Collectors, gamblers, “investors” looking for new growth niches, trend-setters, owners of what they at least believe are stellar intellectual values, aggregators, agents, brokers, scammers. . . and their lawyers. . . are stepping into what appears to be a brand, spanking new market of tradable and hopefully appreciating assets. Self-described “experts” arise from the digital ether, claiming to be able to create paths to riches in a world of digital uniqueness, non-fungible tokens or NFTs. Hey, everybody is doing it! From every major league sport, record labels, art galleries and even the Los Angeles Times, NFTs are everywhere. We first saw these creatures in the 2017/18 season, but boy have they grown since then!
When I first ventured into what my colleagues viewed as a “must learn” mega market, perhaps more than the distraction of how to fit into the evolving notion of a parallel digital universe (the corner “metaverse,” where everybody knows your name), I was reading of transactions in the millions of dollars, make those tens of millions (see below), for high-profile digital assets. . . and feared that somehow I and my clients might be left behind. Were these NFT traders insane or did I just not understand?
But just as I polled some of these “experts,” I discussed the detail with lawyers who were as neurotic as I am. I began to realize that “no one really knows what they are doing” in this field and few truly appreciate the perils of a new market with just too many snags, risks, and legal thorns to allow a prudent lawyer to sleep comfortably at night. All the disclosures, warnings, articulations of risk factors, waivers and assumptions of the risk just might not absolve a participant in a field of potentially extreme legal risk (civil and criminal) and financial liability (loss and beyond). Or their counsel. Let us explore.
First what are NFTs?
Writing for the Los Angeles Times, tekkie Jon Healey explains: “Video clips of basketball highlights. Digital works of art. A yacht in the metaverse. Cartoons of apes, cats, frogs and hipsters. These are just a few examples of the digital collectibles sold as non-fungible tokens, many at forehead-slapping prices. NFTs have become a hot commodity among crypto investors and celebrities, who have shown off their purchases on late-night TV and social media — causing critics to wonder about the financial interests being served.”1
“NFTs work much like bitcoin and other cryptocurrencies but with a key difference: Each NFT is unique and indivisible. That allows them to serve as proof of ownership for items that may themselves be easily copied and shared online. . . [a]n NFT enables people to declare, ‘This particular copy is the authentic original, and here’s who owns it.’ Although NFT sales aren’t immune to fraud and other crimes, the tokens themselves are extremely reliable as ownership records.”2 In other words, if you own an NFT, it really is yours (assuming that what it was based on exists and was legally owned by the “seller”). What a buyer has purchased is unique digital data, singular or part of a limited edition, stored usually in some cloud-based server. . . somewhere else, in that buyer’s personal blockchain-protected “digital wallet.”
Huh? The NFT ownership—stored somewhere else—is protected with “blockchain” encryption, clearly identified, through multiple digital codes from separate sources that aggregate to form the “proof.” The buyer has unique access to this digital asset. This is serious encryption; the platform, a digital ledger, is usually Ethereum. Ethereum is a decentralized open source blockchain system that features its own cryptocurrency. Did someone say “cryptocurrency?” Welcome to the primary trading currency of this NFT universe. Sellers in this world might not even know their buyers. After all, this is a largely anonymous marketplace.
As Healey puts it, “[t]he point of blockchain technology is to maintain records without relying on a central authority, such as a bank or a government. Instead, the information is spread among the thousands of computers that perform the math that maintains and adds to the blockchain. . . . To offer proof of authenticity in a world where illegitimate copies look exactly like the real thing.”3 To artists, musicians and other creators (or owners of unique creations), NFTs offer a way for them, or their designated representatives, to connect directly with the fans, buyers, and audience, in control of their own intellectual property. But once an NFT enters the marketplace and is transferred to a buyer, it becomes a tradable commodity.
Further, who has the right to NFTs would seem simple, but when writer-director Quentin Tarantino launched NFTs based on scanned scenes from his earlier screenplay that were not incorporated into the film Pulp Fiction, generating over $1 million, the owner of that motion picture cried foul, that they owned all the rights to his materials under copyright law. Tarantino claimed unused excerpts were his alone. The dispute rolled into litigation.4 . The notion of “all rights now known and hereafter devised” represents some of the contested language. Further, as machine-generated content explodes – which the Copyright Office has ruled is not subject to copyright – note that the resulting NFTs are still selling. Is this just a question of taxonomy or are there huge holes in statutory and case law through which NFTs have fallen?
Not that the NFT item must be digital; counterparts exist in the real world, like a famous basketball star’s autographed, game-used high-tops or a unique item of merchandising or a rare, autographed book. But then, it’s not just a “token,” is it? We’ll understand why that matters soon.
Why Would Someone Buy an NFT? What do They Really Get?
Let me put this gently. Buyers will often tell you that they are “collectors.” Sellers and sales representatives often go out of their way to state that the subject NFT is merely a “collectible,” a self-serving statement laced with hope. Maybe purchasers of physical NFTs—like those high-tops—are more likely to be bona fide, “I’m going to keep this for life” collectors. But I suspect that, in a “gambling” FanDuel generation, those buyers are more likely to be traders looking for a digital score. Now or someday.
I suppose these digital players could indulge in digitally cataloging their wares, present PowerPoints or other sexy images of their NFT asset, perhaps even print a copy and hang it on a wall, perhaps in an NFT “trophy” room. Social media? A celebrity website? Pride of ownership, showing off what they have? If it’s not visual, perhaps a musical moment (an outtake or an edit?), their expensive stereo system might be the appropriate flash of ostentation. While baseball trading cards were a foreshadowing marketplace of the NFT revolution, I believe today’s NFTs are mostly not a collector’s medium. As we shall see, opinions differ.
In Healey’s useful article, he refers to one notorious buyer, using the name Metakovan, as a “collector investor.”5 Metokovan paid $69 million for a collage of JPEGs by the graphic illustrator Beeple, believing that the work would someday fetch a price in the billion-dollar range.6 He noted that “the work is valuable not because it’s an NFT but because of the 5,000 days it took to produce, one illustration per day. ‘Skill is transferable and technology becomes obsolete. The only thing you can’t hack is time, and this piece represents 13 years of time’ said [Metakovan].”7
“Nevertheless, it’s hard to ignore how much the value of some NFTs has climbed from sale to sale. For example, the Verge noted the case of the investor who bought a different Beeple NFT for $66,666, then sold it four months later for 100 times that amount.”8Musicians, photographers, authors, artists and their representatives are in this to make money, and the buyers are usually in this to. . . er. . . make money too. Sports teams and art galleries, entrepreneurial “hunter gatherers” willing to act as intermediaries, are leaping into the NFT fray. Investor groups are even forming to buy “the big stuff.” PayPal has even restricted the use of its payment services by limiting NFT purchases in excess of $10,000.9
Are you beginning to grasp some of the legal risks here? Especially where you do not know who the buyer actually might be. It may have started out as a market for true collectibles, but… a lot has changed since inception. Bottomline: it appears that the primary motivation of NFT buyers and sellers is to engage in the commercial trade of investment-grade assets. My opinion anyway. A red flag for determining if this arena falls into a the highly regulated universe of commodities/derivatives/securities or a virtually unregulated simple all-American quest for bona fide collectibles. An unregistered public offering or a memento? Some lawyers also embrace the position that many NFT transactions are really disguised lotteries or unregulated gambling, which may run afoul of all sorts of state and federal laws.
To make this increasingly complex, many buyers have no real notion of what they get when they purchase an NFT, while most don’t care because they intend to sell or trade that asset when, they assume, it soars in value. Notably, buyers are not buying a copyright! They do not get the right to create derivative works or publicly perform the work. Remember, Under 17 U.S.C. § 204(a), “a transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.”10
Terms and Conditions/Contracts of Sale for NFTs
Attorney Ned T. Himmerich, who leads law firm Gordon Feinblatt’s technology and intellectual property team, admonishes attorneys: “An agreement dealing with NFTs should consider who owns the original work and the specific digital image to which the NFT relates, and if there is a limit on how many digital copies and NFTs can be created from the original. Also, determine whether the copyright in the original work is granted with the NFT and what rights the NFT owner may have to copy the image. For any NFT, safeguard all passwords and logins and consider who in the corporate structure should have access to them.”11
“If marketing the NFT is part an arrangement, include a grant of name, image and likeness of the artist and be specific about other benefits that may be available to the NFT owner. Consider what channels or sales outlets are used for marketing, who determines pricing, what controls exist over resale, and what royalties are paid to the artist. If any owner will receive royalties for downstream transfers, have the agreement remain active to receive and distribute downstream royalties.”12 Indeed, many originating creators layer in a droit de suite (French for “right to follow”) payment, generating a royalty or percentage of every subsequent sale of the resulting NFT, in their structured terms.
For legal representatives, there are often serious legal issues that no one thinks about until it is too late. Vladamir Arutyunyan, attorney of the UK law firm Fox Williams, reminds us: “When releasing an NFT collection, a brand does not want to be in the unenviable position of retroactively trying to prove its ownership of the intellectual property in the NFT’s artistic work.. . . The current approach in many countries is to take existing IP rules and apply them to the metaverse. When reviewing agreements used by fashion brands [for example] to bind owners of these NFTs, lawyers can see familiar language and terms.
“As a result the underlying NFT (which is ultimately recorded on a blockchain), is distinguished from the artwork ‘associated’ with the NFT. A common approach is to make clear that the purchaser is acquiring only the actual token that is associated with the artwork, whilst the brand retains all rights to artistic creation. . . . This results in clauses such as:
- Nike – ‘RTFKT retains all right, title and interest in the RTFKT-Owned Content and all copyright or other intellectual property rights in any RTFKT-Owned Content’;
- Under Armour – ‘The Digital Object(s) provided pursuant to this Owner Agreement are licensed, not sold, and Owner receives no title to or ownership of the Digital Object(s) or the intellectual property rights therein. Except for the license expressly set forth herein, no other rights (express or implied) to the Digital Object(s) are granted’; and
- Adidas – ‘You acknowledge and agree that adidas AG (‘adidas’) (or, as applicable, its licensors) owns all legal right, title and interest in and to the Art, and all intellectual property rights therein. The rights that you have in and to the Art are limited to those expressly stated in Section 3 of these Terms and Conditions (these ‘Terms’) below.’”13
There are other considerations which Arutyunyan believes are part of this process, including: “[a] varied approach [to a buyer’s commercial use of an NFT] has been taken here. Many companies do not allow any commercialisation of the NFT. . . . [Some, like] Nike however, [have] allowed owners of its NFTs to apply for a commercial licence which grants them specific rights to commercialise the modified version of their NFT.”14
“These rights are limited mainly to physical merchandising (note that this does not extend to footwear or apparel) and the owner, using generally accepted accounting principles, is only allowed to make an aggregate of $1 million gross revenue. After this threshold is reached, the NFT owner will have to request further permission from Nike to continue benefiting. This is certainly a novel approach, allowing both the owner to profit but also to retain control over the commercialisation of the NFT. . . . If the NFT is sold, the previous owner’s rights to the NFT (and any restrictions, unless they extend beyond ownership) terminate upon transfer. There is nothing unusual about this.
However, if an owner breaches the terms of the agreement whilst still in possession of the NFT, then the companies have stated in no uncertain terms that the agreement will be terminated and all rights under the agreement rescinded. What this means from a practical sense will be hard to predict.
When brands mint large collections of NFTs (Adidas minted 30,000 NFTs), even with the use of a blockchain it will be difficult to supervise proper use. Furthermore, it will be equally challenging to enforce any sanctions against individuals where identity and ownership are not easy to ascertain.”15
The intractability of blockchain storage in digital wallets is further complicated when the NFT was not legally acquired. NFT dealers need NFTs, and lots of them, to make a commercial market. They are not always particularly sensitive to making sure what they have is actually genuine or legal. Brandon W. Clark, attorney of the firm of McKee Voorhees & Sease, PLC, cites this example: “Already, specific NFT owners have had their NFTs blacklisted because they have acquired them through illicit means, for instance when OpenSea froze $2.2 million worth of stolen Bored Apes NFTs. However, it is extremely difficult to physically remove the actual NFT from someone’s possession. Being blacklisted means that you may not be able to sell the NFT on specific marketplaces like OpenSea, however there are ways to circumnavigate this, especially if the NFT remains in your wallet.”
Taxing More than Your Credibility
Transactional lawyers often miss the tax issues, which grow proportionately when your client begins to deal across international boundaries. Tax treaties kick in, and VAT issues raise their ugly heads as well. But presenting a thorough examination of the cross-border ramifications of NFT sales is well beyond the scope of this article. But even within the United States, the taxation of NFTs is anything but clear.
As of February 18, 2022, a June 24, 2021 examination of NFTs from the Journal of Accountancy still seems to apply, for now: “[w]hile the IRS has issued some guidance as to the tax consequences of transactions involving what it calls ‘virtual currency’ or ‘cryptocurrency’ (see Notice 2014-21 and Rev. Rul. 2019-24, also Chief Counsel Advice 202114020), it has yet to address the tax treatment of NFTs specifically as a cryptoasset and their gain, loss, or income generation. Nonetheless, just as with other cryptoassets, general tax principles would no doubt come into play in some possible ways explored below. Even more than ‘cryptocurrency,’ which the IRS regards as property distinct from fiat, or ‘real’ currency, NFTs bear some traditional hallmarks of property.”16 Hmmm. An interesting observation that may carry over into other aspects of governmental regulation.
Sales tax, generally a seller obligation, seems to fall within the purview of many existing state laws: “Although no state tax agency has specifically announced that NFTs are subject to sales and use tax yet, some states already have the statutory framework in place to impose their sales tax on NFTs. Furthermore, selling NFTs to a buyer in a different state could result in a state income tax filing requirement. This GT Alert [Greenberg Traurig, LLP] contains some questions and answers to address the state tax issues of NFTs so that sellers and investors might be aware of the potential state tax consequences [including:]
“32 states (so far) impose their sales tax on digital products, such as movies, music, ringtones, and e-book downloads. Some of these tax statutes on digital products are broad enough to encompass NFTs, if the NFT can be viewed (such as artwork or trading cards) or heard (such as a musical work).”17 But wait, there’s more!
Licensing for NFT Dealers
“The traditional way to become licensed to trade or invest in securities (like stocks and bonds) is to pursue a test known as the Series 7. Administered by the Financial Industry Regulatory Authority (FINRA), the Series 7 is considered one of the most difficult tests you can take to obtain a professional license.”18
“While the Series 7 is important, the license limits professionals to offering only a narrow list of investments to their clients. A second, lesser-known career path, involves taking the National Commodity Futures Examination, otherwise known as the Series 3, which gives anyone in the U.S. the ability to offer alternative investments in commodities and futures securities.”19 Just know if a sales agent is not licensed in a covered field, the risks of being held civilly or criminally accountable under state of federal law are very real.
For those offering NFTs and those representing people making those offers, understand that the same regulations that concern offering of passive investments (i.e., securities, public and private)—disclosure, accuracy, accrediting investors, perhaps registration and governmental approval, limitations on marketing and solicitation, etc.—just might be required. My friends in high places tell me a number of states, as well as the federal Securities and Exchange Commission, are about to get very active in NFTs. Ignore these regulatory features and proceed at your own risk. Maybe an NFT is a “collectible.” Maybe it isn’t.
We will ultimately find a judicial determination—whether these NFTs are mostly unregulated collectibles or highly regulated securities—in one of more cases now pending, including, perhaps, a class action involving the NBA.20 On October 1, 2020, the NBA’s “Top Shot Moments”—created in an agreement between Dapper Labs and the league—were first made available to the public as part of an “open beta” program. Effectively, NBA highlights become “minted” into NFTs, resulting in a one-of-a-kind digital asset stored on Dapper’s blockchain. You have to wonder how up the appellate ladder this issue will rise. . . and how long that might take.
There are currently some highly regarded legal opinions as how, possibly, ways to mitigate this risk. For example, see Stephen P. Wink, Miles P. Jennings, Shaun Musuka and Deric Behar, in the March 19, 2021, Columbia Law School’s blog on corporations and the capital markets looked at how Latham and Watkins views these risks: “In the case of NFTs that constitute art or collectibles, on the surface of things, such NFTs should arguably not be deemed to be securities. (Needless to say, any given NFT would have to be analyzed on its specific facts.) These NFTs are essentially finished products whose value is determined at a sale that is made directly to a buyer. For such NFTs to maintain or appreciate in value, there is typically no expectation or need for third parties to extend managerial efforts that will enhance the value of the NFT. As noted by the SEC staff in its 2019 Framework, ‘Price appreciation resulting solely from external market forces (such as general inflationary trends or the economy) impacting the supply and demand for an underlying asset generally is not considered ‘profit’ under the Howey test.’ In other words, an NFT is not a security simply because it can increase in value.”21
“However, NFTs that constitute art or collectibles may only be the tip of the iceberg. Many industry participants think the technological developments being driven by the demand for NFTs could lay the groundwork for expansion into an enormous variety of digital property rights. The analysis becomes more complex when considering the emerging trend towards these other areas, including the financialization of NFTs.”22
“NFT issuers are [thus] advised to avoid marketing NFTs as an investment that can reward holders with appreciation, profit, or dividends. The concern here is that such marketing could transform a non-security into a security, such as in the Gary Plastic case [Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 756 F.2d 230 (2d Cir. 1985)], in which a secondary market for the instruments was touted.”23 Simply, choose your marketing words very carefully.
The “Howey” test was established just after World War II over a sale-leaseback scheme involving an orange grove. The Supreme Court found a “security” in violation of the Securities Act24 and promulgated the following rule as to when a security exists: “The test is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. If that test be satisfied, it is immaterial whether the enterprise is speculative or non-speculative or whether there is a sale of property with or without intrinsic value.”25 Subsequent courts, applying Howley, have ruled that art, collectibles and the like are not securities. How confident would you be that a 1946 precedent would be applied to the modern world of cryptocurrencies and NFTs? Exactly.
The Securities and Exchange Commission has warned that NFTs, particularly when they involve the “fractionalization” of digital assets into many segments and sold accordingly (like the ownership of stock in a corporation), migrate fuarther into that passive “Howey test” investment universe, relying on third-party efforts and values, i.e., the world of regulated securities. But as noted above, NFTs may be better regulated as “commodities.”
Some states have stepped in to hold that NFTs are not subject to their local “Blue Sky” laws, ostensibly to encourage the commercial growth of digital transaction, from cryptocurrencies to NFTs. To put it mildly, confusion reigns supreme. The feds are slow to react, but more formalized regulation is on the horizon.
On March 9, 2022, President Biden issued an executive order26 mandating a pan-federal agency review of potential regulation of the trade and exploitation of digital assets (obviously cryptocurrencies and NFTs as the largest segment). The order focused on six policy objectives with respect to digital assets:
(1) Customer, investor, and business protections
(2) Financial stability and systemic risk mitigation
(3) Illicit finance mitigation and national security risks
(4) Ensuring continued leadership in the global financial system and economic competitiveness by the United States
(5) Financial inclusion
(6) Responsible development and use of digital assets.27
And there are additional concerns. Lots of them.
In this digital world, for example, there are also issues from privacy statutes—from state laws to Europe’s highly restrictive General Data Protection Regulation—as well as laws intended to protect children like our federal Children’s Online Privacy Protection Rule, which can result in humongous fines, injunctions and more. The Federal Trade Commission has also come down hard on statements and actions of “influencers,” which can make companies that pay for influencer activities liable for what can be construed as misleading. NFT influencers and endorsers are definitely under scrutiny. When NFT marketing and sales reach buyers through online digital communications, these laws and regulations seriously kick in. And remember, worry may even arise if the buyer is an underage minor who lacks the legal capacity to enter into a contract. I am not through yet.
Additional Risks of Loss
Many dealers in this rising commercial arena skip over the potentially serious consequences they face. Like this one: “IRS criminal investigators see cryptocurrencies and nonfungible tokens as ripe for fraud, including money laundering, market manipulation and tax evasion -- and even celebrities could get caught up in the agency’s probes. . . . Digital assets have been a growing concern for government agencies as they’ve become more mainstream, with regulators grappling over how to police the tokens and carry out enforcement activities to deter investors from engaging in criminal activity. ‘We’re just seeing mountains and mountains of fraud in this area,’ said Ryan Korner, special agent in charge of the Los Angeles field office at the IRS’s criminal investigation division. The division is tasked with probing tax crimes and related financial crimes.”28
“Celebrities aren’t immune to the IRS’s criminal probes, Korner said late Tuesday [1/25] at a virtual event hosted by the USC Gould School of Law. ‘We’re not necessarily out there looking for celebrities, but when they make a blatant or open comment that says ‘Hey, IRS, you should probably come look at me,’ that’s what we do.’”29 Some also see NFTs as a convenient vehicle for money laundering. Additionally, beyond the criminal and civil risks of violating securities and commodities laws which allow plaintiffs, (buyers?), and the government to seek massive fines, penalties, and damages, there is a further consideration, one that could incent buyers to find a deep pocket to pay bigtime. Risk of loss from insecure digital platforms is a looming threat by hackers and ransomware. Although very unlikely in blockchain secure platforms, the total collapse of the platform holding the digital wallet is a real risk. In addition, what happens if the NFT turns out to be fake or illegal? Are sellers and broker-dealers simply available deep pockets when there’s no one else to sue? Or is this a classic case of “let the buyer beware.”
If a stated cause of action can be for fraud or violation of a specific statute, there might be hope. But remember, sellers often do not know who the buyers are in this frequently anonymous, cryptocurrency driven marketplace. But what if those buyers suddenly appear seeking damages? And while blockchain encryption is considered very safe, occasionally, an outright theft can occur… if protocols are not carefully observed. On February 20th, for example, Verge.com reported a $1.7 million theft of NFTs the day before on OpenSea.30
What about insurance, especially in these mega NFT transactions? Perhaps, one or more forms of cyber insurance might apply, particularly to professional intermediaries, but as of this writing there were no U.S. available forms of insurance designed specifically to cover these NFT risks. From a knowledgeable insurance broker after searching for a policy that would cover NFTs:
1. There is certainly coverage available but is usually very expensive. Please bear in mind, however, that the coverage would NOT be for the actual NFT, just the software used to create the NFT and the network the software runs on.
2. This would not apply to the actual NFT, only the software used to create it. You would need fine arts coverage to cover the actual asset.
Good luck with that fine art coverage. No luck finding anyone will to cover an NFT as an insurable work of art.
As NFT transactions become more normalized, we can expect case law, statutes, and administrative regulation to evolve. We might witness a hodgepodge of mixed state regulations with uniformity sorely lacking (like the world of privacy legislation), effectively the evolution of acceptable industry practices or the continuation of the Wild West of everyone guessing, acting, and hoping they are doing the right thing. It seems as if the perils associated with NFTs are beginning to take root as many of the more sophisticated players in the space become increasingly aware of the risks and the ambiguities. According to law firms tracking the industry, the NFT business has definitely slowed of late. What do they know that the rest of market does not?
Do all these warnings suggest that NFTs are unsustainable? While flagging somewhat, the commercial demand for this new digital asset still suggests otherwise. Governmental agencies, perhaps even the underlying enabling statutes, need to catch up with what has launched with a massive series of digital commercial explosions.
1. Jon Healey, Why are celebrities buying million-dollar ape cartoons? NFTs, explained, Los Angeles Times (Feb. 7, 2022) https://www.latimes.com/business/technology/story/2022-02-07/what-are-nfts-bored-apes.
4. See Complaint for; 1. Breach of Contract; 2. Copyright Infringement; 3. Trademark Infringement; 4. Unfair Competition and Demand for Jury Trial, Miramax LLC vs. Tarantino, No. 2:21-cv-08979 (C.D. Ca. Nov. 16, 2021), 2021 WL 5359414, ECF No. 1.
5. Healey, supra note 2.
9. The policy update was dated February 11, 2022, and became effective on March 21, 2022. The policy update highlights, “[r]evising PayPal’s Seller Protection program to expand the list of ineligible items to include certain Non-Fungible Tokens (NFTs) with a transaction amount of more than $10,000.” See Michael McSweeney, PayPal to limit some NFT transactions for its merchant-focused Seller Protection program, The Block (Feb. 15, 2022) https://www.theblock.co/linked/134401/paypal-to-limit-some-nft-transactions-from-its-merchant-focused-seller-protection-program.
10. See Brandon W. Clark, Copyright Ownership, Transfers, and NFTs, McKee, Voorhees & Sease PLC (Mar. 14, 2022) available at https://www.filewrapper.com/copyright-ownership-transfers-and-nfts/.
11. Ned T. Himmelrich, NFT Agreements Require Specific Terms, Lexology (Feb. 10, 2022) https://www.lexology.com/library/detail.aspx?g=e448541c-0b97-488a-aaeb-015738f1767d.
13. Vladamir Arutyunyan, Stephen Sidkin, Non Fungible Token Licensing —What are the Commercial Legal Issues?, Fox Williams (Jan. 18, 2022) https://www.fashionlaw.co.uk/2022/01/18/non-fungible-token-licensing-what-are-the-commercial-legal-issues/.
16. Walter Effross, Leonard Goodman, Anthony Pochesi, Jay A. Soled, Tax Consequences of Nonfungible Tokens (NFTs), Journal of Accountancy (Jun. 24, 2021) https://www.journalofaccountancy.com/news/2021/jun/tax-consequences-of-nfts-nonfungible-tokens.html.
17. Marvin A. Kirsner, State Sales Tax on Sale of Non-Fungible Tokens (NFTs) – Questions and Answers, National Law Review, Volume XI, Number 119 (Apr. 29, 2021) https://www.natlawreview.com/article/state-sales-tax-sale-non-fungible-tokens-nfts-questions-and-answers.
18. Noble Drakoln, Series 3 License: A Career With No Limits, Investopedia (updated Jul. 13, 2022) https://www.investopedia.com/articles/professionaleducation/08/series-3-commodities.asp.
20. Friel v. Dapper Labs, 1:21-cv-05837-VM, (S.D.N.Y. Oct. 8, 2021)
21. See Stephen P. Wink, Miles P. Jennings, Shaun Musuka, Deric Behar, Latham & Watkins Discusses Whether NFTs Are Securities, The CLS Blue Sky Blog, (Mar. 19, 2021) https://clsbluesky.law.columbia.edu/2021/03/19/latham-watkins-discusses-whether-nfts-are-securities/.
24. See 15 U.S.C. § 77a et seq..
25. S.E.C. v. W. J. Howey Co., 328 U.S. 293, 301 (1946).
26. See “Executive Order on Ensuring Responsible Development of Digital Assets,” White House Briefing Room, March, 9, 2022, available at https://www.whitehouse.gov/briefing-room/presidential-actions/2022/03/09/executive-order-on-ensuring-responsible-development-of-digital-assets/.
28. Allyson Versprille, Crypto, NFTs Are Rife With ‘Mountains’ of Fraud, IRS Says, Bloomberg Wealth (Jan. 26, 2022) https://www.bloomberg.com/news/articles/2022-01-26/irs-seeing-mountains-and-mountains-of-fraud-with-crypto-nfts.
30. Russel Brandom, $1.7 Million in NFTs Stolen in Apparent Phishing Attack on OpenSea Users, The Verge (Feb. 20, 2022) https://www.theverge.com/2022/2/20/22943228/opensea-phishing-hack-smart-contract-bug-stolen-nft.