A flurry of enforcement actions and legal decisions against various crypto companies have stacked up in the wake of the stunning and highly public collapse of crypto exchange FTX in November the American government has clearly signaled it can no longer afford to look passive on the question of crypto regulatory enforcement. It’s been very windy in crypto as of late. “The wind is not blowing in a good direction for them, and the last thing they need is a direct judgment and a real precedent.” “I would not be surprised at all if Dapper just goes and settles now,” Cohen said. Still, the judge’s unusually thorough denial of Dapper’s motion to dismiss appears to indicate that the company faces a very steep road ahead. Marrero’s ruling merely allows the private lawsuit to move forward. “There is a lot of misinformation circulating about the nature of this ruling,” Gharegozlou wrote Wednesday, deriding reports that inaccurately framed Wednesday’s decision as a final judgment in the case. The company’s founder and CEO Roham Gharegozlou referenced Wednesday’s ruling in a letter to employees in which he announced another 20% reduction of Dapper’s staff, after slashing 22% of its workforce in November.

If the impact of Wednesday’s ruling on the broader NFT market remains up for debate, one point that doesn’t is that things don’t look great for Dapper Labs. “And if looks and feels like something where people are giving money and relying on a promised roadmap, it may find itself in the same position.” They’re really trying to understand what’s going on, and they’re doing a pretty good job of it,” he said. “It would be a mistake to conclude from this, ‘Well, I’m on a public blockchain, so this is irrelevant to me,’” Lewis Cohen, an attorney focusing on blockchain and tokenization, told Decrypt. That dynamic, in which a company builds both an NFT collection and the blockchain on which it lives, is atypical in the industry- the vast majority of NFT collections exist on public, permissionless blockchains like Ethereum and Solana. īut not everyone agrees that this distinction is particularly important when determining whether an NFT ought to be considered a security. “That Dapper Labs created and maintains a private blockchain is fundamental to the Court’s conclusion,” Marrero said. Such a relationship between a passive product and the active work of a separate entity is core to the definition of a security under U.S. Holders of Top Shot NFTs are therefore unavoidably invested in the success, or at least the survival, of Dapper Labs, according to the judge. “That is the critical causal connection that other collectibles cases lack.” “If, hypothetically, Dapper Labs went out of business and shut down the Flow blockchain, the value of all Moments would drop to zero,” Marrero wrote. Want to be a crypto expert? Get the best of Decrypt straight to your inbox. Top Shot NFTs may be securities not only because Dapper Labs created them, said the judge, but also because the company built the Flow blockchain upon which the NFTs were launched. Goldman reasons that the court’s decision may actually bode well for the broader NFT market because of the emphasis that Judge Marrero placed on Dapper Labs’ Flow blockchain as a “private” network. “For most people who mint NFTs using public blockchains, and who allow their NFTs to be traded on marketplaces, I think this is actually a pretty good decision,” Jeremy Goldman, an attorney specializing in blockchain technology, told Decrypt. NFTs are ded… right? /jqCi8CqURz- Teng Yan ⛩ February 22, 2023

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