UK Court Recognizes NFTs as ‘Private Property’ — Now What?

In early May, the UK Web3 community celebrated an important legal precedent – ​​the High Court of Justice in London, the closest analog to the US Supreme Court, ruled that non-fungible tokens (NFTs) represent a “ private property “. There is one caveat, however: in the court ruling, this private property status does not extend to the actual underlying content that NFT represents. Cointelegraph has contacted legal experts to understand what this decision could possibly change in the UK legal landscape.

The Theft of Boss Beauties

In February 2022, Lavinia D. Osbourne, founder of Women in Blockchain Talks, wrote on Twitter that two digital works had been stolen from the Boss Beauties – a collection of 10,000 NFTs of empowered women that was created by “Gen Z Changers” 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 the coins, stolen from his MetaMask wallet, later appeared on the OpenSea marketplace. She tracked down the NFTs with the help of security and intelligence firm Mitmark.

The case went to court in March and on April 29, The Art Newspaper reported on the UK High Court’s decision, in which judges recognized NFTs as legally protected property. In addition, the court issued an injunction to freeze assets in the accounts of Ozone Networks (the host of OpenSea) and compelled OpenSea to disclose information about the two account holders in possession of the stolen NFTs. Shortly after, OpenSea discontinued the sale of these NFTs – Boss Beauties numbers 680 and 691.

As the identity of the wallet holders remains uncertain, the injunction was granted against “unknown persons”. In its commentary on the ruling, law firm Stevenson Law called a freezing injunction a “pretty drastic (i.e. old-fashioned and harsh) remedy”, describing it as a “nuclear weapon” of the law. .

Following the court order, Osbourne proclaimed victoriously:

“Women in Blockchain Talks was founded to open the opportunities offered by blockchain to everyone, regardless of age, gender, nationality or origin. This case will hopefully help make the blockchain space safer, encouraging more people to interact with exciting and meaningful assets like NFTs.

The token and the asset

Racheal Muldoon, the lawyer in the case, stressed the “utmost importance” of the ruling, which she said “removes any uncertainty that NFTs are a property in themselves, separate from the thing which they represent, under the law of England and Wales.” But it is exactly the aforementioned detail that has made other experts skeptical of the groundbreaking significance of the court ruling.

While NFTs already enjoy proprietary status in their processing by the US Internal Revenue Service, the proclaimed difference between the token and the underlying asset does little to fill the current legislative void in the UK. and in the United States. “So if you have a token, you have a token. But not necessarily rights to anything else,” Juliet Moringiello, a professor at Widener University Commonwealth Law School, told Artnet News.

As Deputy Director of the Institute of Art and Law, Emily Gould recalled this in her opinion piece about the case, UK court rulings, regulatory developments and government studies in recent years. years have been increasingly in line with the categorization of crypto assets as property. She specifically pointed to the 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 the same year.

And after

“The underlying property or asset that the NFT represents, whether a work of art or other copyrighted material, is always governed in the UK by the same copyright laws as in the United States,” Tom Graham, CEO and co-founder of web3 company Metaphysic.ai, explained to Cointelegraph. “This ruling does not help clarify that distinction.”

But for Graham, the ruling still set an “interesting precedent” because the court had issued an injunction order to OpenSea. This is important in terms of court intervention and granting an injunction when NFTs have been stolen. He added:

“It is now clear that NFTs are governed by the same UK property laws that govern all other property. This sets a big precedent for people who invest in NFTs that the legal system, at least in the UK, will protect their property rights.

Speaking to Cointelegraph, Anna Trinh, chief compliance officer at digital finance firm Aquanow, noted that the decision is not groundbreaking, but not without “executive significance”. Establishing a legal precedent that confirms what most already believed to be the case could give NFT platforms more comfort in demanding the freezing of malicious actor accounts. trinh said:

“I don’t think NFTs being recognized as private or personal property is a big surprise. You can buy, sell, or trade NFTs, which basically indicates that they are personal property under first principles. It would have been more shocking if the court had ruled that NFTs were not personal property.

Trinh does not view the existing legal protections for the underlying assets as problematic. These are governed by the content of the contract at the time of purchase, so contract law and intellectual property law would come into play depending on the nature of the good. In Trinh’s view, there are more pressing legal issues that regulators could pay attention to, such as creators’ rights.