A probe that began earlier this year has the crypto world wondering if Bored Ape Yacht Club is an SEC villain or victim. Gary Gensler, the SEC Chair, is adamant that cooperation with the SEC is the only way crypto exchanges can operate within the law.

The SEC’s View

Using Howey Test as the basis for their argument, the SEC states that you are a security if another’s efforts create profits, the assumption is you will gain a profit, the profits are interwoven among investors, and the investment involves money. Since cryptocurrency fits all four criteria, the SEC wants it to register as a security. 

While the SEC appears to be the bad guy in this probe, they are reacting to a 2021 loss of crypto assets. Scams to the tune of $14 million left many crypto investors with empty hands and understandably angry. Crypto regulation gives investors a fighting chance when crypto projects work outside the rules or investors are involved in scams. While the SEC continues to understand NFTs, Web3, and DeFi they’ll work towards completing the risk assessment by 2023.

Finger Pointing at BAYC

To date, the SEC isn’t accusing the Bored Apes Yacht Club of nefarious actions or brought any charges against BAYC. ApeCoin is currently valued at $1.4 billion, but the mere linking of the investigation into Bored Ape Yacht Club has seen it decrease in value by nearly 10%. It is currently down 88% from its $39.40 all-time high.

The SEC cites two reasons they are looking into ApeCoin and the Bored Ape Yacht Club sales offered by Yuga Labs. The first is the SEC’S belief that sales of  BAYC by Yuga Labs are stocks and should follow the same disclosure guidelines. They also believe that ApeCoin given to BAYC token holders is a security and must register as such.

What is most interesting about the ApeCoin probe is that Ape Foundation was the issuer of Apecoin, not Yuga Labs. But Yuga labs benefit from it financially to the tune of $285 million as of May this year.

Whether Yuga Lab’s Bored Ape Yacht Club is an SEC victim or villain remains to be seen. But Yuga Labs doesn’t deny the SEC’s belief, nor are they embracing it. They have been more than gracious under scrutiny, vowing to cooperate with the SEC and help create industry regs to define the industry’s future.

Bored Ape Yacht Club

How Regulations Will Effect BAYC

The Bored Apes Yacht Club launch involved 10,000 ape NFTs with unique characteristics. The tokens offer the holders the right to use the NFT commercially. Token holders create the BAYC community with the option to adopt a dog with ape attributes or get “mutant serum,” making a Mutant Ape NFT. Both have seen a high value when resold. The entire Bored Apes Yacht Club collection currently has nearly $975 million worth.

Yuga Labs and other NFT projects skirt the security issue as collectible digital art on in-game objects and being central administrator free. Once they are sold as an investment, they become a security. The SEC regulations would require the use of technology for order books to be compliant with auditing. The regulation protects the investors but can potentially create a taxing nightmare for their investment. It has yet to be seen how regulations will affect the price of crypto, the platform’s profits, or if they will even affect them.

As Yuga Labs’ continues to develop its Web3 standing, the SEC’s ability to regulate reaches deeper. When and if DeFi offerings and NFTs become securities, any assets connecting to them will be subject to the same regulations. Something Yuga Labs and others never thought would happen. Bored Ape Yacht Club’s success has put them at the forefront of the SEC regulation debate. What seemed like a genius branding scheme at the initial launch could be BAYC’s undoing.          

Bored Ape Yacht Club                                

Is the Future of Bored Apes Yacht Club a Sinking Ship

The BAYC probe comes as ApeCoin rolls out its staking program built by Horizen Labs on October 31st. The program offers token rewards to holders of Mutant Ape, ApeCoin, and Bored Ape NFTs. In light of the SEC investigation, the program’s success and the token value may be in question.

Whether you view Bored Ape Yacht Club as an SEC villain or victim, the Apes are currently the SEC scapegoats!