The High Court ruled last week that NFTs are now to be considered legal property, marking a significant step forward for victims of NFT theft, who will now be more confidently able to apply for an injunction when finding that their NFTs have been misappropriated.
Thefts in the NFT world have become increasingly common; only last week the hacking of one of the most well-known NFT accounts, the Bored Ape Yacht Club’s Instagram, led to a $3 million NFT theft. This ruling would allow those who have had their NFTs stolen to obtain court injunctions against those whose cryptowallet has been identified as carrying a stolen NFT, as well as the NFT platform on which the asset is being sold.
The case was brought by Lavinia Osbourne, the founder of Women in Blockchain Talks, a female-led Blockchain educational and networking events platform. Osbourne claimed that two digital works had been stolen from her online wallet. The works were from the Boss Beauties collection, which is described as a “women-led global initiative that creates opportunities for girls and women through cutting-edge collaborations,” and includes digital portraits of women. The judge decided that the assets were “property”, and therefore subject to legal protection. This resulted in an injunction served to freeze the assets and a disclosure “compelling [the NFT marketplace OpenSea] to send information about the two account holders” who are in possession of the stolen NFTs.
Racheal Muldoon, counsel on the case, said: “It is of the utmost significance as, for the first time in the world (as far as we are aware), a court of law has recognised that an NFT is property capable of being frozen by way of an injunction”, and that “this ruling, therefore, removes any uncertainty that NFTs (as tokens consisting of code) are property in and of themselves, distinct from the thing they represent (e.g., a digital artwork), under the law of England and Wales.”
Holding the NFT marketplace in which the stolen assets are being sold accountable and compelling them to act is a similar decision to one made in a court in Hangzhou, China last week. A Chinese NFT marketplace NFTCN has been held accountable for letting a user “create tokens from a stolen artwork” by the artist Ma Qianli.
Whilst this might seem to be a remarkable step forward in making the NFT marketplace more secure, it has drawn criticism from some. Not all in the NFT world agree that a stolen NFT is indeed stolen. Some believe in the “code is law” ideology, which maintains that ownership belongs to whoever can prove that they hold the asset. They believe that governing bodies and NFT platforms should not interfere with this. Lauren Dorman, a software developer, told ARTnews: “People in the space have mixed feelings about these kinds of developments [in law], some people feel like it’s your own responsibility to learn how to protect your assets and then the other side is like, ‘Whoa, if we want to make this friendly for new people entering the NFT space or the Web3 space then it would be nice to have protections in place.’”
Regardless of if the NFT space agrees with the recent ruling or not, the High Court’s decision has made the UK one of the only places which offer greater protection to victims of NFT thefts. Whether other countries follow suit is yet to be seen.