Earlier in May, the British Web3 community celebrated an important legal precedent: the High Court of Justice in London, the closest analog to the US Supreme Court, has ruled that non-fungible tokens (NFTs) represent “private property”. . There is a caveat, however: in the court ruling, this proprietary status does not extend to the actual underlying content that NFT represents. Cointelegraph reached out to legal experts to understand what this decision could change in the British legal landscape.
The Boss Beauties Robbery
In February 2022, Lavinia D. Osbourne, founder of Women in Blockchain Talks, wrote on Twitter that two digital works had been stolen from Boss Beauties – a 10,000 NFT collection of empowered women that was created by “Gen Z change-makers” and featured on the New York Stock Exchange.
The tokens came with a number of utility points, such as access to exclusive events, free books, and license fees. Osbourne claimed that the pieces, stolen from his MetaMask wallet, later turned up on the OpenSea marketplace. He tracked down the NFTs with the help of the security and intelligence company Mitmark.
The matter was taken to court in March, and on April 29, The Art Newspaper reported on the UK High Court ruling, in which judges have recognized NFTs as property protected by law. Besides, the court issued an injunction to freeze the assets of Ozone Networks (OpenSea’s host) accounts and forced OpenSea to disclose information about the two account holders in possession of the stolen NFTs. Shortly after, OpenSea stopped the sale of these NFTs, Boss Beauties number 680 and 691.
As the identity of the holders of the wallets remains uncertain, the injunction was granted against “unknown persons”.In its comment on the decision, the Stevenson Law Firm called the injunction a “pretty draconian (ie old-fashioned and harsh) expedient”, describing it as a “nuclear weapon” of the law.
Following the court order, Osbourne proclaimed victorious:
“Women in Blockchain Talks was founded to open up the opportunities that blockchain offers to anyone, regardless of age, gender, nationality or background. Hopefully this case will be instrumental in making the blockchain space more secure, encouraging more people to engage with exciting and meaningful assets like NFTs.
The token and the asset
Racheal Muldoon, the lawyer on the case, stressed “the utmost importance” of the ruling, which, according to her, “removes any doubt that NFTs are property in themselves, distinct from the thing they represent, under English law.” and Wales”. But it is precisely this detail that has made other experts skeptical about the innovative significance of the court’s decision.
While NFTs already enjoy proprietary status in their treatment by the US Internal Revenue Service, the proclaimed difference between the token and the underlying asset does little to fill the current legislative gap in the UK and US. Joined. “So if you have a token, you have a token. But not necessarily any rights to anything else.”as Juliet Moringiello, a professor at the Widener University Commonwealth Law School, pointed out to Artnet News.
As the deputy director of the Institute of Art and Law, Emily Gould, recalled in her opinion piece on the case, UK court decisions, regulatory developments and government studies in recent years have been increasingly consistent in categorizing crypto assets as property. Specifically, he pointed to the case AA v. Persons Unknown of 2019 and the report “Legal statement on cryptoassets and smart contracts”, presented by the UK Jurisdiction Taskforce of the LawTech Delivery Panel that same year.
Whats Next
“The property or the underlying asset that represents the NFT, whether it is a work of art or any other material capable of being protected by copyright, continues to be governed in the United Kingdom by the same copyright laws as in the United States” , Tom Graham, CEO and co-founder of UK-based startup Metaphysic.ai, explained to Cointelegraph. “This decision does not help clarify that distinction.”
But for Graham, the ruling still sets an “interesting precedent” as the court had issued an injunction to OpenSea. This is significant in terms of courts stepping in and providing injunctions when NFTs have been stolen. He added:
“It is now unequivocal that NFTs are governed by the same property laws in the UK as all other property. It sets a great precedent for people investing in NFTs that the court system, at least in the UK, will protect your property rights.
Speaking to Cointelegraph, Anna Trinh, chief compliance officer at digital finance firm Aquanow, noted that the ruling is not groundbreaking, but it is not without “executive significance.” Establishing legal precedent that affirms what most already believed to be the case can give NFT platforms more comfort in requiring malicious actors to freeze their accounts. trinh said:
“I don’t think the recognition of NFTs as private or personal property is a huge surprise. NFTs can be bought, sold or traded, which essentially points to their being personal property on first principles. It would have been more shocking if the court had held that NFTs are not personal property.
Trinh does not see existing legal protections for the underlying assets as problematic. These are governed by the content of the contract at the time of purchase, so contractual and intellectual property law would come into play depending on the nature of the asset. In Trinh’s view, there are more pressing legal issues that regulators could pay attention to, such as creators’ rights.
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