Author: Tanvi Vikrant Kate, Dr Babasaheb Ambedkar College of law
To the Point
NFTs (Non-Fungible Tokens) are digital assets that prove ownership of things like art, music, videos, or even tweets, using blockchain technology. They are becoming popular, but the laws are not keeping up. In India, there are no clear rules on whether NFTs are legal, how they should be taxed, or how to protect people who buy or sell them. This article explains what NFTs are, the problems with regulating them, and what the law should do to fix it.
Use of Legal Jargon
NFT (Non-Fungible Token): A unique digital item that shows proof of ownership of something online.
Smart Contract: A computer program that runs on blockchain to automatically do agreements like buying and selling NFTs.
Blockchain: A public digital record that keeps track of who owns what.
Jurisdiction: The area or country whose laws apply to a situation.
Intellectual Property (IP): Rights that protect creations like art, music, and writing.
KYC/AML: Rules that stop money laundering and make sure companies know who their customers are.
Regulatory Sandbox: A testing environment for new technologies under supervision, before making permanent laws.
The Proof
What are NFTs?
NFTs are like digital certificates that prove you own something online—like an image, song, or video. Each NFT is one-of-a-kind and can be bought or sold online.
NFT Market Growth
In 2021, people spent over $17 billion on NFTs. Artists, musicians, and even companies started selling digital items using NFTs. Platforms like OpenSea became popular for trading NFTs.
Legal Issues in India
No Clear Law: India does not have any law that clearly talks about NFTs.
Tax Confusion: The 2022 Budget added a 30% tax on digital assets, but it’s not clear how NFTs fit in.
Copying and Copyright Problems: Some people sell NFTs of things they don’t actually own, like someone else’s artwork.
Jurisdiction Confusion: NFT sales happen worldwide, so it’s hard to say which country’s laws apply.
Securities Confusion: Some NFTs are bought as investments, like stocks, which may need rules under financial laws.
Abstract
NFTs are changing how we buy and own digital things, but the law is not ready for them yet. In India, NFTs are neither fully allowed nor fully banned. The rules about who owns what, how NFTs are taxed, and how people are protected are still unclear. This article looks at the legal problems around NFTs and suggests that India needs a proper law to manage them
Case Laws
Hermès v. Rothschild (2023, USA)
Hermès, a famous fashion brand, sued an artist for selling NFTs that looked like Hermès bags. The court said the NFTs violated their trademark rights.
Nike v. StockX (2022, USA)
Nike said StockX was selling NFTs of Nike shoes without permission. This case showed that using real brands in NFTs can break the law.
Sunil Abraham v. Union of India (Pending, India)
This is a case filed in court asking for rules on NFTs in India to stop illegal use and tax evasion.
European Union’s MiCA Law
The EU passed a new law to control digital assets. It includes some rules on NFTs, especially if they are used like investments.
Conclusion
NFTs are exciting and can help artists and creators earn money in new ways. But without clear rules, there is a risk of cheating, stealing others’ work, and misuse. India should create laws that explain what NFTs are, how they can be used, and how people are protected. The government should also make sure people understand the taxes on NFTs and create a safe system for NFT trading.
FAQS
1. Are NFTs legal in India?
NFTs are not illegal, but there are no specific laws for them yet.
2. Can someone copy my art and sell it as an NFT?
Yes, and it would be illegal. But without strong laws, it’s hard to stop them quickly.
3. Can NFTs be taxed in India?
Yes. The government may treat them as “virtual digital assets” and apply a 30% tax, but more clarity is needed.
4. What law applies if I buy an NFT from another country?
That’s a big problem—because NFTs are global, it’s hard to say which country’s rules apply.
5. What can the Indian government do?
India should create a law that:
Defines NFTs clearly
Protects creators
Prevents cheating
Clarifies taxes
Creates a legal process for NFT disputes
