NFT and Digital Art: Who Owns the Rights to Tokenised Works?

NFTs – non-fungible tokens – are unique digital assets recorded on a blockchain. They became enormously popular with buyers worldwide, many of whom paid substantial sums expecting to acquire rights to unique digital works. In most cases, however, what buyers actually receive is a blockchain entry – one that does not automatically confer any rights to use the underlying work itself.

This misunderstanding creates real legal exposure. Owners of NFTs who use associated images in advertising or on merchandise regularly receive legal demands from the creators of those works – demands to cease use and pay compensation.

📋 Core principle: Buying an NFT and acquiring rights in the underlying work are two legally distinct transactions. The scope of rights a buyer obtains is determined exclusively by the licence or assignment terms attached to that specific NFT project – not by the purchase of the token itself.

1. What Rights Can NFT Buyers Actually Obtain?

Type 1 – Ownership of the token only

Every NFT purchase gives the buyer one thing: a unique blockchain entry confirming ownership of that specific token. This means the owner can store the token in a crypto wallet, display it in a profile, and sell or gift it to another person. This is how the majority of NFTs on platforms such as Foundation or OpenSea work.

What this does not include: any right to copy, reproduce, use in merchandise, or use in advertising the artwork, image, or other content linked to the token. Purchasing an NFT depicting a character or painting does not permit the buyer to reproduce that image commercially – or, in many cases, at all.

⚠️ Common mistake: Buyers frequently assume that because they “own” the NFT, they own the image. They do not. The blockchain entry and the copyright in the work are separate legal objects governed by separate rules.

Type 2 – Licence to use the work

A significant number of NFT projects grant buyers a licence to use the underlying work. The scope of that licence varies considerably:

• Limited (personal) licence: The buyer may use the image for personal, non-commercial purposes. The Binance NFT collection is a common example – buyers receive a licence for personal use and display when reselling on marketplaces, but commercial use is prohibited unless the seller has separately granted written permission.
• Extended (commercial) licence: The buyer may use the image in a business context, on merchandise, or to create derivative works. The Bored Ape Yacht Club (Bayc) collection is a well-known example – holders receive a full commercial licence for their specific ape image. Many holders have used this to launch merchandise lines, restaurants, and music projects.

⚠️ If the licence is not documented, it does not exist: The existence and scope of any licence must be clearly stated in the Terms of Service of the author or platform, or in a separate agreement executed at the time of purchase. In the absence of an explicit licence, the token is only a blockchain record – no usage rights arise.

Type 3 – Full assignment of economic rights

In rare cases – typically at premium auctions or by individual commission – an NFT purchase can be accompanied by a full assignment of the economic rights in the digital work. To be legally effective, this requires a separate written agreement for the assignment of intellectual property rights. Only then does the buyer become a full rights holder, with the authority to use the work, prohibit others from using it, and transfer the rights to third parties.

Type 4 – Utility NFT: rights to additional benefits

A distinct category – Utility NFTs – grants holders not only a blockchain record but also rights to tangible benefits: physical goods, event access, exclusive membership, or services. Examples include Nike CryptoKicks (exchangeable for a physical pair of trainers with an nfc authenticity chip), the Coachella Keys Collection (lifetime free vip access to the Coachella festival), and Formula 1 NFT tickets (event access with associated discounts).

Legally, purchasing a Utility NFT means acquiring a blockchain record that, under the terms of the project, confers a right to certain benefits – not direct ownership of the physical good, ticket, or membership. If the project organiser is unable or unwilling to deliver the promised benefits, the token remains in the buyer’s wallet but its practical value is extinguished.

2. Current Legal Issues

Off-chain storage and broken links

One of the most serious technical-legal problems with NFTs is the instability of the digital content linked to a token. Most NFTs do not store the work itself on the blockchain – they contain only a reference (Url) or metadata pointing to content stored off-chain. If that link becomes inactive or is altered – due to a technical failure, server shutdown, or deliberate data substitution – the token owner effectively loses the connection to the underlying work. They are left holding a valid blockchain entry that no longer verifies the existence or authenticity of the digital object. This undermines the premise of NFTs as civil-law objects and highlights the need for on-chain storage standards.

Unauthorised minting and copyright infringement

The minting process does not include any verification of the minter’s rights in the underlying work. Any person can create an NFT using someone else’s photograph, music, or artwork without the rights holder’s consent. This constitutes copyright infringement and misleads buyers. The cross-border, pseudonymous nature of NFT marketplaces makes it extremely difficult to identify infringers and enforce rights, particularly where the infringing party is located in a different jurisdiction.

Jurisdictional uncertainty

The decentralised nature of NFTs makes determining the competent court and applicable law exceptionally complex. Consider a scenario where the artist is in Ukraine, the buyer in Germany, and the marketplace is registered in the United States – the question of which country’s law governs the dispute creates genuine conflicts of laws. Enforcement of any resulting judgment is even more problematic.

Tax uncertainty

The legal vacuum around NFTs directly affects taxation. In Ukraine, there are currently no official explanations from the State Tax Service classifying income from NFT transactions – it is unclear whether such income should be treated as proceeds from the sale of property, royalties, capital gains, or payment for services. This creates risks of conflicting interpretations and makes legitimate tax reporting difficult. By comparison, the United States Internal Revenue Service (Irs) has attempted to apply existing rules, classifying NFTs either as collectibles or as other capital assets depending on the circumstances.

Risk of classification as securities

In the United States, the Securities and Exchange Commission (Sec) examines whether certain NFTs may constitute investment contracts under the Howey Test. Where the sale of tokens is accompanied by promises of profit from the issuer’s activities or expectations of shared gain, such NFTs may be classified as unregistered securities – with serious legal consequences for issuers.

3. Legal Framework and Emerging Case Law

Ukraine has no dedicated NFT legislation and no established court practice in this area. The Law “On Virtual Assets” has not yet entered into force, leaving the legal status of NFTs under Ukrainian law undefined. Depending on the specific facts, applicable Ukrainian law may be applied by analogy, including provisions of the Civil Code of Ukraine, the Law “On Copyright and Related Rights,” the Law “On Protection of Rights to Marks for Goods and Services,” and other IP instruments.

Internationally, courts in several jurisdictions have begun to develop case law defining the legal nature of NFTs and the boundaries of applicable IP rules:

🇺🇸 USA: Hermès International v. Rothschild, sdny (2023). A federal jury found that the sale of MetaBirkin NFTs – digital images of fur-covered handbags styled after the iconic Birkin bag – infringed Hermès’ trademark rights, constituted trademark dilution, and amounted to cybersquatting. Damages of $133,000 were awarded, and a permanent injunction was issued. The case established that brand IP rights extend into the NFT space.

🇬🇧 United Kingdom: Osbourne v. Persons Unknown (2022). The High Court of England and Wales recognised NFTs as a distinct category of property capable of being subject to a freezing injunction. Two NFTs stolen from the claimant’s wallet were frozen on OpenSea pending proceedings, establishing that courts can and will protect NFTs using conventional property remedies.

🇪🇸 Spain: Vegap v. Mango, Provincial Court of Barcelona (2025). The court held that physical ownership of a work of art does not entitle the owner to create NFTs based on that work without the consent of the author or their rights management organisation. Mango was ordered to delete the NFTs and pay €750,000 in compensation, clearly separating the right of ownership in the physical medium from copyright in the underlying work.

Conclusions and Recommendations

Analysis of the legal nature of NFTs reveals a fundamental distinction between two separate objects: the right of ownership in the token (a blockchain record) and copyright in the underlying work. The purchase of an NFT does not, by itself, confer copyright. The scope of rights acquired by the token holder is determined solely by the terms of the applicable licence or assignment agreement.

For buyers, the practical checklist is straightforward:

• Review the Terms of Service carefully before purchase and confirm the existence and scope of any licence.
• Check where the associated file is stored and whether the link to the content is stable and verifiable.
• Confirm that contact details for the author or project are available for dispute resolution.

For creators, the key recommendations are:

• Clearly articulate licence terms and define the scope of rights transferred to token holders.
• Use decentralised storage solutions to prevent content loss or link rot.
• Monitor the market for unauthorised minting of your works as NFTs.