Question of the Week: As the use cases for NFTs continue to evolve, what are some key considerations for brands, NFT issuers and holders, and marketplaces? | Proskauer Rose LLP

Question of the Week: As the use cases for NFTs continue to evolve, what are some key considerations for brands, NFT issuers and holders, and marketplaces?  |  Proskauer Rose LLP

As use cases for NFTs evolve from digital collectibles to more functional assets, sellers need to be more mindful than ever about what they’re selling. There are still intellectual property-related risks for all content linked to an NFT. And new features for NFTs – new ways in which they are used – could trigger legal and regulatory regimes designed for more traditional assets. Sellers should take a step back and ask themselves, stripped of the NFT label, what they are selling and what will buyers do with it.

Kyle CasazzaLitigation, Los Angeles


Expect NFTs to increasingly intersect with other technologies, creating both new opportunities and challenges. For example, we see an increasing transition between NFTs and artificial intelligence, not only in generative AI-created NFT content, but also in “intelligent” AI-powered NFTs that evolve and can be used, trained and interacted with in metaverses. This convergence presents complex legal issues, such as those related to intellectual property, confidentiality, rights of publicity and privacy. More generally, we have taken a number of creative approaches to help clients structure the intangible, financial and other rights that buyers acquire when they acquire an NFT, with some companies choosing to integrate NFT features specific to regulated assets and implementing sales thereafter.

Wai Choy, Technology, Media and Telecommunications, New York


The applications of NFTs, NFT marketplaces, blockchain and web3 technologies generally continue to evolve and become increasingly sophisticated. While the technology and user-facing applications – including both on-chain and off-chain applications – are developing at a very rapid pace, the law is advancing at a much slower pace. While we have seen some cases in the area, particularly focused on intangible issues, we expect to see new and unique issues arise as new applications of the technology continue to emerge. As with many other technological innovations, courts will struggle to apply laws and principles that were developed long before NFTs were ever conceived. Both transactional lawyers and litigators working in the blockchain, NFT and web3 space will have fun times ahead!

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Jeffrey NeuburgerTechnology, Media and Telecommunications, New York


Regulators are still figuring out how to approach NFTs. The way they end up treating a given NFT can largely depend on how that NFT is similar to things we’ve seen before and how it’s different. For example, does a particular NFT have value because it is something unique, like a work of art, because it can be exchanged as currency, or because it can be used as an investment tool? The answer will not only help measure regulatory risk, but is likely to impact the business case for NFT.

Seetha RamachandranLitigation, New York

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