United States SEC Terminates Probe into YugaLabs

Yuga Labs, the creator of the Bored Ape Yacht Club (BAYC) NFT collection, announced that the SEC had officially terminated its probe, which began in October 2022. The investigation focused on determining whether certain NFTs, including those from Yuga Labs, should be classified as securities under U.S. law, similar to stocks, and whether their sales violated federal regulations. Yuga Labs hailed the closure as a “huge win” for the NFT industry, asserting that “NFTs are not securities.”

This development is part of a broader pattern of the SEC de-escalating enforcement actions against crypto-related entities, including dropping lawsuits against exchanges like Coinbase and Kraken, amid a shifting regulatory landscape under the Trump administration. However, the lack of charges does not necessarily provide definitive regulatory clarity, as the SEC has not formally declared NFTs exempt from securities classification, leaving the legal status of NFTs in the U.S. ambiguous.

Non-fungible tokens (NFTs) are digital assets on blockchain networks that represent ownership of unique items, such as digital art, collectibles, music, virtual real estate, or in-game assets. Unlike cryptocurrencies like Bitcoin, which are fungible and interchangeable, NFTs are distinct, with their uniqueness and ownership verified by blockchain technology, typically on platforms like Ethereum.

As NFTs have surged in popularity—evidenced by high-profile sales, such as Beeple’s EVERYDAYS: The First 5000 Days fetching $69 million in 2021—regulatory scrutiny has intensified globally. Below is a detailed explanation of NFT regulations, covering key jurisdictions, regulatory challenges, and critical implications, with references to recent developments like the SEC’s closure of its investigation into Yuga Labs.

In the United States, the primary regulatory question surrounding NFTs is whether they qualify as securities under federal law, which would subject them to oversight by the Securities and Exchange Commission (SEC). The SEC applies the Howey Test, derived from a 1946 Supreme Court case, to determine if an asset is a security. Under this test, an asset is a security if it involves: (1) an investment of money, (2) in a common enterprise, (3) with an expectation of profits, (4) derived from the efforts of others. If NFTs meet these criteria, they must comply with securities laws, including registration requirements and disclosure obligations.

The SEC’s investigation into Yuga Labs, the creator of the Bored Ape Yacht Club (BAYC), which concluded without charges on March 3, 2025, exemplifies this scrutiny. The probe, launched in October 2022, examined whether BAYC NFTs and related offerings, such as the ApeCoin token, constituted unregistered securities. Yuga Labs argued that its NFTs were collectibles, not investment contracts, and celebrated the SEC’s decision to close the case as a victory for the NFT industry, asserting that “NFTs are not securities.”

However, the SEC’s decision not to pursue charges does not provide definitive legal clarity, as it did not issue a formal ruling or guidance on NFTs’ status. This ambiguity leaves NFT creators, marketplaces, and investors in a regulatory gray area, particularly for projects with features resembling securities, such as fractionalized NFTs, staking rewards, or promises of future value appreciation driven by the issuer’s efforts.
Beyond securities laws, other U.S. agencies are involved in NFT regulation. The Commodity Futures Trading Commission (CFTC) could oversee NFTs if they are deemed commodities, though this is less common.

The Financial Crimes Enforcement Network (FinCEN) focuses on anti-money laundering (AML) and know-your-customer (KYC) compliance, requiring NFT marketplaces to monitor transactions for suspicious activity, especially given concerns about NFTs being used for money laundering due to their high-value, pseudonymous nature. The Internal Revenue Service (IRS) treats NFTs as property for tax purposes, meaning sales trigger capital gains taxes, with tax rates depending on holding periods and income levels.

Compliance with tax reporting is complex, particularly for NFT creators receiving royalties, as highlighted by platforms like OpenSea, which in 2025 began issuing 1099 forms to U.S. users to report income from NFT sales. Recent political shifts, particularly under the Trump administration, have influenced the regulatory tone. The SEC’s decision to drop investigations and lawsuits against crypto-related entities, including Coinbase, Kraken, and Yuga Labs, reflects a more permissive stance, aligning with President Trump’s stated goal of making the U.S. the “crypto capital of the planet.”

Legislative proposals, such as the Financial Innovation and Technology for the 21st Century Act, aim to clarify jurisdictional boundaries between the SEC and CFTC, potentially exempting certain NFTs from securities classification if they are deemed decentralized or collectibles. However, without enacted legislation, the regulatory landscape remains fragmented, posing risks for market participants.