Dapper Labs reaches a settlement with the plaintiff, Flow Blockchain confirms its decentralization status

In 2021, the Flow Blockchain and NBA Top Shot developer Dapper Labs were accused of selling NFTs as unregistered securities. The chief plaintiff Jeeun Friel stated in the lawsuit documents that "NBA Top Shot Moments" should be considered securities because their value would increase with the success of the project, arguing that Dapper Labs should have registered with the U.S. Securities and Exchange Commission but did not, violating U.S. securities law.

After a long legal process, this high-profile case has recently made significant progress: Dapper Labs has successfully reached a settlement agreement with the plaintiffs.

Dapper Labs co-founder and CEO stated: "We are satisfied with the settlement outcome, which is an important milestone for the company and the Flow community. Legal clarity allows us to focus on our core mission of providing better services to users, while also creating greater opportunities for developers, partners, and entrepreneurs on the Flow Blockchain, enabling them to confidently develop innovative Web 3 applications for global users."

It is worth noting that this case also confirms that Flow is a completely decentralized, permissionless public Blockchain that is not controlled by Dapper Labs. Flow will continue to focus on building an on-chain world that empowers users to take control of their data, digital assets, and online identities, with the goal of ensuring that digital communities can thrive in an open, decentralized environment. On the Flow Blockchain, creators can build content for the community without worrying about platform dependency risks, helping people explore the Web 3 world easily and securely.

Legal clarity paves the way for continuous innovation

Dapper Labs, as the creator of the Flow Blockchain, is committed to making it easy and safe for everyone to access Web3, while fostering innovation and building a prosperous digital community.

This settlement not only consolidates the company's commitment to innovation and decentralization in the digital collectibles space, but also further indicates that the NBA Top Shot Moments it offers do not constitute securities under U.S. federal law. The increased legal clarity provides favorable conditions for the company's ongoing development and innovation.

In fact, NBA Top Shot has continued to make good progress during the lawsuit period. Data shows that since January 2024, over 27,000 independent collectors have purchased collectibles on the platform; the user conversion rate has increased fivefold since November 2023; in the fourth quarter of 2023, the average number of independent collectors spending over $1,000 per week on the platform was 135, rising to 241 in the first quarter of 2024, an increase of 78%. In addition, the company launched the daily game Fast Break utilizing NBA Top Shot Moments, attracting a large number of active players to interact with NBA and WNBA games. In April this year, a 1-of-1 Moment of San Antonio Spurs star Victor Wembanyama sold for a high price of $145,000, attracting widespread attention.

Other Key Points of the Settlement Agreement

1. Decentralization: The Flow Blockchain operates as a fully decentralized public blockchain, capable of continuing to function even without Dapper Labs, providing a robust and independent ecosystem for users and developers.

2. Market Expansion: Since March 17, 2022, four new markets have been authorized to showcase and sell NBA Top Shot Moments. This move has the support of the NBA and the Players Association, providing collectors with more opportunities to trade and experience the exciting moments of the NBA.

3. User Experience Optimization: The payment and withdrawal system for NBA Top Shot Moments has been improved, allowing users to process withdrawals within 2-10 business days through collaboration with payment and Blockchain technology companies.

4. Compliance and Education Commitment: The company has implemented a mandatory annual training program for all employees, focusing on compliance with U.S. federal securities laws and ethical marketing practices to ensure project transparency, legality, and protection of community interests.

5. Flow tokens and ecosystem development: The remaining Flow tokens will be transferred to the foundation wallet, and Dapper Labs will relinquish control of the tokens to support the ongoing growth and Decentralization process of the Flow ecosystem.