Court Dismisses Lawsuit Against Yuga Labs Regarding NFTs as Securities
Legal/News

Court Dismisses Lawsuit Against Yuga Labs Regarding NFTs as Securities

A judge has ruled that Yuga Labs' NFTs do not qualify as securities under the Howey Test, dismissing an investor lawsuit.

A U.S. court has decided to dismiss a lawsuit brought against Yuga Labs by investors. The court concluded that the plaintiffs failed to demonstrate how NFTs, like Bored Ape Yacht Club (BAYC), classify as securities under the Howey Test, which the SEC uses to define investment contracts.

Judge Fernando M. Olguin ruled that Yuga Labs had marketed its NFTs as digital collectibles offering club membership, rather than as investment products:

“The fact that defendants promised that NFTs would confer future, as opposed to immediate, consumptive benefits does not alone transmute those benefits from consumptive to investment-like in nature.”

Olguin noted that the plaintiffs also did not establish a ‘common enterprise’ with an expectation of profits deriving from others, addressing legal precedents that state most digital assets do not meet the definition of securities.

Ultimately, the judge found that Yuga Labs did not make clear promises of profit nor did the project’s roadmap meet the Howey test’s requirements regarding profit expectation.

For further updates, see the original ruling here.

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