The U.S. Securities and Exchange Commission (SEC) is on the warpath. It is rumored to be investigating the legal status of the Bored Apes NFTs and the Bored Ape Yacht Club ecosystem's own currency: Apecoin.

The SEC is reportedly investigating whether the NFTs sold by Yuga Labs (the media company behind the Apes) - including Bored Apes, but also Mutant Apes - should be considered securities. If so, from the regulator's perspective, the project is like stocks. A company that issues shares must comply with all kinds of procedures, for example, financial reporting every quarter. Companies like Yuga Labs are not required to do that now.

The SEC's mandate is to protect investors from illegal securities trading. Since crypto came on the scene, the SEC's hunting ground has expanded. Crypto companies are often frustrated by the SEC's approach, which they see as having little to do with protecting investors but more to do with blocking innovation. The SEC's recent move looks like a declaration of war on the world of NFTs.

Kim Kardashian

Earlier this month, the SEC made its presence felt after it settled with Kim Kardashian. The businesswoman had been promoting a coin called EthereumMax for a fee. For promoting this so-called pump and dump, Kardashian was paid a quarter of a million dollars. That was a lot less than the fine she ultimately had to pay to the SEC: $1.26 million.

Kardashian is a small fish compared to Yuga Labs. The market value of all Bored Apes alone is currently 750,000 Ether, or about a billion dollars. If Yuga Labs and other companies won’t be allowed to issue their NFTs the "old-fashioned" way, the bottom would drop out from under how this new form of digital art is traded.

It is unlikely to go that distance. In practice, such cases are often settled. Also, there are no charges pressed at this time. Should that happen, Yuga Labs has a big war chest to fund a solid defense.

But the case shows that the SEC is using laws from 1930 to subsume an entirely new category of investment. Understandable: after all, the SEC’s domain is securities. To keep control of the world of crypto, it will try to classify as many crypto projects as possible as such.