US Financial Regulator Investigates Yuga Labs; Can Bored Ape NFTs Be Securities?

According to a Bloomberg report, the US Securities and exchange commission (US SEC) is launching an investigation into Yuga Labs inc., the company behind Bored Ape Yacht Club (BAYC) NFTs. The US SEC claims that the purpose of the inquiry is to determine whether those NFTs are Securities.

As Securities, they must obey similar disclosure guidelines as it is with firms that sell stocks to the public. According to SEC guidelines, Securities firms must reveal market-related data for new Securities they offer to the public. It doesn’t matter whether such securities are stocks or bonds.

After its minting in April 2021, Yuga Labs pre-sold the BAYC NFTs for three days. Those Ethereum-built NFT collections are worth more than $1 billion as of January 2022. The investigation will also determine whether Yuga Labs’ ApeCoin launch earlier this year breached federal laws.

The US SEC also seeks to know whether Yuga Labs sold the ApeCoin governance token as an unregistered security. According to the amended 1933 US Securities Act (Sections 3 and 4), firms can sell specific Securities and make certain Securities-related transactions without any SEC registration.

The Bloomberg report also said that Yuga Labs would cooperate with the financial watchdog in its investigation. The company also pledged its commitment to similar probes from other financial watchdogs. Nevertheless, ApeCoin is up 0.96 percent in the last 24 hours and trades at $4.72, according to the latest Coinmarketcap data.

The SEC Vs. Crypto Firms

This SEC investigation is the latest in a series of investigations involving the NFT markets. Recently, the SEC has claimed that some NFTs can be classified as Securities. The regulator’s enforcement legal counsels have been sending subpoenas to relevant crypto firms since the beginning of this year.

The SEC continues to display its lack of love for the crypto industry as it remains in a long-standing court battle with blockchain firm Ripple labs. The financial watchdog claims that ripple’s sale of its governance token (XRP) in 2017 can be classified as the sale of Securities. Yet, it has struggled to substantiate this claim in court. Instead, recent court rulings have favored the blockchain firm.

Image – T. Schneider / Shutterstock.com

Author: Michael Ellis

Michael is an avid cryptocurrency enthusiast and writer. He is the main writer for Cryptocoin Stock Exchange.

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