2021 saw NFTs flooding into the contemporary art ecosystem; but will 2022 see their arrival as a welcome cornucopia of plenty or an unwanted pandora’s box of unforeseen pestilence? A selected survey of the current NFT landscape, keeping a weather-eye on legal matters, should enlighten.
‘The past year will mostly be remembered for the ongoing social and economic convulsions caused by Covid-19. But in the art trade, the old-world order was being demolished’ wrote Georgina Adam reviewing 2021 as the Art Newspaper’s art market editor-at-large. Adam cited cancellation or postponement of art fairs, auctions pivoting to online-only selling, galleries communicating with clients via email and Zoom, and online viewing rooms performing poorly, then highlighted one event ‘that shook the market to its core’: Christie’s March 2021 online auction of Beeple’s born-digital Everydays: the First 5000 Days fetched $69.3m with fees, payment for which was accepted in cryptocurrency (Salerooms AM 446).
That NFT sale and its digital currency payment were both unprecedented in the art market, which Adam believes had ‘a galvanising effect on the market for NFTs, and others quickly racked up similarly eye-watering prices, citing $11.7m for Lava Labs’ CryptoPunk 7523, 2017, at Sotheby’s, $6.6m for another Beeple’s Crossroads, 2020, via Nifty Gateway and, in November at Christie’s, $28.9m for Beeple’s generative sculpture Human One, 2021.
Adam suggests ‘that story is still being written, with more and more fans joining the party and a bewildering number of initiatives being created in this space’ including, notably, the British Museum. To coincide with its ‘Hokusai: The Great Picture of Everything’exhibition (to 30 January 2022), the Museum partnered with a new NFT trading platform (La Collection.io) to make and sell NFTs of 200 Hokusai works including The Great Wave off Kanagawa,1831.
Moreover, a survey of 700 dealers, conducted by cultural economist Clare McAndrew and published by Art Basel and UBS, reported that ‘NFTs were a buzzword in the first half of 2021 … sales accounted for less than 0.5% of the value of sales in the primary market, though this share is likely to grow as the NFT and art markets converge’ and cited data from nonfungible.com ‘that NFT [art] sales on the Ethereum network … accounted for $324m’. McAndrew also reports that ‘while dealers and collectors were largely positive about the impact NFTs have had in expanding interest in art, question marks remained over the “slushpile” of low quality, derivative NFTs coming onto the market.’
Such qualitative caveats about the content of art NFTs have been gathering momentum. In Adam’s opinion that ‘the sudden and explosive arrival of digital art onto the art market has thrown a hand grenade into its traditional notions about price, quality and validation’ and ‘has laser-focused attention on this market, as the paradigm of new art, new buyers and a new way of transacting—even a new idea of art itself’.
As for legal matters, Adam believes the digital world is encountering ‘the darker side’ of the traditional art world. ‘Online copyright infringement cases in the digital world are already rife,’ Adam reports, ‘along with theft and fraud, mirroring real world issues … and stealing digital art—and minting and selling an NFT for it—is unhappily far easier than setting up a brazen art heist in the real world.’ Is this virgin territory currently operating like a wild frontier without law and order?
Any answers need at the outset to distinguish between two main types of art NFTs: work that is born-digital and is invariably minted as a NFT by the original digital author; and work made non-digitally that could be digitally reproduced and minted as a NFT by anyone with access to its physically material form (who need not be the original artist-author). For example: Beeple was original author and NFT minter of his born-digital Everydays work in 2021; Hokusai was original author of The Great Wave in 1831, a physical print of which was acquired by the British Museum in 2008, which then minted an NFT version of it in 2021.
Beeple undoubtedly owns copyright in his born-digital artwork, and has exclusive legal rights to mint his image as NFT for auction sale. Hokusai died in 1849, therefore any copyright in his artwork has long since expired, meaning that his images have fallen into the public domain and can be freely reproduced and used; but, if Hokusai were alive or had recently died, copyright ownership would still operate to require copyright permission being granted to a would-be user to reproduce and mint an NFT.
The past year has seen many artists report via social media that their original copyright works have been minted by others as NFTs without having obtained prior permission to do so from the artist-copyright owner. When online NFT market platforms have been required by such artists to ‘take down’ such NFTs offered for sale, most appear to have done so on the basis that artists’ legal rights have been violated, and some such platforms have gone further to introduce new terms and conditions to deter would-be copyright abusers. Market platforms refusing such ‘take down’ requests risk legal action being taken against them by an artist-copyright owner (for unlawfully offering for sale an infringing copy of a copyright work). In many countries, including the UK, copyright owners have an added alternative legal right to bring criminal proceedings against a trader of copyright-infringing NFTs, for which maximum sentences on conviction may include imprisonment.
Collectors of NFTs also run risks. For example, they may encounter similar copyright violation issues when they try to resell a NFT that is a copyright-infringing work (together with the NFT’s re-selling market platform). Or they may have failed to appreciate that their acquisition does not include owning copyright in their NFT, which may mean that further versions of it may be minted and marketed by others. Such collectors may have a legal remedy against the online platform from which they first acquired the NFT for, say, violation of their selling contract by the seller for failing to disclose or explain such limitations or, say, for misrepresentation or fraud – including being duped into buying an NFT wrongly said to have been created and authenticated by the original artist-author.
This past year various art lawyers have addressed such issues by publishing suggestions that would-be NFT collectors should interrogate the written terms and conditions of sale on NFT selling platforms before bidding and buying. Such suggestions often highlight the added risk of collector’s NFT accounts being hacked to steal their acquisitions; to cite the now-established ICT caveat ‘if it can be digitised, it can be hacked.’ NFT artists and collectors and traders take care.
© Henry Lydiate 2022