Yuga Labs SEC investigation timeline: Are Bored Ape NFTs securities?
Updated
Yuga Labs, the company that created the Bored Ape Yacht Club non-fungible token (NFT) collection, is under investication by the US Securities and Exchange Commission (SEC).
According to Bloomberg, the SEC is examining whether these tokenised ape portraits are securities.
APE, the native cryptocurrency, has suffered as a result and is down more than 10% since the news broke.
Investigation details and timing
The SEC has only started an investigation, according to Bloomberg. It has not accused Yuga Labs of breaking federal law.
However, an SEC probe has been opened to determine if the collection should be classed as a security and therefore follow the same disclosure rules that secutities have to under US law.
The commission applies the Howey test to determine whether an asset is classed as a security. This requires the asset to be an investment contract that has the intention to be profitable.
It is not unprecedented for an NFT collection to be determined as a security. Regulators in Texas and Alabama ordered the Sand Vegas Casino Club to stop selling its tokens, arguing they were unregistered securities.
This is a private investigation, according to Bloomberg. There are no public details about the timeline of the case or any noted dates.
Capital.com requested a comment from the SEC about the timeline of the case. But the commission was not able to comment on “the existence or nonexistence of a possible investigation”.
Apecoin's involvement
The commission is also investigating the distribution of apecoin (APE), the native cryptocurrency belonging to the Bored Ape NFT collection.
APE to USD
APE is a governance and utility ERC-20 token, which was designed to be used throughout the Bored Ape ecosystem. Its main purpose is to incentivise growth within the community.
Apecoin uses a decentralised autonomous organisation (DAO) to facilitate this, where APE holders vote on various proposals, including those that impact its ecosystem funds.
Investors have not responded positively to this news. The price of APE has plummeted over the past week. As of 17 October, apecoin was down 12% in the previous seven days.
Ripple vs SEC
The Yuga Labs news comes as the SEC’s case against the Ripple blockchain company entering its final stages.
The commission sued Ripple in December 2020, arguing that XRP was a security and the company had raised more than $1bn through unregistered transactions.
While Ripple expects a verdict in the first half of 2023, it is unclear when, if at all, the SEC would open a case into Yuga Labs.
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