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A US federal judge in the Central District of California has ruled that the Bored Ape Yacht Club (BAYC) non-fungible tokens (NFTs), owned by Yuga Labs, do not qualify as securities under securities laws, thus dismissing a class-action lawsuit filed in 2022.
The ruling determined that the plaintiffs failed to demonstrate a common enterprise or a reasonable expectation of profit dependent on the efforts of Yuga Labs. The court emphasized that the NFTs were marketed as collectible items and provided membership benefits.
The sales occurred through third-party marketplaces, and the combination of creator royalties and decentralized distribution diminished the expectation of profit based on the issuer’s ongoing efforts. The decision narrows the scope of securities laws for NFTs and may limit similar investor claims against creators and marketplaces.
This ruling is a significant legal development for the NFT market. Would you like to know more about the Howey Test that is often used to determine if an asset is a security?
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