Lawyer Monthly - June 2022

WWW.LAWYER-MONTHLY.COM | JUN 2022 90 THOUGHT LEADER - KEVIN KELLY What Are the Legal Risks of Purchasing NFTs? The arrival of non-fungible tokens (NFTs) as a proposed avenue for the sale of art and collectibles has earned a divisive reaction in the art space. A year on from NFTs’ first explosion of popularity, many investors are still unsure of the rights and risks associated with purchasing them. Below, Mazzola Lindstrom associate Kevin Kelly answers some commonly asked questions on the subject of NFTs. does. Mere ownership of an original painting does not mean that a collector owns the copyright of the piece. Another common question that I receive about NFTs concerns their virtual, digital nature. Traditional collectors seem to question why an NFT is valuable when it is solely virtual; whereas traditional art includes a physical piece of art. NFTs and traditional art are valuable for similar reasons. Before NFTs, critics lamented that they did not utilise techniques like Jackson Pollock’s drip painting technique since, according to them, it “took no skill” and are now somehow worth millions of dollars; however, these critics fail to understand the true value of a Pollock drip painting. While the technique may appear “easy”, these critics fail to realise that the price does not come solely from the physical paint on the canvas, but what the work represents. If the price comes from what the work represents, then what difference does it make to own a physical canvas or an NFT? As NFTs and the traditional art world become more interconnected, artists and galleries are beginning to offer NFT and physical art pairings. For example, artist Arina BB’s ManManLaiZzz collection pairs NFTs with physical paintings. Additionally, artists can receive royalty payments automatically to their crypto wallet as their works are sold on the secondary market. The royalties gives artists a chance to share in their future success too because, unlike the traditional art world, NFT artists will receive a portion of future sales. These What issues are traditional art buyers and collectors facing with their first forays into the NFT space? First and foremost, it is important to note the scale in which NFT sales are disrupting the art sales market. Last year, the volume of NFT sales totaled $24.9 billion, Reuters reported, up from $94.9 million in 2020. In 2020, the traditional art and antiquities market was estimated at $50 billion. As traditional collectors try to understand NFTs (non-fungible tokens), it is best to define it as an irreplaceable piece of data that is verified on the blockchain. As such, many of their questions I have received have focused on the exclusivity of rights of artworks minted as NFTs. Recently, I was asked if it would be possible to mint a copy of a Picasso that an art collector owned. Technically, the answer is no, as the act would be an infringement on the copyright of the Picasso work. The collector does not own the copyright – the Picasso Estate If the price comes from what the work represents, then what difference does it make to own a physical canvas or an NFT?

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