The U.S. Securities and Exchange Commission (SEC) has launched a probe into Yuga Labs, the entity behind the popular NFT collection Bored Ape Yacht Club, over the sale of its NFTs and digital tokens.
The regulatory agency is investigating whether some Yuga Labs NFTs are akin to stocks and should follow the same disclosure rules, Bloomberg reported, citing someone familiar with the matter who asked not to be named because the probe is private.
Furthermore, the SEC is examining Yuga Lab’s distribution of ApeCoin, the Bored Ape Yacht Club-affiliated cryptocurrency that is poised to become the native currency of Otherside, a metaverse game from Yuga Labs.
“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,” Yuga Labs said in response.
The Bloomberg report clarified that the SEC has not accused Yuga Labs of any wrongdoing and that the opening of a probe doesn’t mean the agency will sue the company.
Launched in 2021, Yuga Labs has evolved to become one of the biggest players in the crypto and Web3 industry. Aside from BAYC, Yuga’s other NFT collections have also gained some traction, which includes BAYC’s spin-off Mutant Ape Yacht Club and Otherside NFTs.
The SEC is Probing NFT Market Broadly
SEC Chair Gary Gensler has long been investigating the crypto market to make sure it adheres to the regulations. At times, he even claimed that some crypto assets have characteristics of securities, which then requires them to register with the agency before token offerings.
The SEC’s biggest case against the crypto market relates to Ripple’s XRP. The agency argues that Ripple raised $1.3 billion by selling XRP through unregistered security transactions, a claim that Ripple denies.
Nevertheless, the agency has recently launched a broad probe into the NFT market, which also includes NFT marketplaces. As part of this, the SEC is examining so-called fractional NFTs, where one NFT is broken down into fractions to be sold individually.
The crucial legal question is whether NFTs fall under the category of securities. To determine this, the SEC uses the so-called Howey test, which generally considers an asset a security if it involves investors financing a company with the intention of profiting from the efforts of the organization’s leadership.
Meanwhile, BAYC has seen a significant uptick in its sales volume and number of buyers and sellers. According to data by CryptoSlam, BAYC’s sales volume has reached $1.6 million, up by more than 96% over the past day. The surge comes after the collection initially saw a plunge in its trading volume.
This news is republished from another source. You can check the original article here