A federal judge in California has dismissed an investor lawsuit against Yuga Labs, the creator of the Bored Ape Yacht Club, ruling that its non-fungible tokens (NFTs) and associated ApeCoin do not qualify as securities under U.S. law.
Judge Fernando M. Olguin said the plaintiffs failed to demonstrate how BAYC NFTs or ApeCoin met the three conditions of the Howey test, the framework used by the Securities and Exchange Commission to determine whether an asset constitutes an investment contract. The case, originally filed in 2022, alleged that Yuga improperly sold unregistered securities and misled investors about potential profits.
“The fact that defendants promised that NFTs would confer future, as opposed to immediate, consumptive benefits does not alone transmute those benefits from consumptive to investment-like in nature,” Olguin wrote in the ruling.
The judge rejected arguments that Yuga Labs created a “common enterprise” by selling NFTs that relied on the company’s efforts to generate returns. Unlike traditional securities, the court said, BAYC NFTs did not create an ongoing financial link between Yuga and purchasers.
Consensys attorney Bill Hughes noted that investors paid a one-time fee to Yuga to mint NFTs, a payment structure independent of subsequent market prices. This undermined the claim that Yuga’s success directly determined investors’ profits.
Olguin added that general statements about NFT prices and trading volumes were insufficient to establish an expectation of profit. “Statements about a product’s inherent or intrinsic value are not necessarily statements about profit,” he said. “Statements about NFT prices and trade volumes are a somewhat closer call, but even then, these statements by themselves fail to establish an expectation of profit.”
The decision reinforces the challenges for regulators and plaintiffs seeking to apply securities law to NFTs. Courts have repeatedly held that the Howey test requires evidence of investment intent, common enterprise, and profit expectation tied to others’ efforts. In this case, Olguin ruled that Yuga’s NFTs were marketed as digital collectibles with membership perks, not as speculative instruments.
The dismissal comes amid heightened regulatory scrutiny of crypto assets. While the SEC has pursued enforcement actions against token issuers and exchanges, the decision adds weight to the argument that NFTs marketed as consumables fall outside the securities perimeter. It also limits the scope of potential class-action litigation tied to digital collectibles.
Yuga Labs, founded in 2021, grew into one of the most prominent names in NFTs, with Bored Ape Yacht Club becoming a cultural phenomenon and ApeCoin introduced as a governance and utility token for its ecosystem. While secondary trading has fueled speculation, Yuga has consistently presented its NFTs as membership-based collectibles rather than investment vehicles.
The ruling could set a precedent for other NFT projects facing litigation or regulatory review. By drawing a clear line between consumable digital goods and investment contracts, the decision may limit future attempts to classify NFT collections as securities unless clear evidence of profit-driven marketing emerges.
For investors and issuers, the outcome underscores the importance of how NFTs are framed at launch. Projects that emphasize access, perks, or cultural value rather than financial return are more likely to withstand legal scrutiny. The case also narrows the SEC’s potential enforcement scope, signaling that not all digital assets fall neatly under securities law.
