Bored Ape NFTs and ApeCoin Declared Not Securities in Landmark U.S. Court Ruling

A California federal court has dismissed a major lawsuit alleging that Bored Ape Yacht Club (BAYC) NFTs and ApeCoin qualify as securities. The decision, hailed as a defining moment for the NFT industry, clarifies the regulatory stance on high-profile digital collectibles and digital currencies.

Key Takeaways

• U.S. federal judge ruled Bored Ape NFTs and ApeCoin are not securities.

• The judgment distinguished Bored Ape NFTs from other collections previously deemed securities.

• Creator royalties and third-party marketplace sales weakened arguments for securities classification.

• The outcome sets a critical precedent for NFT regulation in the United States.

Background: The Lawsuit Against Yuga Labs

For years, Yuga Labs—the company behind BAYC and ApeCoin—has faced legal scrutiny over whether its flagship digital collectibles functioned as unregistered securities. Plaintiffs argued that Yuga Labs marketed the NFTs as investment opportunities, leading to a class-action suit seeking damages and regulatory intervention.

Legal Reasoning: Why Bored Ape NFTs Are Not Securities

Central to the ruling was the application of the “Howey Test,” a longstanding legal standard used to determine if an asset qualifies as a security. The court found that:

1. No Common Enterprise: Buyers of Bored Ape NFTs predominantly used third-party platforms like OpenSea rather than purchasing directly from Yuga Labs. This undermined the existence of a shared financial enterprise between buyers and the creators.

2. Royalties Structure: The judge noted that Yuga Labs collects royalties on secondary sales, meaning the company could profit regardless of whether NFT holders did. This decoupling differentiated Bored Ape NFTs from investment contracts where profit is directly tied to issuer performance.

3. Consumptive vs. Investment Intent: Bored Ape NFTs were marketed primarily as digital collectibles and gateways to exclusive online communities, not as vehicles for financial return. The court determined that simply promising future utility or club benefits did not convert the NFTs into investment products.

Implications for the NFT and Crypto Sector

This court decision is likely to have far-reaching implications, setting a precedent for how similar NFT projects will be regulated in the U.S. It bolsters the argument that many NFTs, particularly those lacking core investment features, should be classified as digital assets rather than securities.

Despite the favorable legal outcome for Yuga Labs, market sentiment around Bored Ape NFTs remains subdued. The collection’s floor prices have dropped significantly from their 2022 highs, reflecting broader market trends and shifting public interest in NFTs.

What’s Next?

The conclusion of both SEC investigations and a definitive court ruling in favor of Yuga Labs offer clearer guidelines for NFT creators and buyers alike. However, the regulatory landscape remains fluid, with future cases likely to re-examine the boundaries between digital assets and securities.

Legal experts anticipate further legal developments as the NFT market matures, but this case provides a meaningful reference point for courts, regulators, and innovators moving forward.

References

• US court rules Bored Ape NFTs are not securities, Cryptopolitan.

• Bored Ape NFTs Are Not Securities, Court Rules in Landmark Decision, Decrypt.

• Judge Dismisses Lawsuit Against Yuga Labs Over NFTs, CoinCentral.

• Bored Ape NFTs Aren't Securities, Judge Holds, Law360.

• Bored Ape NFTs Not Securities, Federal Judge Rules in Key Yuga Labs Case, CryptoRank.