling by a U.S. District Judge on Dapper Labs’ motion to dismiss a lawsuit alleging that NBA Top Shot NFTs are an unregistered security may have a “net positive” impact on Ripple’s case against the U.S. Securities and Exchange Commission. At least that’s what James “MetaLawMan” Murphy, an attorney and strategic advisor, claims.
District Judge Victor Marrero stated in his decision that Dapper Labs’ NFT collection appears to meet the requirements of a security under the Howey test. Based on this, he denied Dapper Labs’ motion to dismiss.
NBA Top Shots was launched by Dapper Labs in 2021 and is one of the most successful NFT collections of all time. NFT buyers can collect video highlights from the National Basketball Association (NBA) released by the company.
In May 2021, Dapper Labs was sued by a plaintiff alleging that the Top Shots collection was an unregistered security. By failing to register with the SEC, the company allegedly violated U.S. securities laws, harming consumers.
What Are The Implications For Ripple?
Attorney James Murphy explained in a series of tweets that the federal judge in New York ruled that the lawsuit “plausibly alleges” that Dapper Labs’ initial sale of NBA Top Shot NFTs qualifies as a security under the Howey test.
Nevertheless, he does not believe that this ruling should have any impact on the analysis in Ripple vs. the SEC. The first key difference is that the Top Shot decision is a ruling on a motion to dismiss, while Ripple is at the summary judgment stage, where the judge considers the evidence presented by the parties.
In addition, Judge Marrero is not addressing the sale of Top Shot NFTs on the secondary market. Judge Marrero added that this ruling should not apply across the board to all NFTs, but that each should be evaluated on a case-by-case basis:
Not all NFTs offered or sold by any company will constitute a security.
The key factor in the decision, however, could also be a strong argument for Ripple, according to Murphy:
The Judge cited the fact that Top Shots trades on a private blockchain run by the issuer as a key factor in his ruling. XRP trades on a public blockchain. For this reason, the Top Shot opinion could be considered net positive for Ripple. Not a legal opinion – just a tweet.
XRP community attorney John E. Deaton emphasized on Twitter that the judge’s decision is by no means final. The judge “merely denied a rarely granted” motion to dismiss, meaning the case will continue with the discovery phase.
“The Judge may still rule that these NFTs are NOT securities or he/she may conclude that they are, or may rule that a jury must decide factual issues before the judge can rule. In sum, this case hasn’t even begun!” Deaton said.
At press time XRP was trading at $0.3942.
Featured image from Tingey Injury Law Firm / Unsplash, Chart from TradingView.com