In early May, the U.K. Web3 community celebrated an important legal precedent when the High Court in London, closest to the U.S. Supreme Court, ruled that non-fungible tokens (NFTs) represented “private property.” There is a caveat though: in the court ruling, this private property status does not extend to the actual underlying content that the NFT represents. Cointelegraph reached out to legal experts to understand how the decision could change the legal landscape in the UK.
Theft of the Boss Beauty
In February 2022, Lavinia D. Osbourne, founder of Women in Blockchain Talks, wrote On Twitter, two digital pieces from Boss Beauties were stolen – the 10,000 NFT Empowering Women Collection created by “Gen Z changemakers” and exhibited on the NYSE.
These tokens come with many utility points such as access to exclusive events, free books and licensing fees. Osbourne claims the fragments, stolen from her MetaMask wallet, later appeared on the OpenSea marketplace. She tracked down the NFT with the help of security and intelligence firm Mitmark.
The matter went to court in March, and on April 29, The Art Newspaper reported on a UK High Court ruling in which a judge recognized NFTs as property protected by law. In addition, the court issued an injunction freezing assets on accounts at Ozone Networks (OpenSea’s host) and forcing OpenSea to disclose the information of two account holders holding the stolen NFTs.Soon after, OpenSea stopped selling these NFTs – Boss Beauties 680 and 691.
The ban was issued against “unidentified persons” as the identity of the wallet holder remains uncertain.Stevenson LLP in comments on the decision Call The freeze ban is a “pretty draconian (i.e. old-fashioned and harsh) remedy”, describing it as a “nuclear weapon” of the law.
In accordance with the court order, Osborne triumphantly declared:
“Women in Blockchain Talks was established to provide the opportunities offered by blockchain to anyone, regardless of age, gender, nationality or background. This case promises to help make the blockchain space safer and encourage more people Interact with exciting and meaningful assets like NFTs.”
Tokens and Assets
Attorney in the case, Racheal Muldoon highlight The “greatest significance” of the ruling, she said, “removes any uncertainty that NFTs are property in and of themselves, unlike what they represent under the law of England and Wales.” But it is the above-mentioned details that have made other experts suspicious of The groundbreaking importance of the court decision is sceptical.
While NFTs already enjoy the status of property in the IRS treatment, the claimed difference between the token and the underlying asset does not fill the current legislative vacuum in the UK and US. “So, if you have a token, you have a token. But not necessarily any other rights,” said Juliet Moringiello, a professor at Widener University Commonwealth Law School, famous to Artnet News.
As Emily Gould, Director of the Institute of Arts and Law remind In her opinion on the case, UK court decisions, regulatory developments and government research over the past few years have increasingly consistently classified cryptoassets as property.She specifically pointed to the 2019 AA v. Unknown and “Legal Notice on Crypto Assets and Smart Contracts” Reportpresented in the same year by the UK Jurisdictions Working Group of the LawTech Delivery Group.
“The underlying property or asset represented by the NFT, whether it is artwork or any other copyrighted material, remains subject to the same copyright laws in the UK as it does in the US,” said Tom Graham, UK CEO and co-founder of Web3 company Metaphysic. ai explained to Cointelegraph. “This decision does nothing to clarify that distinction.”
But for Graham, the ruling still sets an “interesting precedent” as the court has issued an injunction to OpenSea. This is significant for the courts to step in and provide injunctive relief if NFTs are stolen. He added:
“It is now clear that NFTs are governed by the same property laws that govern all other property in the UK. It sets a good precedent for people investing in NFTs and the court system, at least in the UK, will protect their property rights.”
In an interview with Cointelegraph, Anna Trinh, chief compliance officer at digital finance firm Aquanow, noted that the ruling is not revolutionary, but not without its “implementation importance.” Establishing legal precedent to confirm what most people already believe could give NFT platforms more peace of mind when it comes to calling for the freezing of malicious actors’ accounts. Trinh said:
“I don’t think it’s surprising that NFTs are considered private or personal property. You can buy, sell, or trade NFTs, which basically shows that they are personal property on a first-principle basis. If a court rules that NFTs are not personal property, then Even more shocking.”
Trinh sees no problem with existing legal protections for the underlying assets. These are governed by the content of the contract at the time of purchase, so contract law and intellectual property law will come into play depending on the nature of the asset. In Trinh’s view, regulators can focus on more pressing legal issues, such as creators’ rights.