A little over a month ago, I spent the weekend holed up in my room writing
about how the NFT craze is good for law.
Since then, the craze has intensified in ways that are both very weird
and very cool
. Peel back the hype and one constant remains: legal implications are still the crux of the NFT trend.
Crypto laws are like spaghetti code: loose, slippery, undefined. This leaves blind spots in the NFT universe that haven’t been plugged yet. Some examples, courtesy of ExtraCrunch
a) It’s unclear how financial sanctions relate to NFTs.
BitGo and BitPay were fined
for allowing interactions in Iran and Cuba - jurisdictions where America forbids transactions.
b) Is meme-ified work fair game? If I screenshot someone else’s art, make an NFT out of it, and sell it - it feels like I’m breaking copyright laws, but there’s no precedent that explicitly says I am.
Even if there was, the likelihood of artists lawyering up is pretty low. Case in point: cartoonist Matt Furie asked a law firm to help him pro bono when his Pepe frog meme was hijacked
by the alt-right.
- “To really defend your copyright is something only companies like Disney can do.”
c) Unreliable blockchains can stunt value. There’s a value imbalance between NFTs and Ethereum, the blockchain NFTs exist on.
- NFTs are selling for millions of dollars. Ether sells for less than $2,000.
This imbalance incentivises miners to undo or block transactions. There are legal precedents for assets being stolen from a centralized exchange, but there’s no precedent for what happens if the underlying blockchain itself gets manipulated.
There’s good and bad here.
The bad: meme-ification is sweeping finance, with trends inflating and deflating within a matter of months. The law just can’t keep up.
The good: lawyers who sprint towards the blind spots in crypto will cash out. Trends within crypto will rise and fall, but crypto as an alternative to fiat isn’t going anywhere.
NFTs have been upgraded from fringe conversation to the topic of most Clubhouse rooms, which means the bubble is about to pop. DAOs are the next big thing