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NFT’S and Their Implications On the Fine Art Space (NY)

December 30, 2021

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<p style="text-align: justify;">On March 11, 2021, Christie’s auction house sold a nonfungible token (“NFT”) by the digital artist Beeple for $69 Million. Prior to this sale, the most Beeple had ever sold his work for was approximately $100.</p>
<p style="text-align: justify;">In simple terms, an “NFT” is a unique unit of data stored on a “blockchain,” which is a public database reflecting a history of transactions. An NFT can represent an image, an electronic deed to a piece of property, or a digital ticket for a particular seat at a concert or other event. These data are so unique that they are deemed “non-fungible” or irreplicable, unlike U.S. Dollars and even cryptocurrencies such as Bitcoin and Ether. For example, you can trade one dollar for the same value of another dollar, but the original Mona Lisa cannot be traded for the value of a print of it sold online.</p>
<p style="text-align: justify;">The purpose and benefit of an NFT varies depending on if one is an artist or buyer. Artists may be interested in NFTs not only as an alternative market for their work, but also for the ability to receive royalties each time their work (in NFT form) changes ownership. For buyers and collectors, NFTs function like any other fine art investment: despite prints and replicas, there is only one, true original of each NFT. As such, the value of an NFT is subject to change over time, for better or worse.</p>
<p style="text-align: justify;">While NFTs offer new opportunities for content creators and owners alike, they also present novel legal issues in the intellectual property space. For example, a single NFT may include various copyrightable elements, such as a video clip and accompanying music. In this respect, already complicated copyright actions will, quite literally, involve several more layers of legal analysis and implications.</p>
<p style="text-align: justify;">As such, understanding the basics of the NFT marketplace is vital for fine art insurers and insureds, in anticipation of both coverage and litigation issues.</p>
<p style="text-align: justify;">Thank you to Alexandra Deplas for her contribution to this post. Please contact <a href="mailto:agibbs@wcmlaw.com">Andrew Gibbs</a> with any questions.</p>

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