How The SEC’s Investigation Of Bored Ape Yacht Club (BAYC) Can Kill NFTs

2 years ago · Updated 10 months ago

✍️ 19 December, 2023 - 20:24 👤 Editor: Jakub Motyka

The US regulator is scrutinizing BAYC developers for alleged violation of securities laws.
SEC is also examining fractionalized NFTs; something feared could possibly kill the sector.

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The US Securities and Exchange Commission is probing the conduct of Yuga Labs, the creator of Bored Yacht Club NFTs. The agency wants to know if the sale of BAYC digital assets breached the securities provisions.

Specifically, sources say, the SEC is looking into NFTs by a Miami-based firm. The watchdog is examining whether the asset class relates to stocks, and if the players adhered to the set policies.

Besides, the agency has concerns about the distribution of ApeCoin. According to the SEC, APE, distributed to BAYC holders, could have contravened the said legislations.

Yuga Labs Pledges Full Corporations, Welcomes The Probe As A Game Changer

BAYC developer, recently commented that the investigation does not condemn its actions. In effect, the company termed the scrutiny as an opportunity to legally define NFTs and Web3. Additionally, Yuga said it was ready to comply with the inquest.

The SEC investigation is not specific to BAYC. The commission is also looking into possible violations in fractional NFTs. The term refers to the smaller units of NFTs, making them more affordable. Fractionalized NFTs are easy to buy and sell.

The inquiry marks the latest attempt by the Gary Gensler-led commission to curb crypto. In his previous comments, Gensler wants the digital assets to be fully under the commission's watch. To support of his argument, he added that the asset class closely mirrors securities as per the 1940 supreme decision.

In the precedent, an investment becomes a security if it has a profit element. Particularly, the SEC is using the Howey Test to determine whether an asset is a security or not.

About BAYC and ApeCoin

BAYC has gained popularity as the most famous NFT. The series of primates’ cartoons currently trades for hundreds of dollars. ApeCoin cryptocurrency was issued in March to BAYC holders. The token aims to facilitate NFTs and to enhance a decentralized internet of blockchains.

According to CoinMarketCap, APE is down 8% in the past day and 10% in the last week. Despite the token hitting the market with strong bullish momentum, the SEC probe and a bearish market sentiment seem to have contained further uptrend.

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Jared Kirui

EN: Jared Kirui is an experienced financial writer with a passion for all things blockchain technology. Previously, he was into stock markets and forex, providing asset managers with top-notch content. With a flair for producing high-quality articles, he started covering crypto news in 2021. He is open-minded, trades for fun, and enjoys sports.

ES: Jared Kirui es un escritor financiero experimentado apasionado por todo lo relacionado con la tecnología blockchain. Anteriormente, estuvo en los mercados bursátiles y forex, brindando a los administradores de activos contenido de primer nivel. Con un don para producir artículos de alta calidad, comenzó a cubrir noticias crypto en 2021. Tiene una mente abierta, comercia por diversión y disfruta de los deportes.