This may be one of the best ads in recent memory – an ad promoting visiting Lexington, Kentucky, horse capital of the world. The ad promises to make kids’ holiday dreams come true with the opportunity to buy “Non Fungible Thoroughbreds” at VisitLEX. The horses have names like Ol’ Pixel Face, iHorse, OpenSea Biscuit, Notta Pony and Champing at the Bitcoin. They promise no feeding or grooming or upkeep. And “the only thing more precious than a child’s wish is a unique and noninterchangeable unit of data with limited usage rights stored in an online ledger.” Watch for a laugh here: https://www.youtube.com/watch?v=6ZOegq2E030. It may make you want to visit Lexington after omicron departs, hopefully blowing away soon like our old Christmas tree needles. And we might see you there!
NFTs (non-fungible tokens, not thoroughbreds) were not a disappointment but instead were all the rage for holiday giving this year, including offerings from brands such as Adidas and Balmain x Barbie. Amy’s teens were in and see them as a longer-term investment opportunity vested with immediate bragging and display rights. But if your clients are launching NFTs for sale in 2022, making clear to consumers what they are buying is key. In this new market, defining the “reasonable consumer” is difficult – is it the crypto trading entrepreneur who has everything or a curious teen’s mom or dad? Better to assume little experience and make very clear what good is being purchased.
- Make very clear what rights are being conveyed to the purchaser. Typically, these rights include a limited license to access the NFT media and display it for personal use, but do not include the ability to use it for commercial purposes or to reproduce or transform the underlying media.
- Also make clear that the purchase of an NFT does not confer any right to participate in secondary market royalties with respect to the underlying media; such rights belong with the entity that owns the copyright in the NFT media.
- Avoid advertising the NFT purchase as an investment opportunity.
In the case of our four-footed NFT friends in Lexington, the NFT sale is in the form of a charitable auction. For promotions such as these, ensure the third-party auction platform is registered in all applicable states pursuant to state auction laws. In addition, commercial co-venture laws may apply when a for-profit entity is raising funds on behalf of a nonprofit entity, so there may be additional contractual, registration and reporting requirements.
The BakerHostetler team would love to hear about your creative NeighFT – sorry, NFT – promotions, and would be happy to help you navigate this new Wild Wild West.