NFTs recognized as ‘legal property’ in landmark case

The UK’s Supreme Court has recognized NFTs (non-fungible tokens) as “property” in a case likely to have far-reaching implications for digital art disputes.

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 make money to collect for women, had been stolen from her online wallet.

In a ruling, to be published later this week, the judge ruled that the assets were “owned” and thus could have access to legal protection — in this case, an injunction served on accounts on Ozone Networks (which the NFT marketplace host) OpenSea), to freeze the assets, and a disclosure of the Bankers Trust “compelling” [OpenSea] to send information about the two account holders” who currently own the NFTs.

An additional permission to serve the injunctions, regardless of jurisdiction, is also important for digital art cases, as the physical location of those involved is often unknown.

“It is of utmost importance because for the first time in the world (to our knowledge) a court has recognized that an NFT is property that can be frozen through a court order,” said Racheal Muldoon, a legal counsel on the case. , with 36 Commercial Law. “This ruling therefore removes any uncertainty that NFTs (as tokens composed of code) are proprietary in themselves, distinct from the thing they represent (e.g. a digital artwork), under the law of England and Wales.”

OpenSea has since blocked the sale of the NFTs on the platform, but did not immediately respond to the request for comment.

The intelligence agency, Mitmark, was called in to collect evidence on the matter and continues to support efforts to identify the current holders of the tokens and facilitate their return.

“We are conducting several investigations to help those who have been victims of scams/hacks. The amount of money involved is astronomical — a huge, huge volume associated with large-scale, highly organized crime groups, operating on a global level,” said Rob Moore, head of intelligence at Mitmark.

Such cases will be closely monitored by the art market, given the rapid growth of the digital art trade on platforms that remain largely unregulated and where there are no significant legal precedents. The news of this ruling also comes as reports emerge this week of a court ruling in Hangzhou, China, in which an NFT marketplace, NFTCN, was allegedly held responsible for allowing the artist to create “tokens of a stolen artwork” by a user. Ma Qianli.

“Hacks and theft are an increasingly common problem for NFT holders. Now that the courts have recognized NFTs as proprietary, holders can rest assured that they will be supported and have recourse to this jurisdiction should their wallets be compromised and their NFTs stolen. Others in jurisdictions, such as the US, do not have this security. In that sense, the courts here are leading the way internationally in protecting crypto asset holders,” Muldoon added.

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