{"id":2278,"date":"2022-03-25T14:37:58","date_gmt":"2022-03-25T14:37:58","guid":{"rendered":"https:\/\/scienceandnerds.com\/2022\/03\/25\/will-apecoin-and-yuga-labs-make-the-regulators-go-ape\/"},"modified":"2022-03-25T14:37:59","modified_gmt":"2022-03-25T14:37:59","slug":"will-apecoin-and-yuga-labs-make-the-regulators-go-ape","status":"publish","type":"post","link":"https:\/\/scienceandnerds.com\/2022\/03\/25\/will-apecoin-and-yuga-labs-make-the-regulators-go-ape\/","title":{"rendered":"Will ApeCoin and Yuga Labs make the regulators go ape?"},"content":{"rendered":"

Source: https:\/\/www.theverge.com\/2022\/3\/25\/22994795\/apecoin-yuga-labs-sec-regulation-utility-token<\/a>
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You know what, I do think it\u2019s nice that the Bored Ape Yacht Club is trying to do something more ambitious than just selling people code that says they own jpegs! But I am very interested in whether its ApeCoin is going to get shot out of the sky by regulators before it has a chance to [rocket emoji] to the [moon emoji].<\/p>\n

Look, I\u2019ve been told by a bunch of people with more money than me that Web3 is the future and that I should get in now. Maybe that is true! But how we regulate the future is going to matter, and I can\u2019t help but remember a craze in crypto token launches in 2017 that ended in tears (and fines) for the issuers. A lot of crypto\u2019s regulatory path is still in flux<\/a>. That may not be good news for Yuga Labs, which originated the BAYC and Mutant Ape Yacht Club NFTs, but it\u2019s great news for me, a person who loves drama.<\/p>\n

Let\u2019s start with what a security is<\/a>: a category of financial instruments or interests, which include things such as stocks, bonds, options, and a whole bunch of other things. Legally, anyone issuing a security has to register it with the Securities and Exchange Commission \u2014 the idea is that this protects investors from fraud. So if Yuga Labs were trying to form a separate company<\/em> to prop up the value of BAYC and MAYC, they\u2019d have to go register with the SEC before they sold shares, which divvy up ownership of the company. <\/p>\n

Now $APE is trading on Coinbase and a bunch of other exchanges. Aesthetically, ApeCoin feels like a stock<\/a>, what with the trading and speculation. It\u2019s just got, for lack of a better word, stock vibes. <\/em><\/p>\n

But unlike a company selling its shares, the ApeCoin DAO \u2014 the decentralized autonomous organization supposedly behind it all \u2014 isn\u2019t registered with the SEC. Technically, this DAO isn\u2019t really a legally-recognized entity at all. ApeCoin seems like an attempt to remain in a legal gray area.<\/p>\n

The standard test used for determining whether something is a security or not is from a 1946 Supreme Court case called SEC v Howey<\/a> : a security represents \u201can investment in a common enterprise with the expectation of profit solely through the efforts of others.\u201d Let\u2019s say an investor buys a bunch of shares in Tesla, figuring he\u2019ll make some profit. Maybe he\u2019s read something about how the US is moving away from fossil fuels; maybe he saw a hot tip in his weekly horoscope. Either way, he thinks he\u2019s going to make money on this group effort made by other people. For the purposes of the Howey Test, it doesn\u2019t matter whether Tesla is incorporated, or whether its shares are trading on Wall Street, or even whether Tesla has made a car yet. <\/p>\n

The very first DAO was distinctly <\/em>a security, the SEC has said<\/a>. Of course that organization was explicitly<\/em> meant to invest in things, and ApeCoin DAO very carefully doesn\u2019t promise a profit to its coin holders.<\/p>\n

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