Non-fungible tokens (NFTs) have surged in popularity in recent years, with millions of pounds exchanging hands for digital assets such as artwork, music, and collectibles. However, as the NFT market continues to grow, regulation challenges surrounding NFTs have become a pressing concern. One of the most debated issues involves royalties and intellectual property rights.
To illustrate this, consider the case of pop star Rihanna. In 2021, she sued an individual accused of selling counterfeit merchandise featuring her likeness, including NFTs. While this case is emblematic of potential intellectual property violations in the NFT space, similar disputes have become more frequent as the market evolves.
NFTs, Royalties, and Intellectual Property: A Legal Grey Area
NFTs operate in a complex and often ambiguous legal landscape. When an artist creates artwork or music, they typically retain the copyright, granting them control over how their work is used and distributed. However, when that creation is minted as an NFT, it becomes a digital asset that can be bought, sold, and traded, raising critical questions about ownership and profit entitlement.
A key issue arises when NFTs feature copyrighted material. For example, in cases like Rihanna’s, the unauthorised use of her likeness violates her right of publicity. Yet even when the NFT features original artwork or music, questions persist about whether creators are entitled to royalties or a share of secondary sales profits.
Additionally, the decentralised nature of the NFT market complicates enforcement. Without a central authority to monitor transactions, it becomes challenging to address copyright infringements and ensure fair remuneration for artists.
Recent Developments in NFT Regulation
Recognising these challenges, regulatory bodies and industry stakeholders are taking steps to establish clearer guidelines for NFTs:
- EU’s MiCA Regulation
The European Union’s Markets in Crypto-Assets (MiCA) framework, effective since 2024, has introduced measures to regulate the broader crypto market, including NFTs. Although MiCA does not yet offer detailed provisions for NFT royalties, its overarching requirements for transparency and compliance could pave the way for future NFT-specific regulations. - UK Proposals for Digital Asset Regulation
In the UK, discussions about digital asset regulation have intensified. The Financial Conduct Authority (FCA) is exploring how existing intellectual property and consumer protection laws apply to NFTs, while considering measures to combat fraud and copyright violations. - Industry Initiatives
Major NFT platforms, like OpenSea and Rarible, have started implementing tools to verify the authenticity of digital assets and enforce creator royalties. However, the effectiveness of these measures remains limited without industry-wide standards.
The Need for Regulation in NFTs
To address these challenges, experts advocate for:
- Mandatory Authenticity Verification: NFT platforms should be required to authenticate the originality of artworks or music minted as NFTs.
- Standardised Royalties Mechanisms: A universal framework for tracking and distributing royalties could ensure that creators receive a fair share from primary and secondary sales.
- Centralised Databases: Developing a decentralised but interoperable registry of NFTs would improve transparency in ownership and sale tracking.
How Trakti Supports NFT Creators
Given the reliance of NFTs on blockchain technology, smart contracts play a crucial role in managing transactions related to their sale, purchase, and exchange. However, the lack of standardisation in the NFT industry has made it challenging for creators to track and collect royalties effectively.
Trakti provides a solution by enabling artists to automate royalty tracking and distribution. By leveraging Trakti’s smart contract platform, creators can ensure they receive their fair share of profits while maintaining control over their intellectual property.
Trakti’s services not only simplify royalty management but also provide creators with a secure and transparent way to monetise their digital work. As the NFT market continues to expand, platforms like Trakti offer invaluable tools for artists seeking to maximise their earnings and protect their rights in an increasingly competitive landscape.
Conclusion
NFTs have revolutionised the art and digital asset industries, offering new opportunities for creators and collectors. However, as the market matures, it is essential to address pressing regulatory issues, particularly those related to intellectual property and royalties. By establishing clear guidelines and leveraging innovative solutions like Trakti, the industry can strike a balance between fostering creativity and ensuring fairness and transparency.
As the NFT ecosystem evolves, collaboration between regulators, platforms, and creators will be key to unlocking its full potential while safeguarding the rights of all participants.
Subscribe to our newsletter and receive the latest articles and updates directly in your inbox!
