The explosive rise of non-fungible tokens (NFTs) has opened exciting avenues for creators and collectors alike—yet it has also sparked contentious debates over ownership, licensing, and the very nature of digital art. As NFTs evolve from novelties to mainstream assets, legal frameworks are scrambling to keep pace. In this article, we’ll dissect:
The Legal Status of NFTs as “Proof of Ownership.”
Copyright on Underlying Art: What Rights to Embed in Smart Contracts.
Landmark Court Cases: From the Mona Lisa Dispute to the Beeple Battle.
The Next Frontier: Fractional NFTs and Their Legal Implications.
By design, an NFT is a unique token on a blockchain—often Ethereum—that points to a piece of digital art, audio, or media. Ownership of the NFT proves you hold the private key controlling that token ID, and the public ledger shows the chain of custody. However:
NFT ≠ Copyright. Owning an NFT does not automatically grant you copyright in the artwork itself. It merely proves you own the token that represents a link to the art.
Metadata Matters. The token’s on-chain metadata and any linked off-chain data (via IPFS or URLs) must clearly specify what “ownership” entails—display rights, commercial rights, or simply bragging rights.
To avoid disputes, creators should explicitly define licensing terms within the NFT’s smart contract or accompanying legal document:
Display & Personal Use. Grant buyers the right to display the artwork in digital galleries, social media, or personal collections.
Commercial Rights. Decide if purchasers can reproduce, sell derivative merchandise, or use the art in branding campaigns. If so, outline royalties, permitted formats, and sublicensing rules.
Creator Royalties. Many NFT marketplaces support automatic on-chain royalties (e.g., 5% of each secondary sale flows back to the artist). Ensure your contract enforces this mechanism.
Attribution Requirements. Specify how the artist must be credited when the art is shared or exhibited.
Pro Tip: Use standardized licensing frameworks like Creative Commons variants or draft a bespoke NFT license with clear, plain-language clauses embedded in the token metadata.
The “Mona Lisa” Token Case (2023): A European gallery tokenized a public-domain image of the Mona Lisa, sold it as a limited NFT series, and then attempted to enforce exclusivity. Courts ruled that, since the underlying image was in the public domain, the gallery could not prevent others from minting their own “Mona Lisa” NFTs—highlighting that provenance of the token, not the public-domain art, was the only protected asset.
Beeple vs. NFT Flipper (2024): Digital artist Beeple (Mike Winkelmann) sued a collector who minted unauthorized derivative NFTs based on his work. The court granted an injunction, recognizing that derivative creations infringed Beeple’s copyright even though the original token had been sold. This ruling underscored that minting a derivative without permission violated the original artist’s exclusive rights.
Fractional NFTs—where a single tokenized asset is split into multiple fungible shares—promise broader access to high-value art, real estate, and collectibles. But:
Securities Concerns. When investors buy fractions hoping for profit, regulators may classify these shares as securities, triggering stringent compliance (KYC, disclosure, reporting).
Governance & Voting. Who decides on licensing new uses, resale timing, or licensing deals for the art? Fractionalization platforms must build robust on-chain governance to reflect shareholder votes.
Payout Structures. Smart contracts must define how secondary-sale royalties or licensing revenues are distributed among fractional owners.
NFTs have redefined digital ownership, but they also challenge traditional copyright paradigms. Clear licensing in smart contracts, respect for underlying copyrights, and proactive legal structuring are imperative for artists and platforms. As fractional NFTs emerge, the community must navigate securities laws and governance models to ensure shared ownership doesn’t become a recipe for legal chaos. By crafting precise on-chain licenses and learning from early court rulings, creators and collectors can enjoy the full promise of digital art without getting entangled in intellectual-property disputes.
