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October 20th, 2022
SEC vs BAYC? Here’s What Legal Experts Say It Means for NFTs
Blockchain Technology Co-Chair Jeremy S. Goldman is quoted in the article, “SEC vs BAYC? Here’s What Legal Experts Say It Means for NFTs" published by Decrypt. The article discusses the SEC’s investigation of Bored Ape Yacht Club creator Yuga Labs for securities violations and the impact on the NFT industry. Jeremy says, “Stepping into regulating the NFT space by starting with the biggest NFT brand of them all would seem to go against the SEC’s modus operandi. It seems much more likely that if the SEC is going to go after someone, they're going to go after projects that much more easily fit the framework of what the SEC believes is a security.”
Jeremy believes that there are other NFT projects besides Bored Ape Yacht Club that much more obviously check the boxes of appearing like securities. He is confident the SEC would almost certainly go after those projects first—if it were to go after any. He says, “The SEC usually starts by going after lower hanging fruit. Think of a project where the marketing said, ‘This is going to be a great investment,’ ‘We’re going to 10x what you’ve put in and take you to the moon,’ That is really easy for them to prove falls within their purview as a security. And I just don’t see BAYC in that category.” He thinks it’s highly unlikely the SEC will ever actually sue Yuga Labs for securities violations. He believes Yuga has only been implicated here to assist the SEC in a publicity-oriented battle for sovereignty over regulating the crypto space.
Jeremy suggested that the leak may have been planted by the SEC itself, explaining, “To me, it's a little suspect. Suddenly an anonymous source says, ‘Oh, yeah, Yuga’s on the list,’ and then it makes headlines. I just do wonder whether this is part of government in-fighting for control. They're putting it out there, ‘We're already investigating this,’ and they want to put out a big name so it gets the attention of the public.”
If the SEC went ahead with a case again Yuga Labs and won Jeremy says, “It would be an issue for the entire industry. Launching an NFT would become like going public with a stock. It would require a tremendous amount of legal work and accounting work and disclosures and registration […] that is just not feasible or practical for the vast majority of startups.”
Read the full article here.
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