UK Court Recognizes NFTs as 'Private Property' - What's Next?

In early May, the UK Web3 community celebrated an important legal precedent – the UK High Court (the closest analogue to the US Supreme Court) ruled that non-fungible tokens (NFTs) represent “private property”. But there is a caveat: In the court's ruling, this status of private property does not extend to the actual underlying content that the NFT represents. Cointelegraph reached out to legal experts to find out what changes the decision might bring to the U.K. legal landscape.

Boss Beauties Theft

In February 2022, Lavinia D. Osbourne, founder of Women in Blockchain Talks, tweeted that two digital pieces from Boss Beauties had been stolen. Boss Beauty is a women's empowerment NFT series created by "Gen Z changemakers" consisting of 10,000 NFTs and has been showcased on the New York Stock Exchange.

These tokens come with many utility points such as access to exclusive events, free books and licensing fees. Osbourne claimed that the pieces were stolen from her MetaMask wallet and later appeared on the OpenSea marketplace. She found these NFTs with the help of security and intelligence firm Mitmark.

The matter was brought to court in March, and on April 29, The Art Newspaper reported on the ruling of the English High Court, in which the judge recognized that NFTs are legally protected property. Additionally, the court issued an injunction freezing assets on the accounts of Ozone Networks (the operator of OpenSea) and required OpenSea to disclose information about the two account holders holding the stolen NFTs. Shortly after, OpenSea discontinued the sale of these NFTs — Boss Beauties 680 and Boss Beauties 691.

The ban was imposed on "unidentified persons" as the identity of the wallet holder was uncertain. Commenting on the decision, Stevenson Law described the freezing ban as a "pretty harsh (i.e. old-fashioned and harsh) remedy", calling it the "nuclear weapon" of the law.

According to the court order, Osbourne triumphantly claimed:

“Women in Blockchain Talks was founded to open up the opportunities blockchain offers to all, regardless of age, gender, nationality or background. This case will help make the blockchain space a safer place, encouraging More people interacting with exciting and meaningful assets like NFTs."

Tokens and Assets

Racheal Muldoon, lawyer for the case, emphasized the "best significance" of the ruling, which she said "removed any uncertainty that under the law of England and Wales, NFTs themselves were property, distinct from the things they represented. But it was those details that made other experts doubt the groundbreaking significance of the court's decision.

While NFTs are already considered property by the IRS, the difference between the claimed token and the underlying asset does not fill the current legislative gap in the UK and US. “So if you have a token, you have a token. But not necessarily any rights in other respects,” noted Juliet Moringiello, a professor at the Federal School of Law at Widener University, in an interview with Artnet News.

In her opinion piece on the case, Emily Gould, assistant director of the British Academy of Arts and Law, cautioned that UK court rulings, regulatory developments and government research over the past few years have become increasingly consistent in classifying cryptoassets as property. She specifically referred to the 2019 “Legal Statement on Cryptoassets and Smart Contracts” report published by the LawTech Delivery Panel’s UK Jurisdiction Working Group.

what's next

"The underlying property or asset represented by the NFT, whether it is a work of art or any other copyrightable material, remains governed in the UK by the same copyright laws as in the US," said Tom Graham, CEO of Web3 company Metaphysic.ai and ’s co-founder explained to Cointelegraph. "This decision does nothing to clarify that distinction."

But for Graham, the ruling still creates an "interesting precedent" as the court has already issued an injunction against OpenSea. It makes a lot of sense for the courts to step in and provide injunctive relief in cases where NFTs are stolen. He added:

"It is now clear that in the UK NFTs are governed by the same property laws as all other property. This sets a good precedent for people investing in NFTs and the court system will protect their property rights, at least in the UK .”

Anna Trinh, chief compliance officer at digital finance firm Aquanow, noted in an interview with Cointelegraph that the ruling is not revolutionary, but not without “importance of enforcement.” Establishing a legal precedent, confirming what most already believed to be the case, may give NFT platforms more peace of mind when it comes to asking for the freezing of accounts of malicious actors. Trinh says:

"I don't think it's surprising that NFTs are considered private or personal property. The fact that you can buy, sell or trade NFTs essentially indicates that they are private property on a fundamental basis. If a court rules that NFTs are not personal property, then It's even more shocking."

Trinh sees no issues with existing legal protections for the underlying assets. These are determined by the terms of the contract at the time of purchase, so contract law and intellectual property law come into play depending on the nature of the asset. In Trinh's view, there are more pressing legal issues that require regulators' attention, such as creators' rights.

Cointelegraph Chinese is a blockchain news information platform, and the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial advice. Readers are requested to establish correct currency concepts and investment concepts, and earnestly raise risk awareness.