Non-fungible token (NFT)) I make headlines frequently these days. The NFT first received a lot of attention in March 2021.Mike Winkelman is an artist who goes by name Beeple. He sold digital art Christie’s Auction House For $ 69.3 million.
As the NFT space explodes, there are many new legal issues. Companies and lawyers are struggling to understand how NFTs fit into existing legal frameworks. They are also striving to keep up with the new regulations being enforced by regulatory agencies.
Law firms are strengthening their capabilities as they seek out some of their actions. Their goal is to help NFT clients navigate the complex web of legal issues. These issues include areas of intellectual property, securities law, and other corporate law. In addition, it anticipates changes in NFT government regulations and helps clients adapt and adapt to their business activities.
What the lawyer says
For companies looking to enter early, with a large international law firm Blockchain-Focus boutique law firm. A Los Angeles law firm, which has an important foundation for clients in the entertainment industry, reports a surge in interest in NFT legal advice.
Jordan Bromley is a leader in the entertainment trading and financial practice group of law firm Manat. He witnessed the company needing more resources to meet the demand for NFT-related advice. “I first heard the term [NFT] In September 2019, when musician Odessa was thinking of doing something in 2021, I thought it was because of the bragging rights of glory like Rembrandt on the wall. ” Said. “This extends to a variety of artists on our side, including musicians and visual artists.”
The list of potential NFT clients is extensive. Clients come from a variety of backgrounds. They include music creators, media platforms, museums, sports teams, individual investors and collectors.
Laurel Loomis Rimon is a partner of O’Melveny & Myers based in Los Angeles. She states: “NFT issues are attracting some clients who are not deeply involved in the blockchain, but to understand how transfers occur, the underlying technology and transactions occur. The work itself is drawn from working on the blockchain because we need to understand what to do. “
New legal issues presented by NFT
NFTs are unique digital assets. Because they are not substitutable Cryptocurrency, Can be replaced. One Bitcoin has the same value as another Bitcoin, but each NFT is associated with its own real-world assets. These assets include blog posts, artworks, sports highlights, and more.
This is just one indicator that NFTs have long-term endurance. “For the first time, we are able to create digital shortages with NFTs,” said Lewis Cohen of DLx Law, a boutique law firm focused on blockchain.
Cryptocurrencies have raised many legal issues. NFTs may raise a similarly large set of new legal issues. Some are highlighted below.
Intellectual property rights are a gray area in the emerging world of NFTs. Copyright law is usually not a major issue in art. People traditionally combine art with tangible works. NFTs challenge that concept. NFT owners may expect to view or use digital artwork. For the sale of digital art, the contract must clearly outline the intellectual property rights.
Is NFT a security?
In terms of securities regulation, some regulators have shown similarities between NFTs and Initial Coin Offerings (ICOs). This means that certain NFTs may be classified as securities. In that case, strict disclosure requirements and potential liabilities under the Securities Act will act. Determining whether a particular NFT is a security depends on the particular design of the NFT and the associated collection of rights.
Government regulation and enforcement
Potential compliance issues have been raised under money laundering prevention regulations such as the Bank Secrecy Act. As with cryptocurrency or token exchange transactions, the Office of Foreign Assets Control (OFAC) can apply sanctions to NFT transfers. Such regulations can affect players in the NFT ecosystem, such as digital content creators, payment processors, and online marketplaces.
Cyber security and NFT
Since NFTs are created on the blockchain, cyber attacks on the blockchain can lead to proceedings. Many companies buy cybersecurity insurance. However, companies dealing with NFTs need to ensure that their cybersecurity insurance policies cover NFT hacking events.
A growing future
Signs show that the current momentum surrounding NFTs is more than just a bubble. There are many opportunities for sustainable and long-term growth of NFTs. Law firms that tackle these early complex legal challenges may have an advantage over law firms in the same industry.