- Already the SEC has started regulation by enforcement approach.
- The ruling comes as Top Shot’s Moments matched the criteria for an investment contract.
U.S. District Judge Victor Marrero’s decision to classify Flow’s NBA Top Shot NFTs as securities have caught many off guard. Moreover, the judge’s decision was predicated on the fact that Dapper Labs kept a private blockchain. And limited NFT trading to the Flow platform.
The value of these NFTs, sometimes referred to as “Moments,” was entirely dependent on Dapper Labs’ internal processes, thus purchasers had to put all their faith in the company.
Since that Top Shot’s Moments matched the criteria for an investment contract, the court ruled that they were securities. This was owing to the fact that Dapper Labs, the company behind NBA Top Shot and the administration, had a direct impact on Moments’ worth.
Case-by-Case Basis
Investors alleged that the NFTs should be classified as securities under U.S. federal law, therefore a case was launched in the U.S. District Court for the Northern District of California. As an added complication, Dapper Labs had breached securities laws by failing to file the NFTs with the SEC.
Moreover, whether or not different types of digital assets should be categorized as securities was a major topic of controversy at the time this judgment was reached. Already the SEC has started regulation by enforcement approach towards the crypto sector as a whole. And this latest ruling will strengthen its claws.
Judge Victor Marreo stated:
“Ultimately, the Court’s conclusion that what Dapper Labs offered was an investment contract under Howey is narrow. Not all NFTs offered or sold by any company will constitute security, and each scheme must be assessed on a case-by-case basis.”
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