🍕When the Moon Hits Your Eye Like a Big Pizza Pie, That’s Amore🌖
A federal judge in California has ruled that Bored Ape Yacht Club NFTs are not securities, dismissing a class-action lawsuit against creator Yuga Labs. The decision by Judge Fernando M. Olguin arrives at an interesting moment in regulatory history—after the SEC closed its investigation into Yuga Labs earlier this year, but before we've seen how the agency will reconcile this ruling with its previous positions.
The court's reasoning hinges on technical distinctions that matter enormously in securities law. Judge Olguin found that Bored Apes fail the "common enterprise" test because buyers purchased them on third-party marketplaces like OpenSea and Coinbase, not through a platform controlled by the issuer. This differs from NBA Top Shot and DraftKings NFTs, which courts have found plausibly constitute securities, partly because those transactions occurred within ecosystems the issuers controlled.
The ruling also addresses creator royalties—the percentage fee Yuga Labs collects each time a Bored Ape changes hands. The judge determined these royalties actually suggest a separation between the company's fortunes and those of NFT holders. Yuga profits from the royalty whether an individual seller makes or loses money on their ape. This interpretation directly contradicts arguments the SEC made during the previous administration, when the agency suggested that creator royalties indicated an asset was a security, one its creators actively encouraged holders to resell for profit.
The implications extend beyond expensive cartoon primates. We're watching courts work through how decades-old securities frameworks apply to entirely new forms of digital property. The traditional tests for what constitutes a security were developed for stocks, bonds, and investment contracts—not for collectibles that happen to exist as blockchain tokens.
There's something quietly profound about watching these distinctions get drawn. The difference between a security and a collectible shouldn't theoretically depend on which website facilitated the transaction, yet here we are. Baseball cards traded at conventions aren't securities. The same cards sold through an issuer-controlled platform with promises of future value might be. The medium—whether cardboard or cryptocurrency—turns out to be less important than the structure of the transaction and the expectations it creates.
For Yuga Labs, this represents a significant legal victory, even as Bored Apes themselves remain 90% below their April 2022 peak of nearly $370,000. The floor price currently sits around $37,000, essentially unchanged by the ruling. The market, it seems, has already rendered its own judgment about speculative value, independent of the legal classification.
The SEC now faces a court ruling that contradicts positions it held just months ago. Whether the agency appeals, issues new guidance, or simply moves forward under different leadership remains to be seen. For anyone tracking how regulators approach digital assets, the contrast between this ruling and previous SEC arguments isn't just noteworthy—it's essential reading for understanding where these boundaries might ultimately be drawn.
