SEC's NFT Securities Framework Crumbles in Landmark Ruling

A U.S. federal court has ruled that ApeCoin and Bored Ape Yacht Club (BAYC) non-fungible tokens (NFTs) do not meet the legal definition of securities, marking a significant milestone in the regulatory landscape for digital assets. The decision, handed down by Judge Fernando M. Olguin in a California-based case, dismissed a class-action lawsuit against Yuga Labs, the creators of BAYC, and provides clarity on the application of the Howey Test-a 1946 Supreme Court framework used to determine if an asset qualifies as an investment contract. The ruling underscores key distinctions between BAYC NFTs and other digital collectibles previously deemed securities, such as Dapper Labs' NBA Top Shot NFTs .

The court's analysis centered on the structure of BAYC transactions and the absence of a "common enterprise" between Yuga Labs and NFT holders. Unlike cases where NFTs were sold directly through issuer-controlled platforms, plaintiffs in this case acquired BAYC NFTs via third-party marketplaces like OpenSea and Coinbase . This decentralized distribution model, the court argued, weakened the financial interdependence between Yuga Labs and buyers, a critical factor in securities classifications. Additionally, the collection of creator royalties-where Yuga Labs earns a percentage of secondary sales-was interpreted as a mechanism that "decouples" the fortunes of NFT holders from the issuer, rather than aligning them . This reasoning directly contradicts the Securities and Exchange Commission's (SEC) prior stance, which had framed resale royalties as evidence of a shared financial interest .

The SEC's investigation into Yuga Labs, which spanned over three years, concluded in March 2025 with the agency formally closing its probe without pursuing enforcement action SEC drops Yuga Labs investigation into BAYC NFTs …^[1]. This outcome aligns with broader regulatory shifts under the Trump administration, which has prioritized a pro-crypto policy framework. The SEC's decision to forgo action against Yuga Labs follows similar closures in cases involving OpenSea, reflecting a strategic pivot toward fostering innovation rather than aggressive enforcement SEC drops Yuga Labs investigation into BAYC NFTs …^[1]. However, the agency's recent actions against other NFT projects-such as Impact Theory and Flyfish Club-highlight ongoing tensions between regulatory scrutiny and industry growth .

The court's ruling has immediate implications for the NFT market. By affirming that BAYC NFTs are not securities, the decision offers legal reassurance to creators and investors, potentially encouraging further adoption of blockchain-based digital assets. However, market metrics suggest the BAYC collection remains far from its peak valuation. The floor price for BAYC NFTs currently stands at approximately $37,337, a 90% decline from its April 2022 high of $369,900 . Analysts attribute this to broader market corrections rather than the legal outcome, underscoring that regulatory clarity alone may not revitalize demand for digital collectibles.

Looking ahead, the ruling sets a precedent for how courts might evaluate future NFT projects under securities law. The decision emphasizes the importance of transaction structure, including the role of third-party marketplaces and royalty mechanisms, in determining regulatory classifications. This aligns with the SEC's recent enforcement focus on resale royalties and marketing claims, which have been cited as indicators of securities-like behavior . While the court's interpretation of the Howey Test provides a defense for certain NFTs, it does not eliminate the possibility of other digital assets being deemed securities.

The U.S. crypto regulatory environment remains fragmented, with the SEC, Commodity Futures Trading Commission (CFTC), and state-level regulators maintaining overlapping jurisdictions. The Trump administration's introduction of the GENIUS Act in July 2025-a federal framework for stablecoin regulation-signals a shift toward harmonizing oversight, though challenges persist in defining the boundaries between commodities and securities Crypto rule comparison: the US GENIUS Act versus EU's MiCA^[3]. Meanwhile, the European Union's Markets in Crypto-Assets (MiCA) regulation, which took effect in late 2024, offers a contrasting approach by imposing unified rules across member states NFTs and Securities Law Issues Are on the Rise - JD Supra^[6]. These diverging strategies highlight the global debate over balancing innovation with consumer protection in digital finance.