US SEC Probes Yuga Labs to Determine If Bored Ape NFTs Are Securities

The United States Securities and Exchange Commission (SEC) has reportedly launched an investigation into Yuga Labs Inc., to determine whether the firm’s Bored Ape Yacht Club (BAYC) non-fungible tokens (NFT) are securities.

Bloomberg in a report cited a source familiar with the enquiry as saying that the US financial markets regulator wants to determine if the digital asset company’s sale of its NFTs should have been subjected to the same disclosure requirements required of firms that offer stocks to the public.

The SEC in its rules and regulations require securities firms to disclose and share market-related information when new securities such as stocks and bonds are issued to the public.

Bloomberg reports that while Yuga Labs has not been accused of violating any laws, the probe could determine whether the firm’s offering of the BAYC NFTs contrived federal securities law.

The BAYC, which as of this year is worth over US$1 billion, was minted on April 20, 2021, and was launched for pre-sale three days later by Yuga Labs. The NFT collection was built on the Ethereum blockchain.

The probe is also seeking to determine if Yuga Labs’ launch of ApeCoin in March violates any federal laws and if the native cryptocurrency passes as an unregistered security.

Sections 3 and 4 of the US Securities Act of 1933 (as amended) provide for certain securities and specific transactions in securities to be offered for sale without registration with the SEC.

The outlet reports that Yuga Labs has pledged cooperation with the SEC and looks forward to future collaborations with other regulators.

As of the time of filing this report, CoinMarketCap reports that ApeCoin has gone down 7.79% in the last 24 hours.

“The live ApeCoin price today is $4.75 USD with a 24-hour trading volume of $344,818,255 USD,” the crypto asset price tracking firm wrote on its website.

Case against Ripple

The SEC’s focus on Yuga Labs comes on the heels of the regulator’s probes into NFT markets to determine if some of the assets can be categorized as securities.

Earlier in the year, the agency’s enforcement lawyers sent out queries and subpoenas on the matter to digital asset companies.

Meanwhile, the SEC has been battling with Ripple Labs Inc., a blockchain company, claiming its native cryptocurrency, XRP, can be categorized as a security.

In April, Ripple claimed ‘a very big win’ against the SEC after a US Judge, Sarah Netburn, denied a request by the markets supervisor to the court to reconsider shielding documents in which William Hinman, its former Director of the Division of Corporation Finance, admitted that Bitcoin and Ether cannot be categorized as securities.