Non-fungible tokens gained massive traction after hitting the mainstream in early 2021 because of the considerable value these blockchain-hosted units bring to the table. Utility-driven and benefit-rich NFT collections that emerged in the past two years boasted a lot of selling points, one of the most compelling of which is the opportunity for owners to commercialize their avatars in order to create and sell derivative merchandise and artwork, among other things. However, a new report released by Galaxy Digital revealed that some of the prominent NFT projects may have misled buyers about what comes hand in hand with the minted tokens.
Released on August 19, “A Survey of NFT Licenses: Facts & Fictions” analyzed the top NFT projects in the market, categorizing their associated licenses according to what purchasers actually own when they buy a non-fungible token. The key takeaway: almost all retained the rights to the intellectual property to which the NFT refers, with some issues exposed of providing misleading statements either directly or implicitly.
“The vast majority of NFTs convey zero intellectual property ownership of their underlying content,” read the report. “Some issuers have provided misleading statements directly, such as on websites, marketing materials, or in community chat rooms, that contradict the terms set forth in their associated licenses. In some cases, the reasons for these contradictions may be the result of ignorance of the confusing legal labyrinth governing intellectual property and digital rights. In other cases, issuers appear to have intentionally misled purchasers by not explicitly correcting the market’s misconception as to the ownership rights purchasers hold over their NFTs.”
Two projects, in particular, were placed under the spotlight in the latest Galaxy Digital report: Bored Ape Yacht Club and Moonbirds.
“You own the NFT,” Yuga Labs stated under the ownership section of the Bored Ape Yacht Club license. “Bored Ape is an NFT on the Ethereum Blockchain. When you purchase an NFT, you own the underlying Bored Ape, the Art, completely.” Despite this statement, Yuga Labs’ license makes no mention of any assignment of intellectual property to minters of the NFT, granting the copyright holder the sole power to issue a license to use intellectual property they own.
Meanwhile, Moonbirds, the 6th most valuable NFT collection by implied market capitalization, is reportedly more obviously guilty of putting up misleading advertising. Its official website read “You own the IP,” a statement that is in direct contradiction to the expressed terms in the original Moonbirds license relaying that no intellectual property rights are assigned to Moonbirds NFT holders.
The promise of digital ownership and property rights has fueled the craze over NFTs. For months, non-fungible tokens were believed to be heralds of a new era and the rise of Web3. However, in light of these IP issues, Galaxy Digital fears that the vision of Web3 will remain elusive. “Without improvements in the on-chain representation and transfer of intellectual property rights from NFT issuers to NFT token holders, the expansive vision of Web3 will remain unrealized,” it concluded.