Dapper Labs, the company behind NBA Top Shot, has reached a $4 million settlement in a class action lawsuit that accused the firm of illegally offering securities.

The lawsuit, filed by disgruntled customers, claimed that Top Shot NFTs were sold as unregistered securities. According to court filings, Dapper Labs will pay $4 million to the plaintiffs, which includes monetary relief and legal fees. In return, the plaintiffs will give up any future claims that Top Shot NFTs are securities, as stated by Dapper Labs CEO, Roham Gharegozlou.

“The settlement provides legal clarity and allows Dapper Labs to concentrate on its main goal—providing unmatched experiences for its core users,” Gharegozlou said.

Last year, a federal judge ruled that the lawsuit could proceed, suggesting that Top Shot NFTs might be considered securities. The ruling was influenced by the fact that Top Shot NFTs are based on Flow, a blockchain network created by Dapper. The judge viewed Flow as a “private” blockchain, unlike Bitcoin or Ethereum, which are decentralized.

The judge also noted that Dapper’s statements suggested the collectibles would appreciate in value. Despite Dapper’s claims that Flow is decentralized, the lawsuit’s plaintiffs demanded certain business changes as part of the settlement. These changes include transferring Dapper’s FLOW tokens for the Ecosystem Reserve to the Flow Foundation and allowing third-party marketplaces to trade Top Shot NFTs.

The lawsuit, originally filed in 2021 during the digital asset boom, was one of the first significant tests of the security status of NFTs. While American regulators have scrutinized the crypto market, NFTs have largely avoided widespread rejection as securities.

With this settlement, Dapper Labs can now focus on innovation without the looming threat of legal disputes. The resolution marks a significant moment in the evolving landscape of blockchain and digital collectibles.