Yuga Labs Closes SEC Probe, Labelling NFTs as "Not Securities"

The US Securities and Exchange Commission has officially closed its investigation into Yuga Labs, the company behind the Bored Ape Yacht Club and CyberPunks NFT collections.

The US Securities and Exchange Commission has closed its investigation into Yuga Labs, the company behind the Bored Ape Yacht Club and CyberPunks NFT collections, without planning to take any further action or issue charges.

The regulator began probing the crypto startup in October 2022 to examine whether certain NFTs could be classified as securities under federal law.

Specifically, the SEC was investigating whether Yuga Labs’ flagship NFT collections, including Bored Ape Yacht Club and related assets, were marketed in a way that could be considered an investment contract. This would typically be assessed through the criteria of the Howey Test.

The agency was also scrutinizing the company’s sale of ApeCoin (APE) to determine whether it fell under securities regulations.

Earlier this year, there were reports that the SEC was likely to close its probe into Yuga Labs without any further action being taken.

However, with the recent confirmation from the agency that the case is now closed and no charges are planned, it marks a significant regulatory victory for Yuga Labs and the NFT industry at large.

This decision provides some clarity for NFT creators and marketplaces operating in the US.

It is part of a broader wave of SEC cases being closed in the crypto sector. Several cases opened previously by the agency are now being terminated by the new leadership, appointed by the Trump administration earlier this year.

In addition to Yuga Labs, the SEC has also dropped investigations into Robinhood (HOOD), Gemini, Uniswap Labs, Consensys, and OpenSea, according to a report by The Block.

Meanwhile, the agency has settled lawsuits with Coinbase (NASDAQ:COIN) and Kraken and is reportedly moving toward a resolution with TRON founder Justin Sun.

This shift in strategy follows years of scrutiny from the SEC, which had been ramping up its enforcement actions against digital asset companies.

The agency has argued that many crypto assets, including certain NFTs, meet the definition of securities under the Howey Test, a legal standard used to determine whether an asset falls under SEC jurisdiction.

However, industry leaders have pushed back against this classification, arguing that NFTs represent digital ownership and collectibles, while ApeCoin is a decentralized governance token used for voting on proposals within the BAYC ecosystem. They maintain that these assets are not sold as part of an investment contract.

Despite the SEC’s decision to close the case and the recent administrative case closures, the agency’s longstanding lawsuit against Ripple remains in active litigation.

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