The limited NFTs have been traded for $19 million, but Yuga Labs is keeping some marketplaces out of the deal.
Late last year, as marketplaces moved to stop requiring creator royalties on NFT sales, the creators of the Bored Ape Yacht Club made it clear that they didn’t like it. With the launch of Sewer Pass NFT yesterday, Yuga Labs took action and stopped secondary trading on some marketplaces.
The Sewer Pass came out on Wednesday for owners of Bored Ape or Mutant Ape Yacht Club NFTs. It gives access to the upcoming Dookey Dash web game. Ape NFT owners are the only ones who can make a free pass, but the Ethereum NFT passes can then be sold on secondary markets for any price.
As traders quickly found out yesterday, the Sewer Pass can’t be traded on some platforms that don’t fully enforce creator-set royalties. A royalty is a fee that is usually between 5% and 10% of the price at which the NFT is sold. This fee is taken out of the price at which the NFT is sold and sent to the project creator during each transaction.
According to data from CryptoSlam, there has been a lot more trading on OpenSea and X2Y2 since Wednesday morning. Since then, over $19 million has been traded in Sewer Pass. As of this writing, each NFT costs 1.59 ETH (about $2,400), and “Tier 4” versions start at nearly 4.9 ETH (about $7,550) on OpenSea.
But it seems that marketplaces like Blur, LooksRare, and NFTX, where traders don’t have to pay full creator royalties, can’t sell the pass. A Yuga Labs representative confirmed that all three marketplaces are blocked in the Sewer Pass smart contract, which holds the code that runs decentralized applications (dapps) and NFT projects.
“We’ve always been a creative-first company, and we believe that creator royalties must be protected,” a Yuga Labs representative said. “The Sewer Pass free claim will only be traded on platforms respecting creator royalties.”
Yuga scored a win for the entire ecosystem today, especially the creators that don't have as big of a voice.@blur_io and @LooksRare are being forced to watch thousands of ETH in @BoredApeYC Sewer Pass volume that they are blocked from.— nix.eth (Justin Kalland) (@nix_eth) January 18, 2023
As of this writing, none of these blocked marketplaces have said anything about it in public. Blur has a list of Sewer Passes, but all of the listings come from OpenSea or X2Y2. No sales are made through Blur’s own platform. LooksRare lists Sewer Pass NFTs, but it doesn’t show that they have ever been sold. There are no Sewer Pass NFT listings on NFTX.
In addition to Blur, LooksRare, and NFTX, the Yuga representative stated that Sudoswap, a trading platform based on liquidity pools rather than traditional marketplace listings, is prohibited from trading Sewer Pass NFTs.
The royalties debate
Yuga’s decision to block specific marketplaces follows the launch of OpenSea’s Operator Filter Registry blocklist tool, which the major NFT marketplace introduced in November as it publicly reconsidered its stance on enforcing royalties.
OpenSea later pledged to enforce royalties for all new and older projects that utilize the tool after a specified date. X2Y2, a competing NFT marketplace that had previously made royalties optional for traders, announced that it will also implement the tool and require traders of such projects to pay full royalties.
Before OpenSea moved, the generative art project QQL by Art Blocks Fidenza artist Tyler Hobbs and collaborator Dandelion Wist did something similar to block marketplaces that didn’t automatically enforce royalties. That included X2Y2 at the time, and the platform said in a thread of tweets that the move took away the ownership rights of NFT collectors.
Last November, some NFT markets eliminated royalties to gain market share from incumbents. Limiting NFT owners’ ability to purchase and sell has divided traders, with some alleging that it defies Web3’s decentralization.
In a November blog post, three co-founders of Yuga Labs railed against the potential change after OpenSea stated that it was considering a model that did not impose royalties for all projects and received backlash from artists.
“OpenSea made its position clear that they intend to move with the rest of the herd and remove creator royalties for legacy collections from their platform, while keeping their trading fee the same across the board,” Yuga’s founders wrote, adding, “Not great.”
Yuga Labs presented a “allowlist” model that would let NFT project developers to enable trading only on selected marketplaces that respect royalties, with list governance administered by a community-led DAO, or decentralized autonomous organization. OpenSea stated, however, that it will continue to pay royalties on secondary trades for current collections.
Early in 2022, Yuga Labs raised $450 million at a $4 billion valuation and acquired the influential CryptoPunks project, making it one of the largest Web3 players.
Its earlier pressure may have influenced OpenSea’s decision-making about the enforcement of royalties.