The emergence of non-fungible tokens (NFTs) has spawned novel legal and regulatory considerations, spanning intellectual property rights, the potential classification of NFTs as securities, the recovery of assets held on decentralized platforms, and criminal considerations relating to fraud, money laundering, and insider trading. This roundup tracks ongoing civil and criminal actions involving NFTs and the various unique legal issues at play.
These actions provide a glimpse into how NFTs will be integrated into existing legal frameworks, and may provide clarity over legal questions that loom large over companies and individuals in the business of creating or selling NFTs. For instance, recent actions show that courts and government authorities are beginning to uncover or take jurisdiction over assets on the decentralized blockchain. Based on recent indictments, individuals are finding out the hard way that digital assets held on the blockchain—while often thought to be anonymous—are not beyond the purview of government enforcement and cannot be used to hide illicit gains. The methods used to uncover the identities of token or NFT holders may have implications not only for criminal enforcement, but also for actions where the identification or recovery of assets is significant such as divorce and bankruptcy. Recent enforcement activity by the United States and foreign governments should serve as a warning to those who think they can use digital assets for unlawful means. This compilation is intended to inform readers of the various legal risks that individuals and businesses in this space may encounter.
Ripple Litigation
SEC v. Ripple Labs, Inc., 1:20-cv-10832 (S.D.N.Y.)
Are NFTs regulated securities? This question factors prominently into decisions made by creators, sellers, and purchasers of NFTs. While this litigation does not concern NFTs in particular, it could potentially determine whether, and to what extent, digital assets such as NFTs are considered…
