Will—and Should—VARA Cover NFTs?

Non-fungible tokens, or “NFTs,” gained worldwide notoriety in the art world last year following the sale of Beeple’s EVERYDAYS: The First 5000 Days for a staggering $69 million at Christie’s. Increasingly, NFTs are being seen as a viable investment for art enthusiasts. As the Ethereum website opines: “If Andy Warhol had been born in the late 90s, he probably would have minted Campbell’s Soup as an NFT.” The statement is not hyperbole. Not only is there vast money to be made in creating NFTs—a recent Hiscox report found that NFT art sales have already hit $3.5 billion this year—the merging of the tech, artistic, and financial worlds creates new opportunities for artists to further test our understanding of what exactly constitutes art. As artists increasingly express themselves through NFTs, will their moral rights be protected?

Some might argue that the rationales behind the existence of moral rights preclude their application to NFTs. Typically, moral rights are justified by citing the public interest in the faithful preservation of artistic pieces or the artist’s spiritual connection with his artistic expression. Both rationales don’t necessarily translate to the NFT space. Each NFT is solely a token to which a digital file is affixed. That digital file can exist apart from the NFT and be replicated even if the NFT were hypothetically altered or destroyed. Public interest in the preservation of a specific NFT is nonexistent. Further, because each NFT is unmodifiable once created or “minted,” the code of blockchain already protects the artist’s spiritual interest in their piece. 

Such arguments do not account for the novelty of NFTs. The NFT movement is in its infancy, with artists and investors keen to explore the possibilities NFTs offer. It is not possible to say whether our present assumptions about NFTs and moral rights will hold water in the future.

The phenomenon of “burning” has become widely commonplace. Burning refers to the act of sending an NFT to a verifiably un-spendable address on the blockchain, effectively removing it and ensuring it cannot be resold. The practice is not wanton; it is an invaluable tool for collectors who want to regulate value by gaming the supply-demand curve. Some in the NFT space even see burning as a means to create new digital art communities. Earlier this year, the digital artist Pak launched an NFT burning platform called burn.art and a token, “ASH,” that can only be earned or “mined” by burning NFTs through the platform. These developments illustrate how, despite the immutability of the digital files attached to NFTs, NFT artists’ interests may still be abused and could benefit from VARA protection.

But would a court ever attribute moral rights to the author of an NFT? In the United States, the moral right of attribution (the right of an author to be credited as the author of their work) and the moral right of integrity (the right of an author to prevent prejudicial distortions of their work) are protected under the Visual Artists Rights Act of 1990 (VARA). Courts have been reluctant to expand VARA protections and have historically read the statute narrowly; however, the recent 5Pointz case heralds a potential shift in judicial attitude towards newfangled or nontraditional modes of artistic expression.

In attributing moral rights to an NFT, a court would have to answer the million-dollar question: are NFTs art? Its answer would have massive ramifications for the future of the VARA jurisprudence, which is currently underdeveloped.

“A ‘work of visual art’ is defined by [VARA] in terms both positive (what it is) and negative (what it isn’t).” Carter v. Helmsley-Spear, Inc., 71 F.3d 77, 84 (2d Cir. 1995). Specifically, VARA lists “painting, drawing, prints, or sculpture” as well as “still photographic image[s] produced for exhibition purposes only” as accepted media. It excludes several other media, most relevantly for NFTs “applied art, motion picture or other audiovisual work…electronic information service [and] electronic publication.”

17 USCS § 101.

NFTs straddle the positive and negative. An NFT is conceivably an electronic information service; it is a unit of encrypted code, a database of information that computers can access. One can argue that the NFT is whatever the medium of the digital file embedded within it is. For example, the infamous burnt-Banksy NFT could be classified as a picture, a print, and an electronic information service at the same time. Courts have not had to determine whether VARA applies to works of art that are simultaneously protected and excluded by the statute—but there are analogs in the non-digital world. Take a Koons “copied” poster print for example—prints are protected under VARA; posters are not—or a photographic silkscreen print. As artists continue to explore the possibilities of artistic expression through NFTs, they will continue to upend our definitions of art and artist protections. That upending comes at a critical time in the development of VARA jurisprudence. How courts will handle the confluence is a fascinating—and unpredictable—uncertainty.