- •Court declares Bored Ape NFTs non-securities, boosting crypto confidence.
- •Judge rules Yuga Labs independent, breaking ties to investor profits.
- •Landmark decision reshapes NFT regulation, signaling major win for creators.
In a landmark victory for the crypto and NFT industry, a federal court in California has ruled that Bored Ape Yacht Club (BAYC) NFTs are not securities, ending a long-running class-action lawsuit that questioned the legality of one of the world’s most famous digital collectible projects.
Judge Fernando M. Olguin of the U.S. District Court for the Central District of California dismissed the case against Yuga Labs, stating that Bored Ape NFTs fail to meet the criteria of a security under the Howey test — the standard used to determine investment contracts under U.S. securities law.
A Decisive Legal Victory
The court found no “common enterprise” between Yuga Labs and BAYC NFT holders, meaning owners’ profits weren’t tied to the company’s performance. This sharply contrasts with previous cases involving Dapper Labs’ NBA Top Shot and DraftKings NFTs, where courts found tighter links between issuers and secondary markets.
Judge Olguin emphasized that BAYC NFTs were sold through third-party platforms like OpenSea and Coinbase, not by Yuga Labs directly — a key distinction that helped separate the project from securities offerings.
Royalties Strengthen Yuga’s Defense
In a critical part of the ruling, the judge noted that Yuga Labs’ fixed royalty structure — a small percentage of each resale — undermines any shared financial interest between the company and collectors. The court reasoned that because Yuga earned royalties regardless of whether buyers made or lost money, there was no mutual financial dependence.
This “decoupling” of profits, the judge wrote, shows that Yuga Labs’ revenue wasn’t based on investors’ speculative gains — further proving BAYC NFTs don’t function like securities.
A Turning Point for NFTs
The decision brings long-awaited clarity to how NFTs are viewed under U.S. law, signaling that not all digital collectibles fall under SEC oversight. It follows the SEC’s recent decision to close investigations into both Yuga Labs and OpenSea, reinforcing a trend toward reduced enforcement pressure on NFT creators.
Industry Reactions
Crypto advocates and NFT enthusiasts are hailing the ruling as a major win for innovation and decentralization. Legal experts say it sets a precedent that could protect other NFT projects — provided they maintain independent marketplaces and transparent royalty systems.