Legal Considerations Surrounding NFTs

In January 2022, an international luxury brand, Hermes, filed a complaint against a digital artist who goes by the name Mason Rothschild, alleging amongst other things, that a series of NFTs he created, constituted a trademark infringement on their famous Hermes Birkin bags. The case has raised many questions concerning issues about damages, in the real world versus the virtual world, as brands are beginning to take note of the implication of NFTs for their real-world creations. [1]

Goods and services have historically been physical, however, we are beginning to see digital products like the NFTS take the stage, as we shift our focus to the digital space. Selling digital goods online, however, has proved challenging. Unlike physical goods which are difficult to replicate, digital goods are one click away from being copied. NFTs attempt to address this problem. The purpose of this article is to examine the phenomenon of NFTs from a legal standpoint.


Non-fungible Tokens otherwise known as NFTs, refer to non-interchangeable units of data stored on a blockchain, a form of digital ledger, that can be sold and traded.[2] Thus, they cannot be exchanged for another of the same kind in the digital environment, nor can they be used as a medium of exchange for another asset. Perhaps the most well-known feature of an NFT is its non-fungibility. This is what makes it distinguishable from cryptocurrencies like Bitcoin. When a thing is said to be non-fungible, this means that it is not easily replaceable. For example, a single N1000 note can be exchanged for two N500 notes or five N200 notes, and so on. However, a non-fungible token exists as a one-of-a-kind token that does not equal any other asset.

An NFT allows a digital product to have a distinctive identity. This feature means that you can confirm the authenticity of your product, monitor who has it, and determine how much it costs. In essence, when you buy an NFT, what you are buying is the digital rights to the ownership of the said thing.

Here are some advantages of NFTs; First, NFTs offer a new way for digital artists to make money. This means that digital artists can sell directly to their customers on marketplaces like OpenSea, SuperRare, and Rarible. For buyers of this art, this presents a way for them to not only support their favourite digital artist but also invest in art, by buying digital art which they think will appreciate in value in the future. They also have the opportunity to collect rare digital art.

Second, NFTs allow digital creators to make use of smart contracts. These are computer programs or transaction protocols which are intended to automatically execute, control or document legally, relevant events and actions according to the terms of a contract or an agreement.[3] In smart contracts and NFTs, there are two primary ways that they can interact. One is through NFTs embedded in smart contracts, and the other through smart contracts embedded in NFTs[4]. They have become a way for digital creators to bypass lengthy and often verbose physical contracts. It must be noted that smart contracts are not necessarily binding in many jurisdictions around the world.[5]

So How Did NFTs Become A Thing?

NFTs arguably began with Kevin McCoy when he minted his non-fungible token “Quantum” in 2014.[6]

CryptoKitties became the first game to use NFTs to let players award in-game items such as digital shields, swords or similar prizes to gamers who played the game. From there, other games used NFTs to allow players to win in-game items such as digital shields, swords or similar prizes, which created a great deal of interest among game developers. This game-changing innovation enables tokens to be transferred between different games or to another player, thanks to NFT specialized blockchain markets.[7]

The NFT market is widely used for the sale of other virtual collectibles, such as NBA trading cards, music, digital images, video clips and even real estate in Decentraland, a virtual world.[8]

Some well-known examples of NFTs include- ‘Everydays’: The First 5000 which sold for million USD in March 2021, Jack Dorsey’s first published Tweet which sold for 2.9 million USD in the same month and CryptoPunk #7804 which sold for 7.56 million also in March, 2021.[9]

It must be noted that an NFT may also be related to a sound recording, a video, virtual real estate etc. This is because NFTs are not the product (digital art) but are tokens that represent ownership of that product.


According to a poll from, 13.7 per cent of 1,205 Nigerian Internet users who were polled, currently own a non-fungible token (NFT) while an additional 21.7 per cent said they plan to acquire some.[10]

Nigerian artists have not also been left out from the shift towards digital goods and services. Most notably, Jason Osinachi sold two NFTs for $16,227 (sixteen thousand, two hundred and twenty-seven US Dollars) and $23,633 (twenty-three thousand, six hundred and thirty-three US Dollars) respectively.[11]

The money and buzz surrounding NFTs in Nigeria has prompted an inquisition into the regulatory framework surrounding NFTs, and what the possibilities and challenges are for creators and buyers alike.


  1. Intellectual Property: Section 15(1)(d) of the Copyright Act states that a person is liable for copyright infringement, where he or she without the licence or authorisation of the owner of the copyright, distributes by way of trade, offers for sale, hire or otherwise or for any purpose prejudicial to the owner of the copyright, any article in respect of which copyright is infringed.

A mere digital transaction might not suffice for an assignment of an exclusive license to the digital asset, as contemplated under the Nigerian copyright law.

Accordingly, sellers and creators must take care to only list for sale, NFTs of artworks which they have intellectual property rights over, as opposed to selling a copy of a digital copy of an artwork, without the consent of the owner. This also relates to Section 25 of the Cybercrime (Prohibition, Prevention, etc) Act 2015 (Cybercrime Act) prohibits Intellectual Property infringement on the internet.

  1. Data Privacy: Under the Nigeria Data Protection Regulations 2019, marketplaces i.e. internet platforms where NFTs are sold, must make sure that they have the consent of the data subject (sellers and creators alike), before obtaining their personal data.

Individuals have a right to request the erasure or rectification of inaccurate personal data, under Nigeria’s Data Protection Regulation 2019.[12] However, blockchain-based creations such as NFTs, with their unchanging nature, make it difficult to execute this right and may render it impossible to exercise. Consequently, it seems that NFTs that contain personal information may violate Nigeria’s current data protection law.[13]

  1. Investment Issues: The SEC defines a Crypto asset as a digital representation of value, that can be digitally traded and functions as: (i) medium of exchange; (ii) unit of account; and (iii) store of value, but does not have legal tender status in any jurisdiction. As noted above, NFTs are unique in their nature as Cryptoassests.[14] They may be subject to regulation by the Securities and Exchange Commission (SEC) in some instances. If they fall within the scope of digital assets, the SEC is in charge of regulating NFTs. However, an initial assessment will need to be done to determine this.


Notwithstanding the issues raised above, it seems that NFTs are here to stay and Nigerians are fully embracing its possibilities. There is a need for comprehensive regulations, that address the niche legal issues that it creates head-on.

In the meantime, stakeholders in Nigeria are encouraged to take note of the legal issues surrounding NFTs, and what the existing regulatory framework says about those issues.


  1. Handler, Samantha. “Hermes Sues Mason Rothschild Over Sale of Birkin NFTs” Bloomberg Law (2022) available at <> accessed on 27/02/2022
  2. Dean, Sam, “$69 million for digital art? The NFT craze explained.” Los Angeles Times. Available at <> accessed on 20/2/2022
  3. Savelyev, Alexander. “Contract Law 2.0: “Smart” Contracts As the Beginning of the End of Classic Contract Law”. Social Science Research Network (2016)
  4. Ray, Shaan. “NFTs and Smart Contracts” Medium (2021) available at <> accessed on 24/02/2022
  5. Allass, Kate. “The legal status of “smart contracts”: a guide to he conclusions of the LawTech Delivery Panel”. Farrer & Co. (2022) available at <> accessed on 27/02/2022
  6. Cascone, Sarah “Sotheby’s Is Selling the First NFT Ever Minted – and Bidding Starts at $100”Artnet News. (2021) available at accessed on 24/02/2022
  7. Tepper, Fitz. “People have spent over $1 million buying virtual cats on the Etherum blockhain” TechCrunch (2017) available at <> accessed on 24/02/2022
  8. Howcroftt, Elizabeth. “Virtual reasl estate plot sells for record $2.4 million.” Reuters. (2021) availabale at < accessed on 24/02/2022
  9. Marr, Bernard. “10 Best Examples of NFTs”Bernard Marr (2022) available at <> accessed on 27/02/2022
  10. Richard Laycock, “NFT Statistics 2021”, available at <NFT statistics 2021 – finder Nigeria> assessed on 20/2/2022
  11. Onukwu, Alexander, “How Nigeria’s leading crypto artist makes and sells NFTs” Tech Cabal. (2021) Available at <> Accessed on 20/1/2022
  12. Regulation 3.1. of the NDPR, 2019.
  13. Detail Commercial Solicitors, “Non-fungible tokens and legal considerations in Nigeria.” Financial Nigeria (2021) available at accessed on 24/02/2022.
  14. Ibid

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