Bored Ape NFTs Not Deemed Securities in Federal Ruling

Federal Judge Rules Bored Ape NFTs Not Securities

A U.S. federal judge has determined that Bored Ape Yacht Club (BAYC) non-fungible tokens (NFTs) and ApeCoin do not constitute securities, dismissing a class-action lawsuit against their creator, Yuga Labs. The ruling, issued by Judge Fernando M. Olguin of the U.S. District Court for the Central District of California, offers significant legal clarity regarding the regulatory status of certain digital assets and may influence the future landscape for NFT projects.

The Event in Detail: Application of the Howey Test

The court's decision centered on the application of the Howey Test, the established legal framework used to assess whether an asset qualifies as an investment contract and thus a security. Judge Olguin concluded that the plaintiffs failed to satisfy the test's three prongs, specifically finding no "common enterprise" linking the financial success of NFT holders to the operations of Yuga Labs. Key distinctions highlighted by the court included:

• Decentralized Sales Platform: BAYC NFTs were acquired through third-party marketplaces such as OpenSea and Coinbase, rather than an exchange directly operated by Yuga Labs. This contrasts with other NFT collections previously deemed plausible securities, such as Dapper Labs' NBA Top Shot NFTs, which often involved issuer-controlled platforms.
• Royalty Structure: The court noted that Yuga Labs' receipt of royalties from secondary NFT sales was structured as a fixed fee, independent of whether the buyer made a profit or incurred a loss. This mechanism was interpreted as "decoupling" the financial interests of Yuga Labs and the NFT holders.
• One-Time Minting Fees: The economic model primarily involved one-time minting fees, rather than ongoing capital contributions or profit-sharing arrangements typically associated with traditional securities offerings.
• Marketing Emphasis: Yuga Labs consistently marketed its BAYC NFTs as a membership-based digital collectible project, prioritizing social identity, creative ownership, and community culture over direct financial returns. This strategic positioning was instrumental in the court's finding that the NFTs were presented as digital collectibles with membership perks, not as speculative investment instruments.

Analysis of Market Reaction and Broader Context

This landmark ruling sets a critical precedent for the classification of NFTs under U.S. securities law, potentially reducing regulatory uncertainty for creators and holders of similar digital assets. The decision reinforces the view that most digital collectibles, if marketed as consumables and emphasizing community engagement, may not be subject to stringent securities regulations. Furthermore, the Securities and Exchange Commission (SEC) closed its three-year probe into Yuga Labs in March 2025 without pursuing enforcement action, an outcome reflecting broader pro-crypto regulatory shifts, particularly under the Trump administration.

Despite the legal victory, the immediate market reaction for Bored Ape NFTs has been muted. The floor price for a BAYC NFT currently stands at approximately $37,337, representing a substantial 90% decline from its peak value in April 2022. Analysts largely attribute this depreciation to broader market corrections within the cryptocurrency and NFT sectors, rather than directly to the legal ruling itself. Despite this decline in individual NFT value, Yuga Labs' NFTs have collectively accumulated an estimated $7.2 billion in trading volume since their launch in 2021.

Looking Ahead: Regulatory Landscape and Market Evolution

The ruling is expected to influence future cases and may prompt regulators and plaintiffs to focus on digital assets with clearer profit-driven structures. It highlights the importance of transaction structure and marketing claims in determining regulatory classifications. While this decision offers a degree of legal certainty for certain NFT models, the U.S. crypto regulatory environment remains fragmented, with overlapping jurisdictions among the SEC, Commodity Futures Trading Commission (CFTC), and state-level regulators. Proposals such as the GENIUS Act introduced under the Trump administration signal a continued effort towards harmonizing oversight.

The global NFT market is projected for significant growth, with forecasts suggesting it could reach between $211.7 billion and $247 billion by 2030, potentially expanding to $703.47 billion by 2034. This growth is anticipated to be fueled by continuous infrastructure improvements and the increasing recognition of NFTs as an integral component of the Web3 ecosystem, redefining digital ownership and intellectual property rights. However, challenges such as market illiquidity and metadata centralization risks persist. The current ruling is a step towards establishing clear boundaries, fostering an environment where innovation and communal engagement can thrive within defined legal parameters.