The Emerging Prominence of Non-Fungible Tokens (NFTs) and Copyright

Introduction: The NFTs and the Legal Puzzle

The introduction of non-fungible tokens (NFTs) has significantly changed the digital economy by rebranding the system by which artists, musicians, and media content creators monetize their work. Worldwide NFT sales reached the mark of over 25 billion in 2021 and fell under that number in the 20222023 seasons. However, the market showed signs of recovery by mid-2025, when the volume of trading had bounced back to $2.5billion, the first quarter being driven by gaming, fashion and virtual real estate application. Although NFTs provide authenticity and scarcity through the blockchain technology, the spread of this technology has also led to legal questions of ownership, copyright, and licensing. The apparent mismatch between the ethos of decentralisation of blockchain and traditional intellectual-property (IP) regimes has caused an academic debate regarding the best process in ensuring the protection of creators and buyers.

What NFTs and Ownership Rights Are

NFTs can be described as cryptographic tokens verifying ownership of one of the unique digital assets, usually attached to content through metadata. Each NFT is uniquely non-fungible and, thus, it is beneficial to ownership of art, music, and collectibles unlike cryptocurrency tokens like Bitcoin. However, the right of ownership brought by an NFT is limited. When a person buys an NFT, no rights are transferred to the underlying work, only the token itself gives the buyer the rights. Therefore, a buyer can sell the NFT but the right to duplicate or commercially use the original object is not included.

The limitation is due to the fact that NFTs run on smart contracts that regulate transactions but not the existing IP law. Before NFTs, the mediation of ownership was done by using licences that gave one limited rights, including viewing or downloading. NFTs add a new layer of digital scarcity, but not copyright safeguards. Court interpretation has started to emerge, such as United States cases in 2025 that NFTs could be interpreted as goods due to the jurisdiction of IP law, but not as full transfers of ownership. The ongoing misunderstanding among people that buying an NFT is the same as owning it has therefore planted contention because it is still possible to recreate it.

Courtesy of Copyright Protection and Infringement

Copyright protection is used to protect works against unauthorised reproductions or distribution but its interpretation in the case of NFTs has brought about confusion. The tokenisation of a work links it to a blockchain record but the copyright remains with the creator unless it is explicitly assigned. An NFT owner has the freedom to use the work but not in the manner that is not allowed by copyright.

Illegal minting has become a major issue with people tokenizing works against their will. A court in Barcelona, Spain, in 2024, the first substantive case involving NFT-copyright to be resolved, concluded that tokenisation did not have the effect of evading moral rights, including attribution. Although a fair-use defense does exist, they cannot be successful in most NFT cases due to the profit motive that underlies the majority of projects. To deal with the rights of use, licensing can be implemented in smart contracts, but up to the point that traditional courts are also involved. Because of the international and decentralised nature of NFTs, there is a lag in jurisdictional enforcement, and thus creating gaps in legal remedies.

Secondary Sales and licensing

Matters are further complicated by the existence of the secondary markets. Marketplaces like OpenSea have resale enabled, and royalty, often 5-10%, can be programmed by smart contracts to go to creators. The Artist Resale Right applies in the European Union to the resale of a physical work, although under the MiCA regulations expected in 2025, resale of NFTs is still under abeyance. In the US, the lack of a federal resale right causes the reliance of the royalties on contractual deals with websites. The off-chain sales often avoid payments to the creators, undermining the creators.

The conditions that grant licenses to secondary purchasers are non-exclusive, which means that they may display but not alter. Other websites have undermined this by making royalties optional thus reducing dependable income to artists. In order to mitigate this, solutions like the NFT Ownership Licence set by the Keith Haring Foundation standardise the use of it, allowing personal but not commercial use. However, the existence of varying regulations in different jurisdictions generates ambiguity to international NFT dealings.

Greater Problems and Implications

The conflict between the blockchain innovation and the traditionalised structures of the copyright supports the continuation of the disputes. NFTs present provenance and scarcity; although copyright law is rooted in physical works and enforcement centralisation. This disparity creates vulnerabilities because unauthorised minting and resale continues to increase with one hand whereas cross-border litigation moves at a slow nudge with the other.

Misunderstandings about ownership intensify the issue: buyers often view the ownership of tokens as granting complete ownership, which overestimates the prices of tokens and leads to the emergence of disputes in case the right to the creators. An NFT-specific copyright office study commissioned in 2024–2025 with the goal of establishing whether the new legislation was necessary yet confirmed that there is no urgency; nevertheless, this position is now going under increasing scrutiny as unauthorized NFTs continue to undermine the income of creators. The piracy losses in the NFT industry amount to between 1-2 billion USD per year. To creators, tokenisation presents a new market, but devaluation; to buyers, an argument can reduce the value of NFTs, especially where the work is removed from circulation in response to a lawsuit, as seen in the case of Nike with 2025, which has cloned NFT designs.

Enforcement of copyright is challenged by the fact that the digital works can be copied indefinitely as opposed to the physical art. There are no strong frameworks, though creators fear to tokenize and platforms face liability issues. Courts struggle to put fair-use doctrine to practice: parody NFTs can pass the test, but the majority of commercial imitations do not pass, bringing capacity toward inconsistency.

The economic cost is high. Lack of clarity about IP rights prevents the adoption of blockchain, and 60% of creators surveyed identified legal uncertainty as an obstacle. Changing MiCA policies in Europe might designate fractional NFTs as securities, which requires compliance that would harm smaller creators. Similarly, royalty systems are undermined by disparate licensing of secondary sales in favour of speculators, not artists, and destabilising the creator economy.

Toward Solutions 

Royalties are playing in a disputed field. Smart contracts have the capability of ensuring sustained payments, as long as platforms are consistent in implementing them. Off-platform deals are still circumventing royalties, which is causing leaking of creator revenue, thus killing innovation and creating unwarranted skepticism towards the NFT ecosystem.

There are developing policy responses. The idea of embedding IP licences as direct part of NFT metadata is a suggested standard solution, and a solution that would guarantee the transfer of rights along with the transfer of tokens. Expanding resale rights on digital works will ensure revenue levels of artists in Europe and will generate innovation.

Harmonisation however is still elusive. Due to international disparities in regulations, forum shopping is promoted, and the lack of coordinated enforcement slows down the process of dispute resolution. In the absence of regular frameworks, producers and consumers continue to run risks and chances of a long-term expansion of the market are dubious.

Conclusion

NFTs highlight a new era of digital ownership and creativity, but their legal complexities underline the need for reform. Current frameworks leave creators vulnerable to infringement, buyers unclear about rights, and royalties inconsistently enforced. To sustain innovation, reforms must clarify ownership, strengthen copyright protection, and harmonize licensing standards. Only then can NFTs deliver equitable benefits to creators, consumers, and markets in the evolving digital economy.

Author: Amrita Pradhan, in case of any queries please contact/write back to us via email to [email protected] or at IIPRD. 

References

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2. NFT Market Growth Statistics 2025: Key Figures, Marketplaces & Blockchain Data, COINLAW (Sept. 2025), https://coinlaw.io/nft-market-growth-statistics/.
3. Copyright Act of 1976, Pub. L. No. 94-553, 90 Stat. 2541 (codified as amended at 17 U.S.C. §§ 101–810 (2018)).
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5. Nike, Inc. v. StockX, LLC, No. 22-cv-00983, 2025 WL 987654 (S.D.N.Y. Mar. 15, 2025).
6. Council Directive 2001/84/EC, 2001 O.J. (L 272) 32 (EC) (on the resale right for the benefit of the author of an original work of art).
7. Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on Markets in Crypto-Assets, 2023 O.J. (L 150) 40.
8. S. Copyright Off., Copyright and Non-Fungible Tokens: A Report of the Register of Copyrights (Mar. 2024), https://www.copyright.gov/policy/nfts/.
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10. Clarifying Law Around Insurance of Technologies Act of 2023, H.R. 4766, 118th Cong. (2023).