We had a recent LIVE session on NFTs and legal challenges for the current cohort of the LTIC course. Following on from that and the recent debacle with the Porsche NFT launch we wanted to summarise of the key challenges surrounding NFTs.

IP rights

The ownership of IP rights for an NFT can be complex and depends on several factors, including the type of digital asset represented by the NFT, the jurisdiction in which the NFT was created and sold, and any agreements between the parties involved. The creator of the digital asset represented by the NFT will own the underlying IP rights, unless there is a transfer of ownership. However, should the ownership of the NFT itself, as a unique digital token, be separate from the ownership of the IP rights associated with the digital asset?  A recent example is the lawsuit between artist Trevor Jones and Grimes, over the ownership of an NFT artwork. Jones claimed that Grimes used his artwork without proper permission.  Even more recent is the win in the courts by the luxury brand Hermès against the digital artist behind “MetaBirkin” NFTs.  The court was convinced that that Mason Rothschild’s sale of the NFTs violated Hermès’ rights to the “Birkin” trademark.

It is important to note that the IP laws surrounding NFTs are still evolving, and there is a need for clear regulations and standards to provide clarity on IP ownership in the NFT market. In the absence of such regulations, disputes over IP ownership for NFTs are likely to continue.


NFT transactions are executed on the blockchain, which makes it challenging to determine the jurisdiction in the event there is a dispute.  For instance in the case of the CryptoKitties NFT game, the developers faced challenges in determining the jurisdiction for the game, as it was accessible globally.  Similar with Axie Infinity in 2021, the decentralized gaming platform faced challenges in determining the jurisdiction for its NFT transactions.  With the platform being accessible in many countries with different legal systems. Therefore the main challenges is determining the jurisdiction in which an NFT transaction took place, as the transaction may have involved parties from different countries with different legal systems and laws. This can make it difficult to resolve disputes or enforce agreements related to NFTs. How do we tackle these challenges?  There have been many calls for a global set of standards and regulations for this type of asset, providing a framework for resolving disputes and enforcing agreements.  


There is a lack of clarity regarding the taxation of NFT sales, with different countries having varying tax laws.  In the US, NFT sales are currently taxed as property, leading to confusion among NFT creators and sellers regarding the applicable tax laws.  The classification of NFTs for tax purposes can vary widely depending on the jurisdiction, with some countries classify them as collectibles, and others as digital assets.  Determining their value for tax purposes isn’t straight forward either, with it being tied to subjective factors such as scarcity and demand, which can be difficult to quantify.  There are also sales tax challenges with different jurisdictions treating them differently.  Capital gains tax may apply to the sale of NFTs, and the treatment of capital gains tax can vary widely depending on the jurisdiction.

Consumer protection

NFTs are a relatively new concept and there is a lack of consumer protection measures in place, leading to potential fraud and scams.   In 2021, a fraudulent NFT marketplace duped several users into buying worthless tokens, highlighting the need for consumer protection measures in the NFT industry.  Only last week we saw Porsche launch an NFT of the 911 model, at a price of 0.911 ETH (etherum).  The demand was high the rollout of the NFTs was a disaster with only 20% of the 7500 NFTs minted on day one.  This led to a secondary market place on OpenSea, where not soon after launch it was cheaper to buy there than directly from Porsche. In the midst of this debacle, scammers quickly leveraged phishing sites and fake accounts to dupe consumers who wanted to mint the NFT.  Little did they know once their wallets were connected scammers will try and steal whatever is on the wallet.  Read the full article here 

Environmental impact

The energy consumption associated with NFT transactions on blockchain networks has raised concerns about their environmental impact.  The energy consumption associated with NFT transactions has been criticized, with some experts calling for more environmentally sustainable solutions for the NFT market.  There has been a general push in the Blockchain space to develop more sustainable networks.  Energy-efficient blockchain networks and the use of renewable energy sources to power NFT transactions are on the rise with Solana, Algorand, NEAR Protocol addressing the environmental impact of NFTs and other blockchain-based applications.


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