Yuga Labs’ Bored Ape NFTs Ruled Not Securities in US Federal Court Decision

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A US federal judge in California has dismissed a class-action lawsuit against Yuga Labs, ruling the company’s Bored Ape Yacht Club NFTs do not constitute securities.

Judge Fernando M. Olguin concluded that Yuga Labs’ Bored Ape NFTs did not satisfy several legal criteria required to be considered securities under US law. The plaintiffs were notably unable to prove a “common enterprise” linking investors’ potential profits to Yuga Labs’ success, a key requirement under US securities-law tests. 

Judge Olguin also pointed to the fact that buyers procured the Bored Ape NFTs via third-party marketplaces like OpenSea, lessening the NFT issuer’s control.

A significant factor in the ruling was Yuga Labs’ collection of creator royalties on Bored Ape sales. The judge interpreted this as evidence of a “de-coupling of [plaintiffs’] fortunes from those of defendants, who stood to gain even if plaintiffs sold their own NFTs at a loss.” 

This reasoning diverges from earlier US regulatory interpretations, which had argued in earlier cases that NFTs could be securities.

The ruling represents a major legal victory for Yuga Labs and the US NFT sector at large, with the SEC having also closed its investigation into the company in March of this year. Had the NFTs been ruled securities, the entire NFT ecosystem in the US could have been redefined, such as by needing more regulatory oversight. 

Yuga Labs does not appear to have publicly commented on the decision.