A U.S. judge has dismissed a class-action lawsuit against Yuga Labs, the company behind the Bored Ape Yacht Club (BAYC) NFTs, ruling that the NFTs do not meet the legal definition of securities. The lawsuit, initially filed in 2022, accused Yuga Labs and several celebrities of colluding to artificially inflate the price of BAYC NFTs. The plaintiffs, investors who purchased NFTs or cryptocurrency from Yuga Labs, claimed that the digital assets were unregistered securities and that Yuga Labs, along with celebrity promoters, violated federal and state securities laws.
Judge Fernando M. Olguin of the U.S. District Court found that the plaintiffs failed to demonstrate how the Bored Ape Yacht Club, ApeCoin, or other NFTs sold by Yuga Labs satisfied the conditions of the Howey test. The Howey test, established by the Supreme Court and used by the Securities and Exchange Commission (SEC), determines whether a transaction qualifies as an investment contract. The test requires that a security be an investment of money, in a common enterprise, with the expectation of profits produced by the efforts of others. Judge Olguin determined that the plaintiffs did not sufficiently demonstrate that the NFTs met these criteria.
The lawsuit alleged that Yuga Labs marketed its NFTs as securities with guaranteed returns, while the digital assets plummeted in value. Celebrities, including Justin Bieber, Paris Hilton, Madonna, Serena Williams, and Steph Curry, were named as defendants, accused of promoting the NFTs without proper registration and misleading the public into viewing them as lucrative investments. The plaintiffs argued that the celebrities were often paid or given NFTs for free to endorse the collection.
However, Judge Olguin stated that Yuga Labs marketed its NFTs as digital collectibles with membership perks to an exclusive club, positioning them as consumables rather than investment contracts. He clarified that the promise of future consumptive benefits does not inherently transform these benefits into investment-like in nature. He also emphasized that the plaintiffs did not prove that the Bored Ape Yacht Club and other NFT collections launched by Yuga Labs constituted a "common enterprise" with the expectation of profits generated by others. The NFTs, traded on public blockchain networks, did not establish a continuous and dependent financial relationship between the purchaser and Yuga Labs, thus failing to qualify as a "common enterprise" under the Howey Test. Furthermore, Judge Olguin concluded that Yuga Labs did not make explicit promises of profit to potential NFT buyers, and the project's roadmap did not meet the Howey test's conditions regarding the expectation of profit. He clarified that statements about a product's inherent or intrinsic value are not necessarily promises that meet the Howey test.
The dismissal signifies a pivotal moment for the NFT market, potentially stabilizing investor sentiment and encouraging further innovation in the NFT space. The ruling aligns with legal precedent suggesting that most digital assets are not securities.
Despite the dismissal, Judge Olguin has given the plaintiffs until October 10 to file a third amended complaint, likely focusing on clarifying the allegations related to securities laws. If they fail to meet the legal criteria again, the case may be dismissed permanently.
This is not the only legal battle Yuga Labs has faced. In July 2025, a US appeals court overturned a $9 million judgment that was previously awarded to Yuga Labs in its legal battle against artist Ryder Ripps and his business partner Jeremy Cahen. The Ninth Circuit Court of Appeals ruled that Yuga Labs did not yet prove that Ripps and Cahen's “Ryder Ripps Bored Ape Yacht Club” NFT collection was likely to cause consumer confusion with Yuga's original Bored Ape Yacht Club NFTs. The court sent the case back to a California federal court for trial, where claims of trademark infringement and cybersquatting will be reexamined. However, the appeals court sided with Yuga Labs on a crucial point, ruling that Yuga's NFTs qualify as “goods” under US trademark law.
In March 2025, the SEC concluded its investigation into Yuga Labs, bringing an end to the probe into whether the company's Bored Ape Yacht Club (BAYC) NFTs and ApeCoin violated federal securities laws. The SEC's probe began in October 2022 under former Chair Gary Gensler, examining Yuga Labs' NFT offerings and the distribution of ApeCoin to determine whether these digital assets qualified as securities under U.S. law, applying the Howey Test.
