Art, Law, and Commerce in the Metaverse: On Three New Stories of NFTs

IN FEBRUARY, a Manhattan jury found that the First Amendment did not shield artist Mason Rothschild from liability for infringing Hermès’s trademark with his “MetaBirkin” NFTs. It was a disappointing verdict for those of us intrigued by the possibilities of so-called “crypto art,” art associated with virtual non-fungible tokens created and recorded on an online blockchain network. NFTs emerged on the scene in 2014 with Kevin McCoy’s minimalist Quantum, a digital image resembling a kind of factureless Kenneth Noland target painting in pulsating electric fuchsias and greens. It was not until 2021, however, with the shocking $69 million sale of Beeple’s maximalist Everydays—a collage of over 5,000 digital images of everything from presidents to Pikachu—that the new technology entered mainstream consciousness.

Rothschild’s MetaBirkins—images of fur-covered luxury handbags reminiscent of Hermès’s iconic “Birkin” bag—have a blindingly obvious precedent in Andy Warhol’s cans of Campbell’s Soup and other works of pop art that appropriate high-visibility logos and brands. Birkins cost upwards of $10,000 and have lived in the public imagination as exemplars of commodity fetishism since they were introduced in 1984. In targeting Hermès in particular, Rothschild is in exalted artistic company. Years before the first Birkin was made, Weekend—Jean-Luc Godard’s 1967 film about the nihilistic consumerism of the bourgeoisie—featured a scene in which the female lead emerges from a violent car crash screaming, “My Hermès bag!” while ignoring the flaming corpse of a man who also perished in the wreckage.

None of this could save Rothschild in court. Hermès’s attorneys shrewdly demanded a jury trial, then screened out potential jurors with any knowledge of art history. One juror who made the cut reportedly owned multiple Birkin bags herself. Perhaps unsurprisingly, this group had a hard time seeing Rothschild’s MetaBirkins—one of which sold for $45,100—as anything other than a rip-off. While the jury verdict set no formal precedent, it resounded through the worlds of fashion and art as the first major case involving NFTs to go to trial.

Time will tell if the case has a chilling effect on other artists thinking of experimenting with NFTs. Despite a general downturn in crypto markets over the past year, NFT enthusiasts have remained enthusiastic. Some even contend that that an end to the manic era of crypto investing will be good for crypto art in that it will help separate the gadflies and speculators from those who are serious about art for art’s sake.

Right on time for this reckoning, three new books have arrived to tell three different stories about where NFTs came from, where they are going, and whether we should follow.

In their slim, accessible The Story of NFTs: Artists, Technology, and Democracy, Amy Whitaker and Nora Burnett Abrams situate NFTs in a fine art tradition of market critique and resistance that begins with conceptual artist Sol LeWitt. In the 1960s, LeWitt started making wall drawings in galleries, institutions, and private residences. He sold them with an ownership certificate conveying instructions for execution. If someone had a LeWitt drawing on their dining room wall, then sold the certificate, the drawing would still be there, but it would cease to be a LeWitt—the image and its ownership could become untethered.

NFTs do something similar. Like one of LeWitt’s certificates, an NFT creates a unique record of ownership. The virtual record, not the work itself, is what makes the work of art “authentic.” This arrangement, according to Whitaker and Abrams, “holds wild and exciting democratic possibility.” For one thing, NFTs make it possible for artists to write resale royalties into their contracts, ensuring that if a collector flips an artwork for 10 times its original price, the artist benefits. Artist resale royalties are common in other parts of the world, but the US legal system has remained hostile to the idea.

Legal scholar Edward Lee also celebrates this possibility in his book Creators Take Control: How NFTs Revolutionize Art, Business, and Entertainment, but he sees the paradigm shift as even more profound. According to Lee, NFTs are part of a movement towards “a new form of virtual ownership,” which he calls “interactive ownership.”

In this new ownership economy, Lee rhapsodizes, “[p]eople are no longer treated as ‘users’ of the Internet, subject to ad monetization and the algorithms of Big Tech.” “Instead,” he posits, “people are treated as co-owners in a community, such as one established by an NFT project that grants owners commercial rights.” Here, Lee is offering more of an aspirational account of a fully decentralized internet (Web3) than a description of reality. As it stands, NFTs do not necessarily travel with the copyright to the art with which they are associated—Beeple, for instance, still holds the copyright to Everydays—and people still engage with NFTs via large, centralized platforms that absolutely collect and monetize user data.

Lee is correct that NFTs are hastening a change in attitudes towards intellectual property and the internet. Crypto artists may be more likely than traditional artists to use something like a Creative Commons license to explicitly invite widespread distribution and remixing of their work, but Creative Commons licenses have been around for over 20 years. Lee’s claim that “NFTs are a new form of intellectual property” is, to put it charitably, overstated. It is a claim he repeats in his scholarly writing, where he anticipates the argument that the only “forms” of intellectual property are those created by law: copyright, patent, and trademark. “I see no persuasive reason why this distinction matters,” he writes in a recent law review article. The justification he offers is that “code is law,” as the Lawrence Lessig apothegm goes.

Lessig was speaking metaphorically, a nuance that seems lost on Lee. Code, Lessig famously argued, sets the terms on which life in cyberspace is experienced. Code is like law in interesting and important ways, but it is also unlike law. Code is not, for example, enforced by the state’s monopoly on the legitimate use of violence. Alas, Creators Take Control suffers from other metaphor (and simile) problems. Lee compares NFTs to the iPhone’s virtual keyboard, explaining that both use “a virtual embodiment instead of a physical one.” He writes that NFT owners are “like sole shareholders of their particular NFTs.” He likens Web1 to a “one-way” street, Web2 to a “two-way street,” and then gushes, “Web3 now offers people the ability to own a part of the land surrounding the street and interact with other owners in building a community or even a business.” These figures of speech are not merely inelegant; they create real barriers to understanding with their imprecision. Readers picking up Lee’s book hoping to come away with at least a rudimentary understanding of how the technology undergirding NFTs works will be disappointed. Or worse, they will come away thinking that an NFT is just like an iPhone keyboard (it is not).

An NFT is nothing more than an encrypted unit of data stored on a digital ledger. With the Uniform Commercial Code’s new Article 12 now adopted by a handful of states, NFTs and other “controllable electronic records” are starting to be legally recognized as a new subcategory of property, but not intellectual property. NFTs may index works of art or other things of value, but many of the permissive licensing and creative ownership arrangements Lee extols merely coincide with the rise of NFTs. Lee’s infatuation with his subject prevents him from thinking critically about much of the hyperbole that plagues the space. On the contrary, he joins in, comparing Beeple to Picasso and the Bored Apes to Mickey Mouse. Lee quotes a lot of artists saying, “Oh my God, this is amazing!” and other upbeat, but essentially content-free things about NFTs. He is also keen to act as a hype man for various commercial projects, quoting directly from the websites of companies touting their own “game-changing tech,” and taking such puffery at face value.

In spite of—and in some ways, because of—these many flaws, Creators Take Control succeeds in capturing the lamentable state of the zeitgeist. Lee champions speed, volume, and connectivity, and treats the market as the ultimate arbiter of value, writing that the $27 billion spent on NFTS in 2021 should reassure skeptics that they are “not a scam.” He finds it marvelous that digital artists can now harness code to generate 10,000 works of art in just a few days, as though art was just another commodity, like computer chips or toilet paper.

Like many of us denizens of the post-pandemic world, Lee seems desperate to locate authentic joy and meaning in the metaverse, a space that cannot be rendered abruptly inaccessible by an emergency stay-at-home order. But he is too quick to discount the ways in which the body and shared presence are relevant to our ability to experience the pleasures of life. Digital fashion will allow people to “look good virtually, without having to buy physical clothes,” he confidently asserts, and enjoying a concert “will be as simple as touching a virtual button on your phone.” But readers not already attuned to the appeal of living this way will not be convinced that they should clear out their wardrobe and invest in a pair of digital dancing shoes. True, it would be more efficient. It would also be missing what many of us regard as the point of being alive.

Omar Kholeif’s Internet Art: From the Birth of the Web to the Rise of NFTs takes up these contemporary problems—physical isolation, the neglect of the body, the relationship between art and commerce—in a more searching and thoughtful way. Where Lee emphasizes the novelty of NFTs and keeps his gaze trained on the future, Kholeif sees the rise of NFTs as one of many developments in the long history of internet art, defined as art “produced with a knowing awareness of the networked nature of our collective culture.”

While warmly receptive to the possibilities of art that uses or thematizes the internet, Kholeif does not make the mistake of regarding the internet, much less the metaverse, as a panacea for all that ails art and life. Kholeif, who uses they/them pronouns, notes that the internet has made it easier for far-flung members of marginalized groups to find community, but they also acknowledge that the internet’s promise of a borderless world was exposed as fantasy by the pandemic’s travel restrictions. Kholeif appreciates the ways in which online art exhibitions accommodate shy, anxious types like them, but they also repeatedly reference the physical toll their sedentary, screen-based life takes on their body.

In Kholeif’s judgment and wide-ranging experience, internet art projects that fetishize technology seldom prove to have the most enduring value. The more interesting artists are not the flashiest technological innovators but those who inhabit existing technologies in subversive ways, helping viewers acquire new perspectives on the invisible architecture of our consciousness.

Kholeif speculates that the online platforms Artsy and Sedition may have precipitated the rise of NFTs. Artsy allows collectors to purchase physical art online and Sedition sells “limited editions” of digital art. While these platforms were touted as increasing art market transparency and facilitating direct sales, they were far from perfect. Art ordered through Artsy sometimes looked different from its online listing once it arrived in the mail, and Sedition’s artists required an overwhelming amount of technical engineering support to make their digital works look precisely the way they wanted. While NFTs purport to solve some of these problems—particularly those of distribution and provenance—they create others by generating carbon emissions and arguably pushing the internet towards more privatization, not less.

In contrast to Lee, Kholeif is perhaps too willing to dismiss NFTs as a craze whipped up by museum “suits,” asset managers who sell “watches, yachts, and luxury homes,” and auction houses trying to revive their “aging brand.” Internet Art would have benefited from more conversations with crypto artists, many of whom are motivated not by greed but by the same mysterious impulses that have driven artists to push for new forms since the cave paintings at Lascaux.

For Kholeif, crypto in its current financialized form is a perversion of the internet’s most beautiful possibilities. The web is already “a generative and generous space,” they write, citing Wikipedia and the avant-garde cache UbuWeb as (not-for-profit) examples. Similarly, the metaverse, for Kholeif, could mean wandering through Yayoi Kusama’s Infinity Mirror rooms, or hanging out at Andy Warhol’s Factory. These, too, can be seen as self-contained parallel worlds engaging the total sensoria, but they were created by artists seeking to expand perception, not companies looking for an additional revenue stream.

As the world continues to fight, in court and out, about what NFTs, crypto, and the metaverse should be, it will be important to consider a broad range of perspectives. While Lee urges us to follow the money, Whitaker and Abrams envision the blockchain as an exercise of people power, born of an erosion of trust in institutions. Kholeif makes a compelling case for paying special attention to artists’ voices as this great debate unfolds.

¤

Jessica Rizzo is an attorney based in Philadelphia. She writes about art, technology, and the law.