NFT business models : a legal analysis

Abstract

Whilst the NFT industry has been experiencing an accelerated growth over the last few years, the industry is still lacking concrete legal definitions and legal certainty on where NFTs fit within existing legal regimes. This has led to an increasing confusion on what contractual relationships are forged when NFTs are minted, sold and traded on the secondary market. A main legal uncertainty stems from the industry’s lack of clarity as to whether NFTs fall within the legal regime of property ownership or intellectual property licensing. This study will therefore delve into relevant legal areas, including property law, contract law, and copyright law, to come to a conclusion as to which legal regime applies to NFTs having digital art as their underlying asset, and this from a Maltese law point of view with consideration for the relevant European legislation. For the purpose of answering this question, this study will be undertaken as desk-based research during which international, European, and Maltese legislation will be analysed together with the terms of use of five different NFT projects and platforms in order to be able to ground the legal concepts within current existing NFT business models. Landmark cases as well as select published works will be referred to throughout the legal analysis undertaken. The study has determined that NFTs issued and traded in terms of the business models analysed are not to be classified as property in terms of Maltese law, but rather they fall within the scope of intellectual property licensing contracts, with the token itself being a proof of the licensed rights held by the NFT holder in relation to the underlying content.