The NFT space is a multi-billion industry that has yielded massive profits for traders, investors, musicians, art vendors, game designers, and visual artists. Lawyers can jump on this money train, too, as NFT has a legal backing and the NFT space is in dire need of competent legal services.
The NFT space encompasses people who obtain contents that can be converted into NFTs, those who mint the tokens, and those who build marketplaces and other transaction platforms for licensors, creators, buyers, and sellers. These businesses have legal ramifications that a smart lawyer can tap into.
NFT and the Law
It might seem like NFT is very independent and too ingenious for something the law could control. This is not true as NFT has legal backings.
Here is a list of ways that the law can regulate NFT:
- Formation: if you are launching an NFT marketplace, it is highly advisable to incorporate your business first for substantial liability protection and access to funding from external sources. Incorporation is the legal process involved in forming a company or corporate entity.
- Smart Contracts: NFT is a digital creation usually involving many parties ranging from the licensor, creator, buyer, seller, and marketplace owner. There is a need for the creator to design a smart contract that would not only indicate the amount of money that is allocated for primary sale, secondary sale, royalties, and other transaction costs but would also ensure that the funds automatically flow to the appropriate parties immediately after the sale.
- Intellectual property law: NFTs are subject to copyright law and other forms of IP law. A copyright holder has the right to adapt or modify the work, prepare derivative works, and exhibit and distribute the work. Creating an NFT from a copyrighted work will be deemed “derivative of work.” Hence, only licensees and copyright owners should be creating NFTs based on copyrighted artwork.Also, when you create an NFT, and it is not completely based on your copyrighted work, you have to ensure that the embedded elements of the NFT, such as a soundtrack, do not infringe copyright law. For instance, you might have to obtain a licence from the relevant music publisher or record company before using it.It’s vital to appropriately allocate intellectual property rights between the creators/artists, purchasers/collectors, and any other involved parties effectively and fairly.
- Regulatory compliance: you must ensure that your NFT platform complies with government regulations to avoid hefty fines. You may need to implement KYC standards and other standards to ensure compliance with data privacy regulations, anti-money laundering regulations and other regulatory requirements.
How to make money from NFT as a lawyer
As a lawyer, you can make money from NFT by drafting smart documents that are relevant to NFT transactions, ranging from:
- NFT Art License Agreement
- NFT Code of Conduct
- NFT Platform User Terms and Conditions
- Operating Agreement
Advising your client on how current laws apply to cryptocurrencies and blockchain technology would be one of your core functions as an NFT lawyer. For instance, you can advise your clients to design features that exclude their NFT from what the government seeks to regulate.
Agreement Contract Negotiation
As stated earlier, the NFT sphere is really large. It involves a lot of parties, and there would be a need to enter into a lot of agreements, such as the profit-sharing arrangement. You can help your clients negotiate favourable terms and document them into airtight agreements that fully protect your client’s interests.
Regulatory compliance and due diligence
You can monitor operations and procedures to ensure that NFT platforms comply with government regulations such as Bank Secrecy Act, Anti-money laundering laws, Data protection laws and other government regulations. There is also the function of conducting due diligence to ensure that the NFT transactions do not breach any law such as copyright and security laws.
You can offer your legal services by helping an NFT business with its legal incorporation process. You can also help your clients determine if the NFT is deemed securities and requires registration. Platforms facilitating any NFT transaction might also have to register as a securities exchange, alternative trading system, and broker-dealers.
Ready to take your first leap into NFT? Follow the button below to explore our free resources.