Dapper Labs NFT Case: Emojis Count as Financial Incentive
Using emojis on Twitter, thinking they’re a safe way to avoid being called out for issuing financial advice? Not so fast.
A U.S. federal court judge has ruled that a number of emojis, such as a rocket flying in the air, are not just a means of visual appeal. They are also a form of investment advice.
In a US District Court Southern District of New York decision and order dated Feb.22, which focuses on the lawsuit against Dapper Labs’ NBA Top Shot non-fungible tokens (NFTs) filed in 2021, a federal judge analyzes two tweets made by the company regarding their chief product Moments.
Source: US District Court Southern District of New York decision and order dated Feb.22
“Each tweet promotes a recent sale or statistics of recent sales of Moments on the Marketplace. And although the literal word profit is not included in any of the Tweets, the “rocket ship” emoji, the “stock chart” emoji, and “money bags” emoji objectively mean one thing: a financial return on investment,” the judge writes.
The court explains that the attempt to state that these “tweets merely provide accurate facts regarding recent sales, and do not reference any gains or losses” is not entirely so due to the alleged sales structure of Moments packs as Dapper Labs markets Moments based on scarcity, offering common, rare, legendary, and other premium packs.
“The pricing of these packs at a drop is as low as $9 for common packs and higher based on the promise of acquiring scarcer Moments. Taken together with the Tweets promoting record-high sales, exponentially higher than the price of Moments in the pack, makes it plausible that Dapper labs objectively led purchasers to expect that they would realize the same gains,” the judge writes.
The court also cites an investor called Jesse Schwarz who stated that purchases of Moments “are investments” and that he was motivated to buy the Moment of a LeBron James dunk for “$208,000” because “it was worth seven figures right away.”
NBA Top Shot is a marketplace where you can purchase stills, a.k.a Moments, of NBA players in action. The site offers its users to choose multiple options, including by offering different tiers such as Legendary (0.09%), Rare (1.6%), Fandom (2.5%), and Common (95.8%).
To remind, plaintiffs Gary Leuis and John Austin on behalf of all others similarly situated brought the lawsuit against Dapper Labs and its CEO Roham Gharegozlou in 2021. In it, they allege that Dapper Labs violated the securities laws by offering for sale NBA Top Shot Moments NFTs without filing a registration with the U.S. Securities and Exchange Commission (SEC).
The decision to give the green light to the examination of Dapper Labs’ NFT offering comes in the middle of the SEC’s crackdown on the crypto industry. Find out more about the SEC’s attitude to crypto in this article.
Previously, Gagarin News reported that Dapper Labs introduced restrictions for Russian users.
