The U.K.’s High Court has reportedly ruled that NFTs are property, separate from the underlying thing they represent. The counsel behind the case is calling the ruling a landmark decision with far-reaching implications for digital art, but lawyers in the U.S. that Artnet News spoke to weren’t that impressed. 

Lavinia Osbourne, who lives in London and is the founder of Women in Blockchain Talks, claims two Boss Beauties NFTs were stolen from her Metamask wallet earlier this year. She didn’t say how they were stolen. Boss Beauties is an NFT collection linked to images of “beautifully diverse, empowered women.” 

The tokens ended up in two anonymous accounts in OpenSea. In an effort to reclaim them, Osbourne filed an injunction against the popular NFT marketplace. A judge overseeing the case ruled the NFTs were property, thereby enabling the court to issue an order requiring OpenSea to freeze the accounts, so the NFTs could not be moved or traded, and to provide information on the two account holders. 

OpenSea declined to comment, but it has frozen the two NFTs in question: Boss Beauties 680 and 691.

A written judgment is expected later this week, but Racheal Muldoon, a counsel on the case, with the firm 36 Commercial law, told Artnet News the High Court’s decision “sets an important precedent in recognising for the first time that an NFT is property.” She added that the ruling “opens the way for defrauded NFT holders to claim back what is rightfully theirs with the assistance of the courts, and has broader tax, wealth planning, inheritance, trust law and other implications.” 

Other lawyers disagreed with the significance of the ruling.

As far as the Internal Revenue Service is concerned, NFTs are already property in the U.S., digital asset attorney Max Dilendorf told Artnet News. “The IRS treats all digital assets, including NFTs as property for tax purposes,” he said. “I believe that the U.K. is just following the same path, which makes complete sense.”  

Juliet Moringiello, a professor at Widener University Commonwealth Law School, who wrote a paper on property law and tokens, agreed. NFTs generally are treated as property. There is no reason they shouldn’t be, she said: “An owner of an NFT has the right to transfer it, give it to someone else, exclude others from it. These are all of the attributes of property.”

Moringiello noted, however, that “you can’t ask, ‘Is it property?’ in a vacuum.” She added: “The significance of this opinion is that the court held that the token is the kind of asset that can be frozen.”

Yet the ruling says nothing about any relationship between the NFT and the underlying asset — which would have been a much bigger deal. As things stand now, an NFT doesn’t convey copyright, usage rights, moral rights, or any other rights at all. All of that has to be spelled out separately in a written contract.  “So if you have a token, you have a token. But not necessarily any rights in anything else,” she said. 

Moringiello is the vice-chair of the committee working on revising the Uniform Commercial Code, a set of laws governing all commercial transactions in the U.S. While the proposed amendments treat tokens as property, they are silent as to whether there is any link between the token and the underlying asset, she said. A link would mean that owning an NFT automatically infers rights over the thing the NFT points to, whether that be a digital image, video, music file, or whatever. “That’s left to other laws, and no such other law has recognized that link.”

Rohan Grey, a law professor at Willamette University who’s worked with Democrats to develop crypto regulations, says the reported U.K. ruling that NFTs are property may not be a big deal from a legal perspective, but it could be in clarifying that “code is not law.” 

The term “code is law” is popular among crypto supporters. It’s the idea that software governs decision-making. If the software has a glitch or performs in an unintended manner, it doesn’t matter. The code, as written, is a legitimate form of legal action, according to proponents of the idea. 

Taking that view seriously would mean that if you gain access to an NFT because you got that person’s private keys through a phishing scam—which is how several Bored Ape Yacht Club holders recently lost their NFTs—then you did so in a way that was consistent with the code, and you haven’t broken any laws.  

“But from a property law perspective, that’s like saying, ‘Well I didn’t technically steal anything from you because you left your front door unlocked,’” Grey said. “The fact you are physically capable of taking something doesn’t mean you’re legally allowed to do so.”

The reported U.K. ruling supports that. “It’s simply recognizing that your claim to a particular private key is legally significant,” Grey said. “The fact you are physically capable of taking something doesn’t mean you’re legally allowed to do so.”