Bored Ape, or Bored Ape Yacht Club, creator Yuga Labs is being investigated by the Securities and Exchange Commission (SEC), according to a report.
Bored App became emblematic of the rapid rise in non-fungible tokens (NFTs). Sales of the collectibles began in the Spring of 2021 and, to date, have sold over $1 billion in Bored Ape digital art. Many well-known celebrities have purchased the Bored Ape NFTs. The collectibles are currently available on OpenSea, the largest NFT marketplace.
A report by Bloomberg indicates that the SEC is investigating Yuga Labs to determine whether, or not, the NFTs are securities – similar to shares in a company. The SEC would need to ascertain that Bored Ape NFTs satisfy the Howey Test criteria to be deemed a security. Under Howey, four criteria must exist for a determination of whether or not an investment contract exists: An investment of money, a Common Enterprise, an Expectation of Profit, A profit derived from the efforts of others.
As each Bored Ape is unique, most observers do not believe these digital assets are securities but more akin to other collectibles such as baseball cards or stamps.
Just because the SEC is investigating a firm or offering does not necessarily mean an enforcement action will soon follow. But then, current leadership at the SEC has publicly stated all digital assets are securities.
A spokesperson from Yuga Labs told Bloomberg:
“It’s well-known that policymakers and regulators have sought to learn more about the novel world of web3. We hope to partner with the rest of the industry and regulators to define and shape the burgeoning ecosystem. As a leader in the space, Yuga is committed to fully cooperating with any inquiries along the way.”
If the SEC moved forward with an enforcement action, the entire NFT sector would be in upheaval.