The UK’s High Court has recognised NFTs (non-fungible tokens) as “property”. In South Africa, our courts may consider and be guided by foreign jurisprudence and therefore this is a very useful development for all of us.
But before we get to the core, by way of a little more background on NFTs and the metaverse:
When you buy an item in the metaverse, your purchase is recorded in a transaction on the blockchain, a digital ledger under nobody’s control and in which transaction records cannot be deleted or altered. Your purchase assigns you ownership of an NFT, simply a unique string of bits. You store the NFT in a crypto wallet that only you can open and which you “carry” with you wherever you go in the metaverse. Each NFT is linked to a particular virtual item.
It is easy to think that because your NFT is in your crypto wallet, no one can take your NFT. However, according to a Professor in Law at Indiana University, when you join a metaverse platform, you must first agree to terms of service, terms of use or end-user license agreement. These are legally binding documents that define the rights and duties of the users and the metaverse platform. Unfortunately, almost no one reads the terms of service.[1]
Moreover, many metaverse platforms reserve the right to amend their terms of service with little to no actual notice. Technology alone will not pave the way for actual ownership of digital assets in the metaverse. NFTs cannot bypass the centralized control that metaverse platforms currently have and will continue to have under their contractual terms of service.[2]
Back to our UK case – according to the Art Newspaper: “The action was brought in March this year by Lavinia Osbourne, the founder of Women in Blockchain Talks, who claimed that two digital works from the Boss Beauties collection, an NFT-based initiative designed to “create opportunities” and raise funds for females, had been stolen from her online wallet.“[3]
The judge in the matter against Opensea[4] held that the assets were “property” and thus had access to legal protections. Additional permission to serve the orders, regardless of jurisdiction, is also significant for cases involving digital art, given that the physical location of those involved is often. This ruling, therefore, removes any uncertainty that NFTs (as tokens consisting of code) are property in and of themselves, distinct from the thing they represent (e.g an artwork or musical work), under the law of England and Wales.
Security breaches s and theft are increasingly a common problem for NFT holders. Now that the courts have recognized that NFTs are property, holders can rest assured that they will be supported and have recourse in this jurisdiction should their wallets be compromised and their NFTs stolen. However, this is not uniform across all jurisdictions, including South Africa and the US.
As such, legal reform is sorely needed and we shall continue to keep a close eye on the development of this. For regular updates on technology law and related commercial and contracts please contact www.schoemanlaw.co.za
[1] https://theconversation-com.cdn.ampproject.org/c/s/theconversation.com/amp/can-you-truly-own-anything-in-the-metaverse-a-law-professor-explains-how-blockchains-and-nfts-dont-protect-virtual-property-179067: accessed 2 May 2022
[2] https://theconversation-com.cdn.ampproject.org/c/s/theconversation.com/amp/can-you-truly-own-anything-in-the-metaverse-a-law-professor-explains-how-blockchains-and-nfts-dont-protect-virtual-property-179067: accessed 2 May 2022
[3] https://www.theartnewspaper.com/2022/04/29/nfts-recognised-as-legal-property-in-landmark-case: accessed 2 May 2022
[4] Lavinia Deborah Osbourne v (1) Persons Unknown (2) Ozone Networks Inc Trading as Opensea
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