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If you are producing, minting or dropping non-fungible token products, investing in an NFT business or thinking about buying an NFT, you need an experienced NFT attorney and NFT law firm. Blockchain ensures uniqueness and singularity, but you need top-tier legal counsel for the other aspects of the asset. Call us here at Revision Legal at 231-714-0100. We are internet and NFT lawyers with proven experience with NFTs, IP protection, contract law, entity formation and complex IP litigation. Here are a few questions to ask as you embark on your NFT endeavor.
What Did You Produce/Mint, Sell, and Buy?
Maybe it seems easy enough to mint, sell and/or purchase an NFT. But, the exact legal nature of what was minted, sold and bought can be complicated depending, for example, on the terms and conditions of the sales contract and the selling platform and on underlying legal rights. Did you read the terms and conditions before buying? Did you read the disclaimers, warranties and other stated limitations on the web platform/NFT marketplaces? What did you actually purchase? For example, if you bought an NFT image, did you also purchase the copyright to the image? If so, was the copyright properly and legally assigned or otherwise transferred? Is/was the copyright registered?
These are legal questions that can be answered by NFT lawyers who excel at providing legal services related to blockchain, NFTs and crypto.
Did the Producer/Seller Have the IP Rights?
Along the same lines, another important legal question is whether the producer had the legal authority under U.S. and international copyright laws to produce the NTF. A similar problem might exist with other IP rights such as trademarks and the rights of individuals to their likeness and publicity. If you or your company are producing NTFs, have you done your proper due diligence with respect to trademarks and copyrights? If not, then you may be facing legal action for infringement. Understanding blockchain is not the same as understanding property and IP legal concepts.
Am I Minting/Offering “Securities?
Another legal issue on which you need advice and counsel concerns the question of whether you are minting/offering “securities” as defined and regulated by the federal Securities and Exchange Commission. Tokens and digital coins are increasingly deemed securities and there are a host of legal rules and regulations with regard to how such can be legally offered and sold. For example, securities must be registered before being offered or must come under one or more exceptions. Under some circumstances, even NFTs in the form of art and other digital objects can be considered “securities” if the buyer’s main expectation is to obtain profits that are “derived solely from the efforts of others.” This often depends on how the NFT is marketed.
What Else Should I Consider?
As mentioned above, what you are minting, offering and buying depends enormously on the various contracts involved including the terms and conditions of the sales platform and the purchase contract. These should be crafted and/or reviewed by lawyers with legal expertise in these matters and with deep knowledge of how blockchain technology and NFTs work. Further, all aspects of IP law should be considered when engaged in NFT minting. Examples include copyright issues, as discussed above, as well as:
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For more information, contact the NFT lawyers at Revision Legal at 231-714-0100.
NFT transactions are effectuated through smart contracts — self-executing code deployed on a blockchain that automatically transfers the token from seller to buyer upon receipt of payment. While the blockchain record of ownership is immutable, the legal significance of that record depends entirely on what rights the smart contract and associated terms purport to convey. Courts have begun treating NFT smart contracts as enforceable agreements subject to general contract law principles, including offer, acceptance, and consideration. But the question of what was actually agreed to — and what rights were transferred — frequently requires legal analysis that goes far beyond reading the blockchain.
A critical issue is the relationship between the NFT and any associated off-chain assets. Many NFTs reference images, videos, or other content that is stored on external servers rather than on the blockchain itself. If that server goes down, the NFT may still exist on-chain but the asset it points to may become inaccessible. An experienced NFT attorney can advise on the use of decentralized storage solutions like IPFS (InterPlanetary File System) and on how to structure purchase agreements to address the risk of off-chain asset loss.
One of the most persistent misconceptions in the NFT market is that buying an NFT transfers copyright ownership of the underlying work. Under 17 U.S.C. § 204(a), a copyright transfer must be in writing and signed by the copyright owner. A blockchain transaction is not a signed writing for purposes of copyright law. Unless the sale documentation — whether in the smart contract itself or in accompanying terms — expressly and clearly transfers copyright, the buyer receives a token, not copyright ownership.
What buyers typically receive is a personal, non-exclusive license to display the underlying work for personal, non-commercial purposes. Whether that license is sublicensable, whether it survives a resale of the NFT, and whether it includes any commercial use rights are all questions that depend on the specific terms of the transaction. The absence of clear terms creates legal uncertainty — and legal uncertainty creates litigation risk for both buyers and sellers. An NFT attorney ensures that the scope of any license grant is unambiguous from the outset.
The SEC has signaled increasing interest in whether certain NFTs constitute securities subject to registration requirements under the Securities Act of 1933. The analytical framework is the Howey test, articulated by the Supreme Court in SEC v. W.J. Howey Co., 328 U.S. 293 (1946): an investment contract is a security if it involves an investment of money in a common enterprise with an expectation of profits from the efforts of others. NFTs that are fractionalized, that are sold with promises of future value appreciation, or that entitle holders to revenue shares or governance rights in a project are most likely to be deemed securities.
The SEC has brought enforcement actions against NFT projects it determined constituted unregistered securities offerings. In 2023, the SEC charged Impact Theory, LLC with conducting an unregistered offering of securities through NFTs. The company paid disgorgement and penalties totaling approximately $6.1 million. NFT creators and platforms operating without securities law counsel face substantial regulatory exposure that can result in forced rescission offers, disgorgement of proceeds, and civil penalties.
NFT transactions trigger federal tax obligations that many participants are unaware of. The IRS treats cryptocurrency — and by extension NFTs — as property for federal tax purposes. Gains on the sale of an NFT are generally taxable as capital gains if the NFT was held as an investment, or as ordinary income if the NFT was created and sold in the course of a trade or business. NFT creators who mint and sell their works must recognize ordinary income in the year of sale. Buyers who later resell an NFT at a gain must recognize capital gain — short-term if held one year or less, long-term if held more than one year.
Royalties embedded in smart contracts — amounts paid to original creators on secondary market sales — are also taxable income to the creator in the year received. Tracking royalty income requires careful record-keeping, as blockchain transactions are pseudonymous but not anonymous, and the IRS has demonstrated increasing sophistication in identifying cryptocurrency taxpayers through John Doe summonses and blockchain analytics.
The NFT legal landscape spans intellectual property, securities law, tax, and contract law — it is not a domain where general practitioners can provide adequate guidance. Revision Legal’s NFT attorneys bring specialized expertise to creators, investors, and platforms navigating this complex environment. Whether you are minting a new collection, evaluating an investment, responding to an IP infringement claim, or facing regulatory scrutiny, we can help. Call us at 231-714-0100 or visit our contact page to schedule a consultation.
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