NFTs in Artwork: The genuine article?

Whilst in theory the metadata which the token represents – even the “artwork” itself – could contain terms which create necessary legal rights for the token owner, the mechanics of incorporating binding terms into NFT metadata is in its infancy.

As matters stand, the uniqueness or “non-fungibility” of an NFT artwork – and its value – remains dependent upon off-chain contractual terms.

Much as is the case for an artist producing a limited series of a tangible artwork, the value in the NFT artwork is directly affected by assurances the artist gives to the owner regarding exclusivity.

It is possible to require the artist to provide off-chain assurances that the underlying artwork is genuine, including a certificate of authenticity, as a term of the sale contract. Just as is the case for the sale of tangible artwork, the provenance of an NFT should be verifiable, and comfort obtained from the seller and the marketplace or auction house.

Commentary

Off-chain assurances from the artist and the seller and provenance are an essential part of the value of the overall transaction. This should be investigated, along with any ongoing obligations on the artist which may underpin the value of the NFT artwork purchased.

With the background of an unsettled regulatory position globally on the rights afforded to NFTs, parties to high-value NFT transactions should consider careful investigation, and supplemental off-chain assurances and advice before committing to transactions.

In particular, if the asset is of high value, whether you are a buyer or a seller, you may wish to seek advice from a lawyer experienced in digital assets, on the terms of the transaction and implications for you.

Whether you are a buyer or a seller, you may wish to seek advice from a lawyer experienced in digital assets, on the terms of the transaction and implications for you.

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Are you looking at the emerging world of crypto and considering how it affects your business? Have you launched a currency or created NFTs, or are you considering doing so? Do you need to understand more about the legal issues behind crypto, NFTs or the technology, including regulation, tax, or intellectual property? Have you encountered any difficulties and are looking for advice or redress?

We have specialists across the Firm looking at all of these areas and others related to them. We operate under the Rosenblatt branding in relation to all litigation and dispute resolution matters and the Memery Crystal branding for non-contentious legal advice. Please come and talk to us.

Contact us

Should you have any questions, or wish to discuss any issues raised in this article, please get in touch with the author of this article Memery Crystal’s Chris Pulham. If you are having any issues in relation to an NFT you have purchased or sold please get in touch with Rosenblatt disputes partner Laura Clatworthy.

Disclaimer: We at Memery Crystal (and our parent company RBG Holdings plc) support and encourage free/independent thinking in relation to issues which are sometimes considered to be controversial subject matters. However, the views and opinions of the authors of articles published on our website(s) do not necessarily reflect the opinions, views, practices and policies of either Memery Crystal or RBG Holdings plc.