The art world is slow to adapt to new technology. Back in 2019, which seems like eons ago in Internet time, the Hiscox online art trade report noted that the online art market grew 9.8% in aggregate in 2018 to $4.64 billion, a slowdown from the growth experienced in the previous three years. More telling, the same report notes that the “art world’s adoption of blockchain technology remains slow as convincing [use cases] fail to materialise.” Of course, there are structural reasons and specific factors that make the art world unique in its steadfast commitment to “traditional” transactional formats, including the benefits reaped from in-person inspection of unique works executed in a physical medium, as well as the privacy and competitive benefits afforded by relative market opacity.
Like it or not, the art world is being forced to reckon with the metaverse. During the COVID-19 pandemic, homebound collectors helped to buoy the online art market. Online sales in 2020 accounted for “15.8% of all art sales, up from 7.5% in 2019,” with “sales in the first half of 2021 . . . up by 72% to $6.8 billion.” Sales of non-fungible tokens (NFTs) reached around $3.5 billion in the first three quarters of 2021. Although not a person, ERC-721, which sets forth a standard specification for tokens on the Ethereum-based blockchain, topped ArtReview’s annual “Power 100” list of the most influential people in the contemporary art world in 2021.
Specifically with respect to NFTs, art-world stakeholders appear to be of two camps: some curious and diving in, and others feeling skeptical. What is it about NFTs that make certain art-world stakeholders wish they were a passing fad? What is the legal landscape for this fast-growing portion of the metaverse? And how can artists and purchasers protect themselves using pre-existing legal concepts and frameworks? These are some of the questions that we discuss in this Article. After covering what NFTs are and the application of the pre-existing U.S. copyright framework to the NFT format, we elucidate some considerations and issues that artists face when they decide to mint their work and sell NFTs. We also address some concerns that purchasers of NFTs may have. Because the environment is fast-paced and a single set of standards or guidelines has not yet been adopted, we discuss certain types of terms and conditions that currently govern the sale and use of NFTs. In sharing recent case studies, contracts, and projects we have worked on, we hope to provide a snapshot—if fleeting—of the current dynamic world of NFTs.
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Copyright (c) 2022 Megan E. Noh, Sarah C. Odenkirk, Yayoi Shionoiri