A federal judge in California has dismissed a class-action lawsuit against Yuga Labs, the company behind the Bored Ape Yacht Club (BAYC). The ruling makes it clear that BAYC NFTs and the related ApeCoin do not qualify as securities under U.S. law.
In the filing dated September 30, Judge Fernando Olguin ruled that the plaintiffs failed to prove that purchasing these non-fungible tokens (NFTs) or tokens satisfied the Howey test—the standard used to determine if an asset counts as a security.
The 2022 lawsuit accused Yuga of defrauding investors and selling unregistered securities. The judge opined that the offer of potential future benefits from NFTs does not necessarily constitute an investment.
The court also dismissed the argument that Yuga formed a “common enterprise,” a pivotal consideration in securities cases. Since NFT purchasers paid only a one-time fee and sold on third-party platforms such as OpenSea. Because of this, their financial outcomes were not directly tied to the company’s success. Even statements about NFT prices or trading volumes were not enough to suggest that buyers expected profits.
The case centered on six Yuga digital assets: BAYC NFTs, Mutant Ape Yacht Club (MAYC) NFTs, Bored Ape Kennel Club (BAKC) NFTs, Otherdeed NFTs (virtual plots in the “Otherside” metaverse), Meebits NFTs, and ApeCoin. Yuga retained commercial rights and collected a creator fee each time an NFT was resold, which the court noted further decoupled buyers’ financial outcomes from the company’s profits.
Impact on the NFT market
The ruling provides legal clarity for the NFT market. NFTs that are sold for access, perks, or cultural value, rather than as investments meant to make money, are less likely to be considered securities. This could reduce the risk of future lawsuits or U.S. Securities and Exchange Commission actions against similar projects.
Yuga Labs, which launched Bored Apes in 2021, has always said its NFTs are membership-based collectibles.
Even with the legal victory, the market has cooled since the NFTs peaked. As per CoinGecko, the current floor price for a Bored Ape is approximately 8.13 ETH, around $36,600, down from $369,900 in April 2022. However, the decision may motivate more NFT artists to emphasize utility and community over the prospect of monetary gain.
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