In early May, the British Web3 community celebrated an important legal precedent – the London Supreme Court, the closest analogy to the US Supreme Court, has ruled that the NFT symbolizes “private property”. There is, however, a caveat: in the Court’s ruling, this private ownership position does not cover the actual underlying material that NFT stands for. Cointelegraph asked lawyers to understand what this decision could possibly change in the UK legal landscape.
Theft Boss Beauties
In February 2022, Lavinia D. Osbourne, founder of Women in Blockchain Talks, wrote on Twitter that two digital works had been stolen from Boss Beauties – a 10,000 NFT collection of selected women created by “Gen Z Transformers” and displayed on the New York Stock Exchange.
The symbols included a number of points of use, such as access to private events, free books and license fees. Osbourne claimed that the piece, which was stolen from her MetaMask wallet, later appeared on the OpenSea market. She tracked down NFTs with the help of security and intelligence company Mitmark.
The case was brought before a court in March and on April 29, The Art Newspaper reported on the ruling of the British Supreme Court, where judges have recognized the NFT as a property protected by law. In addition, the court issued a ban on freezing assets on the accounts of Ozone Networks (OpenSea’s host) and forced OpenSea to disclose information about the two account owners who had the stolen NFT computers. Shortly afterwards, OpenSea stopped the sale of these NFTs – Boss Beauties numbers 680 and 691.
As it is not clear who the wallet holders are, the ban was imposed on “unknown individuals”. Commenting on the decision, Stevenson’s law firm called the freezing ban “a completely draconian (ie outdated and crude) remedy”, describing it as a “nuclear weapon” law.
Following the ruling, Osbourne declared with a victory:
“Women in Blockchain Talks was created to open up the opportunities that blockchain offers to anyone, regardless of age, gender, ethnicity or background. This issue will hopefully help make the blockchain space more secure and encourage more people to interact with exciting and meaningful assets like NFT.
The symbol and the property
Racheal Muldoon, an adviser to the case, emphasized the “most important” part of the ruling, which, she said, “removes all uncertainty that NFTs are an asset in themselves, contrary to what they represent, under English and Wales law.” the aforementioned detail that made other experts doubt the revolutionary importance of the Court’s decision.
Although NFTs are already enjoying the status of an asset in their treatment by the U.S. Internal Revenue Service, the declared difference between the symbol and the underlying asset does little to fill the current legal vacuum in the United Kingdom and the United States. “So if you have a sign, you have a sign. But not necessarily rights in anything else, “as Juliet Moringiello, a professor at the Widener University Commonwealth Law Schoo, told Artnet News.
As Emily Gould, Deputy Director General of the Institute for the Arts, pointed out in her opinion on the case, the decisions of the British courts, the development of regulations and state investigations in recent years have been increasingly in line with classifying cryptographic assets as assets. She specifically pointed to AA v. Unknown individuals in 2019 and the report “Legal Statement on Encryption Assets and Smart Contracts”, presented by the UK Jurisdiction’s panel at the LawTech Delivery Panel the same year.
“The underlying property or property of NFT, whether a work of art or other copyrighted material, is still subject to the same copyright laws as the United States in the United Kingdom,” said Tom Graham, the United Kingdom’s CEO and co-founder. Web3 company Metaphysic.ai, explained to Cointelegraph. “This decision does not help to explain the difference.
For Graham, however, the ruling set an “interesting precedent” as the court had banned OpenSea. This is remarkable in the case of courts that step in and provide injunctions where NFT has been stolen. He added:
“It is now clear that NFTs are subject to the same property laws in the UK as apply to all other assets. “It sets a great example for people who invest in NFTs that the judicial system, at least in the UK, will protect their property rights.”
Anna Trinh, chief financial officer at digital financial firm Aquanow, told the Cointelegraph that the ruling was not revolutionary, but not without “executive power”. Establishing a legal example that confirms what most people have already considered to be the case could give NFT systems more convenience in demanding to freeze the accounts of malicious actors. Trinh replied:
“I do not think it is much of a surprise that NFT devices are recognized as private property or personal property. You can buy, sell or trade with NFT, which in fact indicates that they are personal property according to the first basic principles. It would have been more shocking if the court had ruled that NFTs were not personal property.
Trinh does not see the current legal protection for the underlying assets as a problem. This depends on the content of the contract at the time of purchase, so contract law and intellectual property rights would be considered depending on the nature of the property. In Trinh’s view, there are more urgent legal issues that regulators could pay attention to, such as copyright.
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