Dapper Development Lawsuit: What It Means and Why It Matters

• More than 1 million consumers and investors came together to sue Dapper Labs, the company behind NBA Top Shot Moments.
• Major allegations surrounded how Moments could be categorized and sold as securities under the U.S. Federal Securities laws.
• Recently the company put an end to the legal battle after reaching a settlement amount of about $4 million.

If you have been hearing the massive settlement amount that has been decided as a payout in the Dapper Development Lawsuit, then let me tell you that there’s much more to it!

Dapper labs have been making a lot of noise recently, and sadly, it is because of the legal battles that the NFT company has been facing. And very rightly so!

While researching about this lawsuit, I realized how volatile the entire market surrounding NFTs can be. And how difficult it might be to purchase such digital tokens when they are shaking the very foundation of what we call “securities” under the law of the United States.

At the same time, this lawsuit made me think about how has the economy changed so much when we are treating literal “collectibles” of popular NBA stars as securities.

Hi. In today’s blog, I will be talking about what the entire buzz around the Dapper Development Lawsuit is all about. And how you might be a part of the settlement amount.

So, if these are some of the things that you want to know, then you have come to the right place. Therefore, keep on reading this blog till the end, and thank me later…

About The Dapper Lab NBA Top Shot

In the year 2020, Dapper Labs, with their partnership with the National Basketball Association (NBA), launched NBA Top Shot. It is basically a platform where fans can buy, sell, as well as trade non‑fungible tokens, or, most popularly called, NFTs.

Like we all know, NFTs have separate names based on their categories and type. The digital tokens that you can trade here are called Moments. And these represent the popular highlights of your favorite NBA players.

Yes, you read that absolutely right.

The Dapper Development Lawsuit: What Is The Dapper Lab NBA Top Shot Lawsuit About?

Now, fast forward to 2021.

A group of investors purchased Moments from the Vancouver-based blockchain company. However, after a few days in May, they claimed that these “constitute unregistered securities” under the U.S. federal securities laws.

As per reports, the “plaintiffs allege(d) that Dapper Labs violated United States (US) securities law by selling Moments to professional basketball fans without registering them with regulators.”

Major Allegations In The Dapper Development Lawsuit

Some of the major allegations in the Dapper Labs lawsuit, as I have already mentioned above, are related to the incorrect classification of the NFT and the violation of securities laws.

According to the 2021 class action, here are the two major allegations that the group of investors has argued about:

• Moments were offered and sold as unregistered securities under U.S. federal securities laws.
• Dapper Labs restricted purchasers’ ability to withdraw cash or trade Moments on other platforms, artificially boosting their perceived value.

However, in response to the lawsuit, the “high-tech successor to trading cards” denied any wrongdoing. 

They countered the allegation, stating that just like trading card, the NBA Top Shot Moments are simple “collectible” digital items and not securities. However, they agreed to settle the case.

In a rather long post on his X account, the founder of the digital token company Roham Gharegozlou talked about the allegations:

“These were the main allegations we wanted to prove, and continuing to litigate would have been a distraction from our core mission. The settlement also involves Dapper Labs reaffirming its commitment to the decentralization of Flow, as well as confirming the full transfer of all $FLOW coins as part of the ecosystem development reserve to the Flow Foundation.”

Denied Motion To Dismiss In February 2023

Dapper had filed a motion to dismiss the entire case. However, things did not go according to their plans. On 22nd February 2023, Judge Victor Marrero denied their motion to dismiss.

While Dapper’s social media post stated that the judge “did not conclude the plaintiffs were right, and it’s not a final ruling on the case’s merits,” several sources say other things.

According to Belakit, here’s what Marrero wrote in his decision:

“In sum, Plaintiffs adequately allege that Dapper Labs’s offer of the NFT, Moments, was an offer of an “investment contract” and therefore a “security,” required to be registered with the [US Securities and Exchange Commission].”

The plaintiffs have alleged that Moments met all the key parameters that would automatically make it fall under the category of securities under the Howey test. And these parameters are as follows:

• An investment of money.
• A common enterprise.
• A reasonable expectation of profits.
• Profits derived from the efforts of others.

Additionally, the court also emphasized on a critical point. They stated that the control the company has over Flow blockchain and its marketplace is something that created the expectations of a lot of profit. And this was a result of Dapper’s promotional efforts.

What Is The Settlement Amount For The Dapper Development Lawsuit?

By the time it was June 2024, Dapper Labs decided to end the lawsuit with a settlement amount of $4 million.

However, there is one thing that I would like to reiterate here: even while they chose to pay the settlement amount, they did not agree to have done anything wrong.

Furthermore, they also stated that the plaintiffs will no longer be able to claim that Moments are securities. Additionally, as part of the deal with the plaintiffs, Dapper Labs also made certain business changes.

For instance, the ones that you MUST know about are the following:

• Transfer control of Flow tokens to a Flow Foundation to promote decentralization.
• Implement annual securities‑law training for staff.

Eventually, on 28th October 2024, the court finally approved the certification of the litigation as a class action. This meant that individuals who have purchased Moments between June 15, 2020 and December 27, 2021 will be able to get a part of the claim.

After analyzing that, the court found the settlement to be fair enough and closed the case. However, if needed, the plaintiffs can appeal for it to be reopened.

When Is The Payout Date For The Lawsuit?

In March 2025, Trading View confirmed that Dapper Labs had agreed to pay “$4M to settle claims that it sold unregistered securities and restricted cash withdrawals, artificially inflating the value of NBA Top Shot Moments.”

Therefore, if all the class members claim their share, an “average payout will be $0.12 per share” that each of them is supposed to get.

Here’s a timeline that you need to take a look at:

Date	Event
May 2021	Complaint filed alleging unregistered securities
Feb 22, 2023	Court denies motion to dismiss (Howey elements met)
June 3–7, 2024	Dapper agrees to $4M settlement
Oct 28, 2024	Final judgment certifies settlement class
Early 2025	Settlement fund administered, notice mailed

Note: The settlement administration or the court has not yet announced the payout date of the settlement. I will update this section once information about the payout is made public.

Frequently Asked Questions (FAQs):

Here are some of the questions that most people searching about the Dapper Development Lawsuit have! Take a look at them before you leave:

1. Who Is Eligible To Get Their Share In The Lawsuit?

Anyone who purchased or invested in Moments from June 15, 2020, to December 27, 2021 are eligible to have a share of this settlement amount.

2. What Amount Can You Recover From The Settlement?

The exact amount that each class member will receive completely will depend on the specification of the trade as well as the number of investors who participate in the settlement.

3. How Long Will It Take For You To Receive Payout?

The entire process will take somewhere from 4 to 9 months after the deadline of the claim. Additionally, the entire timeline will depend on the settlement administration.

Read Also:

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