In a significant legal development for the digital asset industry, a federal court in California’s Central District has dismissed a class-action lawsuit alleging that Yuga Labs’ Bored Ape Yacht Club NFTs constituted unregistered securities. The 2022 lawsuit claimed investors were misled about the nature of the popular NFT collection, but Judge Analisa Torres determined the assets failed to meet key criteria of the Howey test, the established framework for identifying investment contracts.
The court’s analysis found insufficient evidence to demonstrate either a common enterprise between NFT purchasers or reasonable profit expectations derived primarily from Yuga Labs’ managerial efforts. This distinction proves crucial in differentiating NFTs from traditional securities, as the court emphasized the collectible nature and utility aspects of BAYC tokens within their ecosystem.
Legal experts suggest this ruling could establish important precedent for how digital collectibles are classified under U.S. securities law. The decision reinforces the growing judicial recognition that not all blockchain-based assets automatically qualify as securities, potentially influencing how regulators approach future NFT-related cases. Yuga Labs maintains that BAYC NFTs function primarily as membership tokens and digital art collectibles rather than investment vehicles.
