What to Expect from the Dapper Development Lawsuit
The dapper development lawsuit refers to two separate but related class action cases against Dapper Labs, Inc., the Vancouver-based blockchain company behind NBA Top Shot. The first and most well-known is Friel v. Dapper Labs, Case No. 1:21-cv-05837-VM, filed in the U.S. District Court for the Southern District of New York in May 2021. It alleged that Dapper Labs sold NBA Top Shot Moments NFTs as unregistered securities in violation of federal law.
That case settled for $4 million with final court approval granted in October 2024. The second case is a separate 2025 privacy class action alleging Dapper Labs shared user personal data without consent in violation of the Video Privacy Protection Act. That case settled for $5 million, with a final approval hearing scheduled for April 15, 2026.
What Is the Dapper Development Lawsuit? Background on Dapper Labs
Dapper Labs is a blockchain technology company headquartered in Vancouver, Canada. Founded by Roham Gharegozlou, the company developed the Flow blockchain and launched NBA Top Shot in 2020 in partnership with the National Basketball Association and the NBA Players Association.
NBA Top Shot allows users to buy, sell, and trade officially licensed digital video highlights called Moments. Each Moment is an NFT minted on the Flow blockchain and traded exclusively on Dapper Labs’ proprietary marketplace. During the height of the NFT market in early 2021, monthly trading volumes for NBA Top Shot Moments peaked at $226 million in February 2021, according to CryptoSlam data. The platform generated hundreds of millions of dollars in revenue from transaction fees and primary sales during that period.
Beyond NBA Top Shot, Dapper Labs operated several other NFT platforms under the same infrastructure. These included NFL All Day, Disney Pinnacle, UFC Strike, and La Liga Golazos. The user data collected across all these platforms became the basis of the second major lawsuit discussed later in this article.
The Securities Lawsuit: Friel v. Dapper Labs (2021 to 2024)
The primary dapper development lawsuit was filed in May 2021 by lead plaintiff Jeeun Friel on behalf of a proposed class of NBA Top Shot Moments purchasers. The case was filed in the U.S. District Court for the Southern District of New York, assigned to Judge Victor Marrero, and bears the docket number 1:21-cv-05837-VM.
The complaint named Dapper Labs and its CEO Roham Gharegozlou as defendants. The central legal theory was that NBA Top Shot Moments constituted unregistered securities under the Securities Act of 1933 and the Securities Exchange Act of 1934.
The Howey Test Application
The Howey test, derived from the U.S. Supreme Court’s 1946 decision in SEC v. W.J. Howey Co., defines an investment contract as an investment of money in a common enterprise with a reasonable expectation of profits derived from the efforts of others. Meeting all four elements means the asset qualifies as a security under federal law and must be registered with the Securities and Exchange Commission before being sold to the public.
The plaintiff class argued that NBA Top Shot Moments satisfied every element. Buyers invested real money to acquire Moments. The value of those Moments depended on a common enterprise built on the Flow blockchain and managed exclusively by Dapper Labs. Buyers held a reasonable expectation of profit, supported by Dapper Labs’ own marketing language that emphasized the financial upside of owning limited-edition digital collectibles. And critically, all profits depended on the efforts of Dapper Labs, which controlled Moment supply, set transaction fees, managed the marketplace, and determined which NFTs were produced and when.
The plaintiffs also alleged that Dapper Labs artificially supported the market for Moments and that users experienced significant difficulties withdrawing funds from the platform for extended periods, giving the company outsized control over liquidity in ways that mirrors the control an issuer exercises over a security.
The February 2023 Motion to Dismiss Ruling
On February 22, 2023, Judge Victor Marrero issued a pivotal ruling denying Dapper Labs and Gharegozlou’s motion to dismiss the case. The court held that, accepting all allegations as true at the pleading stage, the plaintiffs had adequately alleged that Dapper Labs offered NBA Top Shot Moments without a registration statement in violation of Sections 5 and 12(a)(1) of the Securities Act of 1933. The court also held that the plaintiffs had adequately alleged control person liability against Gharegozlou personally under Section 15 of the Securities Act.
This ruling was one of the first federal court decisions to hold that NFTs could potentially be classified as securities under the Howey test. It sent immediate shockwaves through the NFT and blockchain industry because it established that the digital collectibles label does not automatically exempt a product from securities law coverage if the underlying economics meet the Howey criteria.
The case was allowed to proceed to discovery and class certification proceedings following that ruling.
The June 2024 Settlement: $4 Million
In June 2024, Dapper Labs announced that it had agreed to settle Friel v. Dapper Labs for $4 million. According to court documents provided by Dapper Labs and reported by The Block, the $4 million would be allocated to a settlement fund available to qualifying claimants.
The Settlement Fairness Hearing was originally scheduled for September 27, 2024, then rescheduled to October 25, 2024. The official settlement administration website, frielvdapperlabssettlement.com, confirmed that final court approval was granted following the October 2024 hearing.
Dapper Labs stated publicly: the settlement in the Friel vs. Dapper Labs case further asserts Dapper Labs’ conviction that NBA Top Shot Moments are not securities under federal law. CEO Roham Gharegozlou stated the company was pleased with the results of the settlement, which he described as a significant milestone.
The settlement was reached without any admission of wrongdoing by Dapper Labs or Gharegozlou.
Who Was Eligible for the Securities Settlement
The settlement class covered individuals who purchased or acquired NBA Top Shot Moments from June 15, 2020 through December 27, 2021, both dates inclusive. This is the confirmed class period from the official settlement administration website.
Given the scale of NBA Top Shot’s user base during that period and the $226 million peak monthly trading volume in February 2021, the class was large. Individual pro-rata payments from a $4 million fund spread across a substantial class were modest. The primary legal significance of the case was in the precedent set by Judge Marrero’s motion to dismiss ruling, not in the size of the individual checks distributed to class members.
The Privacy Lawsuit: $5 Million VPPA Settlement (2025 to 2026)
The second major component of the dapper development lawsuit involves an entirely different legal theory. This case alleged that Dapper Labs violated the Video Privacy Protection Act, commonly known as the VPPA, by sharing users’ personally identifiable information with third parties through video tracking pixels embedded in its platforms.
The platforms covered by this claim included NFL All Day, Disney Pinnacle, UFC Strike, NBA Top Shot, and La Liga Golazos. Users with accounts on any of these platforms were potentially affected.
The specific allegation was that Dapper Labs used third-party video tracking technology that transmitted user identity and viewing data to outside entities without the users’ express consent. The VPPA was enacted in 1988 and makes it illegal for any company that handles video content to disclose personally identifiable information to third parties without written consent from the user. Courts have increasingly applied the VPPA to digital streaming and NFT video platforms over the past several years.
Dapper Labs agreed to a $5 million settlement to resolve this privacy class action. According to ClassAction.org’s April 2026 reporting, the court scheduled the final approval hearing for April 15, 2026. Compensation distribution to class members would begin only after final approval is granted and any appeals are resolved.
As of June 2026, the $5 million VPPA settlement is in the final approval phase. If no appeals are filed following the April 15 hearing, distribution to class members should begin in the latter half of 2026.
The Regulatory Landscape That Made These Cases Possible
The dapper development lawsuit exists within a specific regulatory context that shaped how courts evaluated both the securities and privacy claims.
On the securities side, the SEC has applied the Howey test to digital assets with increasing frequency since 2018. The SEC’s DAO Report in 2018 established that tokens with centralized control can qualify as securities regardless of how issuers categorize them. The Ripple Labs litigation over XRP tokens, which ran in parallel with the Friel case, raised similar issues and ultimately produced a mixed ruling in 2023 that distinguished between institutional and retail sales. Judge Marrero’s February 2023 ruling in Friel built on that evolving body of law and was among the first to specifically apply the Howey analysis to sports highlight NFTs.
The Financial Innovation and Technology for the 21st Century Act, known as FIT21, was passed in 2024. This legislation attempts to create clearer regulatory boundaries between digital assets that qualify as commodities under CFTC jurisdiction and those that qualify as securities under SEC jurisdiction. FIT21 has been cited by industry participants as potentially reducing the uncertainty that led to lawsuits like Friel v. Dapper Labs. However, the legislation’s full implementation and regulatory rulemaking is still ongoing as of June 2026.
On the privacy side, the VPPA has become an increasingly active source of class action litigation against digital media and technology platforms. Cases have been brought against news websites, streaming services, and now NFT platforms. The Dapper Labs VPPA settlement at $5 million is consistent with settlements in similar VPPA cases against other technology companies.
How Dapper Labs Changed Its Business After the Lawsuit
The dapper development lawsuit produced not just a financial settlement but behavioral changes at Dapper Labs that are visible in how the company operates its platforms in 2026.
On the Flow blockchain, Dapper Labs moved away from being the exclusive operator of all NBA Top Shot marketplace activity. The company open-sourced components of the Flow ecosystem and approved external third-party marketplaces for trading Moments, which reduced the degree of centralized control that formed the foundation of the Howey securities argument. Having independent marketplaces operating on Flow means Dapper Labs can argue it no longer meets the common enterprise and efforts of others elements of the Howey test in the same way.
The company also adjusted how it markets its NFT products. Marketing language that emphasized investment potential or financial appreciation was removed from promotional materials. The shift toward emphasizing collectibility and fan engagement rather than financial upside is a direct response to the securities lawsuit arguments.
On the privacy side, Dapper Labs updated its data handling practices and third-party pixel policies across all platforms following the VPPA settlement. Written consent mechanisms for video data sharing were strengthened.
What the Dapper Development Lawsuit Means for the NFT Industry
Every major NFT platform operating in 2026 with a centralized marketplace structure should treat Friel v. Dapper Labs as essential reading.
The February 2023 motion to dismiss ruling is the most legally significant outcome of the entire dapper development lawsuit. The settlement that followed was a business decision to close an expensive and uncertain litigation. The ruling itself established that a federal court found adequate legal basis to allow a securities claim against an NFT issuer to proceed to full litigation. No ruling on the merits was ever issued because the parties settled first. That means the question of whether NFTs like NBA Top Shot Moments are actually securities under federal law remains technically unresolved by a final court judgment.
For NFT platforms, the practical lesson is that centralized control over supply, pricing, marketplace access, and liquidity creates meaningful securities law exposure when buyers are also experiencing profit expectations based on that centralized management. Decentralization is not just a philosophical preference in the blockchain world. After Friel, it is a legal risk management strategy.
For investors and buyers of NFTs, this case established that federal securities law claims are available as a legal theory against centralized NFT platforms, even if the platform calls its products collectibles rather than investments. The VPPA case separately established that video NFT platforms face the same privacy compliance obligations as any other video streaming service.
Frequently Asked Questions
What is the dapper development lawsuit?
It refers to two class action cases against Dapper Labs. The first, Friel v. Dapper Labs, Case No. 1:21-cv-05837-VM, alleged NBA Top Shot Moments were sold as unregistered securities and settled for $4 million with final approval in October 2024. The second alleged Dapper Labs shared user personal data without consent under the VPPA and settled for $5 million with a final approval hearing scheduled for April 15, 2026.
Who is eligible for the Dapper Labs securities settlement?
The class covers individuals who purchased or acquired NBA Top Shot Moments from June 15, 2020 through December 27, 2021. The official settlement administration website is frielvdapperlabssettlement.com.
How much did Dapper Labs pay to settle the lawsuit?
Dapper Labs settled the securities lawsuit for $4 million in June 2024, with final court approval in October 2024. A separate VPPA privacy lawsuit settled for $5 million, with final approval pending as of June 2026.
Did the court rule that NBA Top Shot Moments are securities?
No final ruling on the merits was issued. Judge Victor Marrero of the Southern District of New York ruled in February 2023 that the plaintiffs had adequately alleged securities law violations to survive a motion to dismiss, allowing the case to proceed. The case then settled before a final ruling was issued. Dapper Labs has maintained its position that Moments are not securities.
What is the VPPA settlement against Dapper Labs about?
The Video Privacy Protection Act settlement alleges Dapper Labs shared personally identifiable user information with third parties through video tracking pixels embedded in its NFT platforms, including NFL All Day, Disney Pinnacle, UFC Strike, NBA Top Shot, and La Liga Golazos, without users’ express consent. The $5 million settlement is pending final court approval as of June 2026.
What is the current status of the dapper development lawsuit in 2026?
The $4 million securities settlement received final court approval in October 2024 and is resolved. The $5 million VPPA privacy settlement had a final approval hearing scheduled for April 15, 2026. Distribution to class members begins after final approval is granted and any appeals are resolved.
Final Word
The dapper development lawsuit is a two-chapter legal story that stretches from 2021 through 2026 and touches the two most significant legal risks facing NFT platforms today: securities regulation and consumer privacy. The $4 million securities settlement closed one chapter without ever producing a final ruling on whether NFTs are securities. The $5 million VPPA settlement closes a second chapter on digital privacy obligations for video-based NFT platforms.
Both cases together represent the legal framework that every NFT platform, blockchain developer, and digital collectibles issuer must now account for in their compliance and product design decisions. The law did not create exceptions for NFTs. These cases confirmed it will not.
Note: This article is for informational purposes only and does not constitute legal or financial advice.