Yep, that’s a no go. Last time my ex-boyfriend’s BFF stayed a long time all our electronics magically went missing.

but why is he sleeping on the bedroom floor?

That's what I'm wondering.

Tell your BF that his friend is wearing out his welcome and it's time for him to man up and if that doesn't work just cut off the BF from any booty,then tell him that he and BFF can sleep on the couch together.

Withholding sex, using it as a weapon and regressing to the "doghouse" method when one does not get their way does not a healthy relationship make.

Ignoring your partners wishes and needs while putting them in an uncomfortable situation doesn’t either. I know I wouldn’t be comfortable with an extra person in my bedroom.

Then maybe they need to re-evaluate their relationship.
If one of my boyfriends friends were shacking up with him and I, I'd at least ask dude to sleep on the couch, or in a spare room or someshit.

I wouldn't, however, use sex as leverage.
It's manipulative and is classified as being tantamount to a form of psychological/emotional abuse.

Well, you need to put your foot down
You don't even have to be too harsh about it
Just tell him it's nice to have him stay and that he confided in you both, but it's time to face the thunder
Your boyfriends in a tough corner trying to keep both of you content but it's clearly not working so he needs to back your corner on it

Tell your BF that you want to have sex, if he doesn’t mind his bff watching, that’s red flag.

Not necessarily. Some people are into that. However, dude needs to at least be made to sleep in the couch...that's at the VERY least.

tell your bf that it may be time for his buddy to be a man and face the music

uh no. at the very least make him sleep on the couch.

Why can't he sleep on the couch?

Run. He obviously doesn’t care about your feelings in the matter. Find someone who does

I had a situation like this in college. I think it’s particularly nice both of you are helping him out, but he can’t expect to avoid his life problems forever. At some point he’s either going to have to go home and face the music, or if he’s able to get a proper job, save up and afford it, move out and have a place of his own. He can’t be couch-surfing forever because y’all need to get back to your lives.
I highly suggest talking politely but firmly with your boyfriend first if you haven’t already, in a way that hopefully won’t cause issues in your own relationship. Then, once you know what you want to say, both of you can sit down and have a realistic talk with him. If that doesn’t work and he’s still around, either make your bf grow some balls and kick him out, or give him an ultimatum for when to leave.