Over the past few weeks Non-Fungible Tokens ('NFTs') have upended the traditional art market. These unique 'tokens' are secured using blockchain technology (Ethereum in the majority of NFT instances) and so can provide a definitive and verifiable digital provenance for anything from a JPEG to music to real estate in the real world. They are purchased using cryptocurrency and therein lies the potential hazard for artists, collectors, and the venture capitalists fuelling the growth of online NFT 'marketplaces'.
What is an NFT?
An NFT can be assigned to basically anything, from Twitter CEO Jack Dorsey's first tweet1, a collage by digital artist Beeple or your favourite internet meme2. It can also be a physical thing, like a painting commissioned by American rapper Ja Rule to promote his ill-fated Fyre Festival3, or a video work by Canadian musician Grimes4. In short, NFTs are being billed as a way for anything, digital or physical, to be monetised.
What do you put into it?
The reason NFTs have made headlines of late is because the sums involved in recent sales have ranged from the sublime to the ridiculous. Dorsey's tweet sold for USD $2.9m, Beeple's Everydays - First 5000 Days sold for USD $69.9m5, whereas a 'tokenized' meme can be purchased or traded for pennies. The unifying factor is that all of the funds used to buy these NFTs were cryptocurrency6.
What do you get out of it?
Leaving aside the more esoteric questions of ownership, what you get when you purchase an NFT is simply a piece of code. That's it. Anything else is negotiable – and we suggest ought to be negotiated in advance.
How much does it cost?
This is the thorny issue7. Whereas NFTs auctioned by Christie's can evidently command blockbuster figures, there are growing instances of NFTs being 'minted' without the true owner's consent8. This causes a myriad of legal issues, particularly where an artist's work is being monetised without their knowledge, let alone consent, or in breach of a platform's agreed terms and conditions. In such instances it can be difficult for an artist or marketplace to recover what they are entitled to from the party in breach.
The matter is also more complicated than it may appear. For example, each digital marketplace or retail platform's T&Cs may prescribe entirely different ownership rights over an NFT to a collector. This could include the extent of utilization of a copyrighted work, intellectual property rights, trademarks and licensing (including open-source and creative commons licensing). A further question is then raised, is ownership of the work intended for personal enjoyment only, or can it be monetized in further ways by the new owner (think 't-shirts with a Banksy design on it')?
The questions facing both artists and collectors are two sides of the same bitcoin: 'how do I protect what I've purchased' and 'how do I protect what I've made'?
How we can help.
Astraea Group can advise you on how to enforce your contractual rights and recover what is rightfully yours. We have a solid track record when it comes to recovering crypto assets, whether in the UK or globally. James Ramsden QC is also a recognised leader in crypto asset recovery, frequently involving third party trading platforms, crypto wallet 'custodians' and FX traders. With our specialist team of litigators, we are perfectly positioned to advise you on the most efficient and economical way to make sure that your rights are upheld.
Footnotes
1 https://edition.cnn.com/2021/03/23/tech/jack-dorsey-nft-tweet-sold/index.html
5 https://news.artnet.com/market/beeple-everydays-controversy-nft-or-not-1952124
6 With the notable (and controversial) caveat that Christie's earned approximately USD $9m in fungible cash from the Beeple sale (and is, unsurprisingly, due to schedule another in the near future).
7 ""What we need to understand is that what is being traded is not the artwork, it's the participation," says Edmund Schuster, an associate professor of corporate law at the London School of Economics." https://www.ft.com/content/2757d760-c29e-4834-8636-7601adbacf47
8 https://www.coindesk.com/stop-tokenizing-art-you-dont-own
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