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What Litigators Should Know Now about Non-Fungible Tokens

ABA Litigation: Jurisdictional and other legal considerations in the booming NFT market. ” Many purists think decentralization is the most important promise of cryptocurrency, but to grow in popularity, non-fungible tokens (NFTs) need to guarantee rights to artists. NFTs are non-interchangeable units of data, stored on a blockchain, that can be sold and traded. NFTs can represent real-world items, such as artwork. Currently, some artists are hesitant to enter the NFT space fully because they lack certainty as to how legal rights will be enforced in a decentralized space. For example, if there is a dispute, how would one handle it? When people hear only about the scams or “getting rugged,” they will be wary of entering into the NFT market. (“Getting rugged” is a widely used term for investing in an NFT project after the artists or managers of the project promise the moon but then “pull the rug out from under you” by taking your money and never developing the project). Courts have not yet determined how to treat NFTs. Will artists be able to enforce copyright? What if someone claims that stealing an image is free use but barely changed the original artwork? Because an NFT is a combination of an image and a token, should we treat them the same or differently? Some people in the NFT community believe there should be some regulation, while others say there should be none, given that NFTs are supposed to be completely decentralized. There may be answers in traditional art law, but artists (and art law attorneys who counsel them) cannot be certain how courts will handle disputes involving NFT art law. Many in the NFT community feel this uncertainty is a non-issue. For them, it is more about the thrill of a sale and being on the cutting edge of new technology and art. Yet other artists are waiting for certainty before they fully commit to NFTs…”

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