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NFT in trouble as user sues NBA Top Shots, claims token is security

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TL;DR Breakdown

  • Investor sues NBA top shot token developers, Dapper Labs
  • Analyzing the lawsuit
  • NBA top shot token

Jen Friel, a Virginia woman, has dragged NFT developers, Dapper Labs who made NBA Top Shots, a type of NFT marketplace where users can own unique basketball highlights.

The Virginia woman claims that the tokens they received are securities and Dapper Labs harmed her and other investors as they did not register with the Security and Exchange Commission (SEC).

Friel, who filed her Lawsuit on Friday, pleaded with the New York state court to declare that Dapper Lab and its CEO, Roham Gharegozlou, violated security laws and pay her and other investors compensation for the token they bought.

The Top Shot market, referred to by Friel, took off in February after Dapper Lab sold $2.6 million worth of highlights. Each highlight is unique on its own and registered on Dapper blockchain called flow.

Friel, in her lawsuit, query why the company prevented customers from cashing out their NFTs to hold onto their money and build up hype around Top Shots.

Lawyer speaks on NFT lawsuit

Stephen Palley, a veteran crypto lawyer, spoke on the Top Shot lawsuit and said the case was “goofy.”

He predicted the case might be struck out for technical reasons, primarily for stating that anything that might appreciate in value should be considered an “investment contract,” which is a type of security.

He, however, believes Friel has a case if Dapper Labs indeed delayed their ability to sell their NFT as cases have to be based on consumer protection laws rather than securities law.

Embattled NBA Top Shot token

The NBA Top Shot token is one of the most recent crypto-collectibles where iconic moments in NBA history are turned into non-fungible tokens.

Over the last one month, 100,000 people have purchased NBA Top Shot moments, according to data provider CryptoSlam, for varying reasons.

Some hope to possess their star’s favorite jump shot, while others want to make money by selling it for a higher price.

The increased attention on these tokens have made prices for NBA Top Shots on the rise.

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All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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