Footprint: Does the Law Protect Your NFT Purchases?

Current Legal Risks in the NFT Market While platforms like OpenSea have popularized buying and selling NFTs, several legal dangers exist:  

Money Laundering  

• Most major NFT platforms are decentralized with anonymous transactions.  
• This makes it easier for individuals to inflate NFT values artificially to launder money.  
• Currently, there are no anti-money laundering requirements for NFT minters/sellers.  

Counterfeiting and Piracy  

• In March 2021, an artist’s work was blatantly stolen to create and sell unauthorized NFTs.  
• This highlighted concerns about the authenticity and originality of some NFT offerings.  
• Can NFT scarcity and uniqueness be guaranteed if the original digital work is pirated?  

Lack of Dedicated Laws  

• No laws or regulations specifically addressing NFT transactions exist yet.  
• Debate whether NFTs qualify for intellectual property rights like copyrights.  
• General consensus NFTs represent proof of rights, but details are unclear.  

With this legal ambiguity around NFTs, it’s difficult to assess what protections NFT purchases currently receive. However, we can look at existing intellectual property laws as a guide.  

The State of IP Protection for NFTs  

United States  

• Copyright protection for creators lasts for their life plus 70 years after death.  
• Laws allow for both compensatory damages and additional penalties for infringement.  

• However, IP laws are still being updated and tested for applicability to NFTs/digital rights.  

China  

• Copyright laws protect the expression of creative/intellectual achievements.  
• Creators have rights like reproduction, distribution, and maintaining work integrity for life + 50 years.  
• Making unauthorized NFTs from others’ work likely violates these rights currently.  

Europe  

• Similarly relies on copyright laws, which can apply to NFTs though specifics are still evolving.  
• But there are no unified NFT regulations across the EU yet.  

What Can NFT Transactors Do Now?  

Until dedicated NFT legislation catches up, those involved in the NFT market can take steps to protect themselves:  

1. Content Creators: Provide evidence if your work was stolen to mint unauthorized NFTs. Claim rights protection.  

1. NFT Minters: Get explicit reproduction and distribution rights from original creators if using their work.  

1. Buyers: Research and confirm the source/originality of any NFT before purchasing to avoid legal issues.  

1. Platforms: Strengthen verification processes for minters and sources of NFT assets.  

The legal uncertainties create risks around NFTs that cannot be ignored, like money laundering, piracy, and rights ownership challenges. Clearer regulations are undoubtedly needed as NFT popularity grows. However, existing intellectual property laws offer some guidance in the interim.