Dapper Labs, the company behind the once immensely popular NBA Top Shot Moments NFT collection, has settled a class-action lawsuit for $4 million. The lawsuit alleged that the company violated securities laws by improperly selling digital collectibles.

According to court documents, the $4 million settlement will be allocated to a settlement fund available to qualifying claimants. Dapper Labs issued a statement asserting that the settlement in the Friel vs. Dapper Labs case reinforces the company's stance that NBA Top Shot Moments are not securities under federal law.

The resolution of this case is notable because, in the previous year, the judge overseeing the case had ruled that NBA Top Shot Moments NFTs met the criteria to be considered securities, allowing the lawsuit to proceed. Plaintiffs accused Dapper Labs of making hundreds of millions of dollars in profit by selling unregistered securities and artificially inflating the market for its NFTs. They also claimed that the company prevented users from withdrawing their funds for extended periods, as reported by The Verge.

Originally filed in 2021 with the U.S. District Court for the Southern District of New York, the case involved allegations that significantly impacted Dapper Labs' operations and reputation. Roham Gharegozlou, co-founder and CEO of Dapper Labs, who was named as a co-defendant in the lawsuit, expressed satisfaction with the settlement. "We are pleased with the results of today’s settlement, which marks a significant step forward for Dapper Labs and the Flow community," Gharegozlou said in a statement.

NBA Top Shot NFTs are minted on the Flow blockchain, developed by Dapper Labs. The company highlighted that since March 2022, four additional marketplaces have been authorized to display and sell NBA Top Shot Moments, providing collectors with more flexibility and opportunities to trade and enjoy their Moments. This expansion has the full support of the NBA and the NBA Players Association.

At its peak, monthly trading volumes for NBA Top Shot NFTs reached $226 million in February 2021, according to CryptoSlam data. However, like many top-tier NFT collections, trading volumes have declined significantly since then.

The settlement marks a crucial turning point for Dapper Labs, allowing the company to move forward and continue developing its ecosystem on the Flow blockchain while addressing the legal challenges posed by the evolving regulatory landscape surrounding digital assets.