The Expanding Yuga Labs Empire

The two most famous NFT collections are Bored Ape Yacht Club and CryptoPunks. They’re the closest you’ll currently get to household names–or at least, household images–and behind both projects you’ll find the same entity: Yuga Labs.

The Yuga Labs empire has expanded prolifically over the past year and a half, and attracted the attention of the US Securities and Exchange Commision (SEC) in the process, so let’s break it down and assess where it’s heading.

Yuga Labs’ History

Yuga Labs was launched in April 2021 by four pseudonymous creators (later doxxed by Buzzfeed), and rose to fame through its Bored Ape Yacht Club (BAYC) NFT drop. By the way though, the idea that BAYC just happened to take off organically is not entirely accurate.

Flow chart from OMR digital media company

It’s a long story, but a network of influencers with celebrity connections enabled BAYC’s ascent. That’s fine, it’s a part of how media and commerce operate, but as a key factor in Yuga’s success is worth being aware of.

Yuga Labs then airdropped Bored Ape Kennel Club NFTs to BAYC owners (which showed pictures of companion pets), and then Bored Ape Chemistry Club NFTs, which are serums to be used in combination with BAYC NFTs to acquire Mutant Ape Yacht Club (MAYC) NFTs, which depict–as the name suggests–mutated apes.

An additional 10,000 MAYC NFTs were sold through a public auction, meaning there can be a total of 20,000 mutant apes, compared to only 10,000 original apes.

Later, a partnership of organizations that are officially distinct from Yuga Labs–Ape Foundation and the ApeCoin DAO–created a fungible token called ApeCoin, and BAYC, MAYC and BAKC owners received an airdrop of that.

Yuga acquired the IP to the CryptoPunks and Meebits NFT collections (both from Larva Labs) in March 2022, and subsequently changed the IP model on those projects to match that of BAYC, which is more permissive and allows NFT holders commercial rights over their NFT content.

Then, Yuga Labs moved into metaverse development through the Otherside project. This involved releasing virtual land plots in the form of Otherdeed NFTs, which were paid for when minting using ApeCoin.

Otherside looks like it will be a high quality gaming and metaverse environment, and is being developed in association with Improbable (specialist metaverse developers) and Animoca Brands (an influential web3 investment platform).

This is a stripped-down version of events, but what we end up with is a suite of Yuga Labs crypto products (deep breath):

BAYC, MAYC, and BAKC NFTs, some remaining serum NFTs, and Otherdeed NFTs representing land in the in-development Otherside metaverse. Also, there is ApeCoin, a fungible token which looks integral to future developments, but is technically distinct from Yuga. Additionally, we have Yuga Labs acquiring the rights to CryptoPunks and Meebits.

What is the Best Way to Buy In?

Image credits: Yuga Labs

That depends on how much you have to spend, and how much belief you have in what Yuga is building.

If you have a large budget, like to flex, or want in at the top tier, then BAYC is the primary option. Below that, you have MAYC, which basically moves in unison with BAYC but is cheaper. BAKC is cheaper still (you’re not getting an ape, after all) but its price moves are also coupled with BAYC.

There’s an argument that having already hit crazy highs, BAYC/MAYC can’t experience explosive growth in future, but on the other hand, a ten or twenty percent move up on something initially expensive will bring significant profits, and there’s a clear possibility that previous highs on a growing brand can be approached again in a future bull market.

Also, in the context of NFT trading, which means keeping in mind that the entire NFT space is inherently risky, Yuga’s apes are at the relatively safer end of the market.

Image credits: The ApeCoin DAO

ApeCoin is the choice with the most liquidity, since it’s a fungible token rather than an NFT. If you just want to trade Yuga/Otherside news as quickly as possible, or to add Yuga exposure to an altcoin portfolio, ApeCoin makes sense.

Otherdeeds are arguably the most undervalued Yuga NFTs. It all depends on Otherside development and whether demand outstrips supply (there are 100,000 Otherdeed NFTs). Yuga has resources and top tier partnerships, so it’s reasonable to speculate that Otherside can be a high quality product, but that it might take a long time to develop.

What is Happening with the SEC?

It was reported this month that the SEC is looking into Yuga Labs, raising the question of whether Yuga’s NFTs could be classified as securities, and there is also speculation around SEC interest in ApeCoin.

SEC action would have huge implications for the entire NFT space, opening the door to regulation. However, this is just speculation. Firstly, the SEC is reported as simply looking into Yuga, rather than accusing Yuga of wrongdoing.

Secondly, many NFTs can be regarded as artworks, perhaps including BAYC and its spin offs. The SEC doesn’t regulate traditional art markets, and you can make the case that there’s no difference–in regulatory terms–between physical art and digital art.

Image credits: Otherside

Where the SEC might have stronger cause for involvement is the Otherdeed NFTs. The argument would be that buying an Otherdeed amounts to investing money, in expectation of profiting from a shared enterprise (the Otherside metaverse project). That might constitute an investment contract, and so Otherdeed NFTs could be classed as securities.

That all said, if you take a look over the Otherdeed purchase agreement, the legal team anticipated this issue, and it’s made clear that Otherdeeds are not sold with a promise of future profits. Even besides that, Otherdeeds may have genuine utility as property in a virtual world.

Basically, this is a huge gray area, there are logical arguments on either side, and–as with the whole of the crypto regulation debate–no-one can say for sure how the situation will pan out.

Is it plausible that the SEC could go after NFTs, starting with Yuga in particular? Sure, it’s a possibility. But then again, it’s also true that NFTs are a sprawling sector that defies simple categorization.