SEC has started to churn out unregistered securities lawsuits left and right in the cryptocurrency market. Some experts may argue that several regulatory issues plague the DeFi markets, but the focus of SEC officials to dub everything as unregistered securities seems biased and antithetical to the interests of crypto investors.

The latest project to get the burn from SEC is the Top Shots Moments NFT collection issued by NBA. This NFT collection was released in partnership with Dapper Labs.

The firm has faced a class action lawsuit filed against it 1.5 years ago that alleges the NFT violated federal securities law. The lawsuit has been directed against the CEO of DapperLabs named, Roham Ghregozlu.

Federal Judge has Rejected the Motion to Dismiss the Case Against DapperLabs

District Judge Victor Marrero has dismissed the motion filed by the defendants in the lawsuit to dismiss the case. Marrero maintains that the consideration accused by the plaintiff in lieu of the Howey Test is deemed plausible by the court. Howey Test has been a recognized acid test qualified by SCOTUS to ascertain whether a cryptocurrency is a security or not.

The ruling has also covered the native token issued by DapperLabs called Flow tokens. According to the legal decree, the token is not to be categorized as securities, but they are to be prosecuted as playing an important role in facilitating the sales of alleged NFT collection.

The court highlighted the claims of the plaintiffs that without Flow tokens, no transactions are possible on the DapperLabs platform.

According to the statement issued by Judge Marrero, Dapper Labs has existed as a private blockchain which means that its investors rely on the performance and expertise of the management to profit from their NFT purchases.

The ruling also noted that DapperLabs issued products as an investment contract and the NFTs issued by the firm might qualify as securities.

However, the ruling has dubbed the investment model that connects the cryptocurrency firm with its investors as dubious. Therefore, the judge has ruled that NFTs issued by the firm qualify as unregistered securities.

The court has granted the motion in favor of the SEC to classify NBA NFTs as unregistered securities and need to be registered with SEC. DapperLabs has three weeks to submit a response or appeal.