Federal Judge Rules Bored Ape NFTs Are Not Securities, Providing Regulatory Clarity

The Event in Detail

U.S. District Judge Fernando Olguin has dismissed a class-action lawsuit targeting Yuga Labs, the creator of the Bored Ape Yacht Club (BAYC) NFT collection, and several high-profile celebrities. The lawsuit, filed in 2022 by investors Adonis Real and Adam Titcher, alleged that Yuga Labs and celebrity promoters, including Justin Bieber, Paris Hilton, Madonna, Serena Williams, and Steph Curry, violated securities laws by promoting unregistered digital assets. Plaintiffs claimed celebrities were compensated or received free NFTs for their endorsements, misleading the public.

Judge Olguin based his decision on the Howey Test, the legal standard for determining if an asset qualifies as a security. The ruling found that Bored Ape NFTs did not satisfy key criteria, specifically lacking a "common enterprise," thus concluding they are not securities under federal law. While the ruling clears the defendants in this specific case, the plaintiffs have until October 10 to file an amended complaint. This judicial decision follows an earlier development where the U.S. Securities and Exchange Commission (SEC) officially closed its investigation into Yuga Labs regarding whether its NFTs should be classified as securities, with Yuga Labs stating, "NFTs are not securities."

Market Implications

This landmark ruling establishes significant legal precedent and clarity for NFT creators and marketplaces operating in the United States, potentially mitigating regulatory risks. The decision is anticipated to foster increased innovation and investment within the NFT space by delineating clearer legal boundaries. Market sentiment is generally characterized as cautiously optimistic, as regulatory certainty is often viewed positively by investors and developers. However, the immediate impact on the price action of existing NFT collections remains to be fully observed. Historically, the floor price of Bored Ape NFTs reached 13.75 ETH (approximately $29,650) following the SEC's announcement to close its investigation into Yuga Labs. This figure, however, remained significantly below its peak of 153.7 ETH (over $430,300) observed in May 2022. Concurrently, other collections like Yuga Labs' Mutant Ape NFTs and ApeCoin experienced declines of 95% from their 2022 highs, and CryptoPunks saw its floor price drop by over 70% from its peak.

Expert Commentary

SEC Commissioner Hester Peirce has previously offered clarity on the regulatory stance concerning NFTs with built-in resale royalties for creators. She indicated that such NFTs generally do not fall under securities laws, drawing parallels to compensation structures prevalent in the music and film industries. Commissioner Peirce explained that royalty features enable artists to benefit from the appreciation of their work in secondary markets without necessarily qualifying as securities, as these features typically do not confer ownership in a business or traditional profit rights to NFT holders. However, she acknowledged that legal complexities could emerge if NFT structures begin to promise royalty shares to holders beyond the original creator, as such arrangements might resemble profit-sharing schemes, potentially leading regulators to classify them under securities law.

Broader Context

The ruling aligns with a broader shift in the regulatory landscape for digital assets. SEC Chair Paul Atkins, in September 2025, identified cryptocurrency regulation as the agency's "number one task," indicating a move toward structured policy development over an enforcement-centric approach. This strategic pivot, coupled with concepts like an "innovation exemption" and a focus on asset tokenization, aims to reduce regulatory uncertainty and foster growth in the Web3 ecosystem. Institutional investors are playing an increasing role in the maturation of the NFT market, which is projected to exceed $120 billion. This maturation is being driven by demand for accountability and transparency, with legislative frameworks such as the U.S. GENIUS Act and EU MiCA regulations establishing critical guardrails. Custody solutions provided by entities like Coinbase and BitGo, alongside AI-driven AML tools, are standardizing institutional-grade compliance. Data indicates that 78% of institutional NFT portfolios now mandate third-party audits for provenance verification, underscoring the escalating demand for operational governance and credibility in the sector.