A federal judge in California has dismissed an investor lawsuit against Yuga Labs, the creator of the Bored Ape Yacht Club, ruling that its non-fungible tokens (NFTs) and associated ApeCoin (APE) do not qualify as securities under U.S. law. Judge Fernando M. Olguin stated that the plaintiffs, who filed the case in 2022, failed to demonstrate how BAYC NFTs or ApeCoin met the three conditions of the Howey test, the framework used by the Securities and Exchange Commission to determine if an asset is an investment contract.
Olguin emphasized that Yuga Labs marketed its NFTs as digital collectibles with membership perks, not as speculative instruments, and rejected arguments of a common enterprise between the company and purchasers. No ongoing financial link was established, as investors paid a one-time minting fee independent of secondary market prices. The judge noted that statements about NFT value or trading volumes did not create an expectation of profit, stating, "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."
This ruling adds to U.S. case law limiting the SEC's reach over NFTs and could set a precedent for other projects, reinforcing that digital collectibles framed as consumables may avoid securities classification. It underscores the importance of marketing NFTs for access or cultural value rather than financial returns to withstand legal scrutiny.