Yuga Labs prevails – court says BAYC NFTs not securities
A U.S. federal judge dismissed a 2022 lawsuit against Yuga Labs, ruling that the company's Bored Ape Yacht Club NFTs and related tokens do not meet the definition of securities under the SEC's Howey test.
Judge Fernando M. Olguin of the Central District of California concluded that plaintiffs failed to show how Yuga's NFTs or ApeCoin satisfied the three criteria of the Howey framework, which determines whether a transaction qualifies as an investment contract.
The court found that Yuga marketed its NFTs as digital collectibles tied to membership benefits rather than investment vehicles. "The fact that defendants promised that NFTs would confer future, as opposed to immediate, consumptive benefits does not alone transmute those benefits from consumptive to investment-like in nature," Olguin wrote.
Olguin stated that the NFTs did not create a "common enterprise" or explicit expectation of profits driven by Yuga Labs. He noted that payments made by buyers were independent of secondary market NFT prices. Statements about market value and trade volumes were not sufficient to establish a legal expectation of profit.
The court found that Yuga marketed its NFTs as digital collectibles tied to membership benefits rather than investment vehicles. "The fact that defendants promised that NFTs would confer future, as opposed to immediate, consumptive benefits does not alone transmute those benefits from consumptive to investment-like in nature," Olguin wrote.
Olguin stated that the NFTs did not create a "common enterprise" or explicit expectation of profits driven by Yuga Labs. He noted that payments made by buyers were independent of secondary market NFT prices. Statements about market value and trade volumes were not sufficient to establish a legal expectation of profit.
The lawsuit was originally filed in December 2022, alleging that Yuga Labs misled buyers by presenting its NFTs and ApeCoin as investment opportunities. With the case dismissed, Yuga avoids potential liability.
The Howey test comes from a 1946 Supreme Court case and requires three elements: an investment of money, in a common enterprise, with expectation of profits derived from efforts of others. Judge Olguin found the NFT sales did not meet these criteria.
Yuga Labs launched the Bored Ape Yacht Club collection in 2021. The company also created ApeCoin, a cryptocurrency used within its ecosystem. The plaintiffs argued both products functioned as securities requiring regulatory oversight.
The court's ruling addresses how NFTs are classified under securities law. Judge Olguin distinguished between collectibles with utility features and investment contracts subject to SEC regulation.
The decision came after Yuga Labs filed motions to dismiss the case earlier in 2025. The company argued that its NFTs provided membership access and digital ownership rather than investment returns.
The Howey test comes from a 1946 Supreme Court case and requires three elements: an investment of money, in a common enterprise, with expectation of profits derived from efforts of others. Judge Olguin found the NFT sales did not meet these criteria.
Yuga Labs launched the Bored Ape Yacht Club collection in 2021. The company also created ApeCoin, a cryptocurrency used within its ecosystem. The plaintiffs argued both products functioned as securities requiring regulatory oversight.
The court's ruling addresses how NFTs are classified under securities law. Judge Olguin distinguished between collectibles with utility features and investment contracts subject to SEC regulation.
The decision came after Yuga Labs filed motions to dismiss the case earlier in 2025. The company argued that its NFTs provided membership access and digital ownership rather than investment returns.
Author
Sebile Fane cut her teeth in blockchain by building tiny NFT experiments with friends in her living room, long before the buzzwords took hold. She’s driven by a curiosity for the human stories behind smart contracts — whether it’s a small-town artist minting her first token or a DAO voting on climate grants — and weaves technical insight with genuine empathy.
