The United States Securities and Exchange Commission is probing Yuga Labs, the creator of the Bored Ape Yacht Club (BAYC) collection, over whether the sales of the NFTs violated federal laws, Bloomberg first reported.

According to an anonymous source, the SEC is evaluating whether non-fungible tokens are more similar to stocks and therefore should comply with the same regulation. 

This move from the SEC follows the agency’s settlement with Kim Kardashian over promoting a crypto security, and ongoing commentary from Chair Gary Gensler that almost every crypto asset is a security. As per the report, Yuga Labs has not been accused of any wrongdoings yet, and the probe doesn’t mean that this is going to end in a lawsuit. 

The question of whether, in the US, cryptos aside from Bitcoin are securities or not is one of the most pressing concerns within the industry. The lack of clear guidelines makes development and innovation much more difficult, as projects don’t know how to comply with current regulations.

Regulators have, by and large, chosen to regulate by enforcement, which has sparked a lot of criticism not only from the crypto community but also from legislators and dissenting regulators. Many believe that this kind of action is causing entrepreneurial talent to move out of  the United States. 

In addition to investigating the sales of the digital collectibles, the SEC is also reportedly looking into the distribution of ApeCoin (APE), the governance token of the APE protocol. The price of APE tanked over 10% after the news broke, falling from $5.26 and hitting a low of $4.64.

Meanwhile, BAYC’s floor price (the lowest price of an NFT collection) hasn’t suffered as much, as it stayed flat during the day. The BAYC collection remains the number one NFT project, with a market capitalization of 750,000 ETH (~$960 million).