Federal Judge Dismisses Lawsuit Against Yuga Labs NFTs Not Securities

A federal judge has dismissed a 2022 class action lawsuit against Yuga Labs, the company behind the Bored Ape Yacht Club NFTs and ApeCoin, ruling that these digital assets do not meet the legal criteria to be classified as securities under the Howey Test. The court found that Yuga Labs marketed these NFTs as digital collectibles and membership tokens offering exclusive social benefits, rather than as investment products with an expectation of profits derived from the efforts of others. The judge emphasized there was no "common enterprise" between buyers and Yuga Labs, as the NFTs traded independently on public blockchains without ongoing financial arrangements linking purchasers to the company. Moreover, the plaintiffs failed to demonstrate that Yuga Labs made explicit profit promises or that statements about NFT prices and future plans constituted an expectation of profit. This ruling significantly shapes the debate around the applicability of U.S. securities laws to NFTs, reinforcing the position that most NFTs, especially those designed as collectibles, are not securities. Legal experts noted that this decision weakens the argument that digital assets like BAYC NFTs should be regulated as investment contracts.