On Sept. 30, 2025, the U.S. District Court for the Central District of California granted Yuga Lab’s motion to dismiss plaintiffs’ second amended complaint, alleging, among other things, that defendants’ offer and sale of the Bored Ape Yacht Club (“BAYC”) NFT collection constituted the offer and sale of unregistered securities in violation of the federal securities laws.
In all, there are 10,000 unique NFTs in the BAYC collection. Yuga Labs also created and sold two spin-off NFT collections called the Mutant Ape Yacht Club and Bored Ape Kennel Club; “Otherdeed” NFTs, which represent virtual plots of land in “Otherside,” the virtual ecosystem in which Yuga NFT holders could interact; and ApeCoin, a native currency for that ecosystem.
In its discussion of whether these assets were sold as investments, the Court noted the defendants argued the NFTs conferred membership in a digital club and provided holders with access to a collaborative art experience; but the plaintiffs alleged no such club existed, that defendants promised to build that club, and defendants’ stated ambition was for BAYC to be a brand with tentacles in gaming, events, and streetwear, giving the NFTs inherent-long-term value.
Legal Tokens
Crypto oldsters who weathered the ICO craze are accustomed to courts finding a security where tokens were marketed and sold with promises to build an ecosystem—on some future date—in which the token will be used and from which the token will derive its value.
Here, the Court found, “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.” We here at SKrypto agree. The Court’s decision also underscores that the Howey test for an investment contract truly is a facts and circumstances determination.
The Court distinguished the case before it from the Dapper Labs case in which it was found that the offer and sale of NBA Top Shot NFTs constituted the offer and sale of unregistered securities under the federal securities laws.
First, the Court noted, in Dapper Labs, the defendants operated a private blockchain and associated token without which the NBA Top Shot NFTs would lose all their value. Whereas BAYC, the other Yuga NFTs, and ApeCoin are recorded on the Ethereum Blockchain.
Second, there was this quote: “The court acknowledges that the factual allegations…are fairly close to those in Dapper Labs. There…defendants also announced sales volumes and the prices of noteworthy NFTs via social media. However, the court’s conclusion that promises of profits had been made was also based on the defendants’ use of “rocket ship,” “stock chart,” and “money bags” emoji images that, the court explained, ‘objectively mean one thing: a financial return on investment.’”
