The Ripple Effect: How High-Profile NFT Lawsuits in 2024 are Reshaping Digital Asset Regulation

by Viktoriia Palchik

Published: May 29, 2024 at 5:28 am Updated: May 29, 2024 at 5:28 am

by Anastasiia O

Edited and fact-checked:
May 29, 2024 at 5:28 am

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NFTs became widely used in 2024 during a volatile cryptocurrency market, with the legal environment being established by a number of high-profile court cases. Important precedents for copyright and fair use for NFTs produced from already-existing artworks were established by a Spanish court case. Lawsuits were filed against big fashion labels, and the founders of CryptoZoo were charged with undermining their venture. In a disagreement over a contract for the NFT marketplace, a U.S. court granted the complaint.

NFTs Triumph in Landmark Spanish Court Case Over Copyright Dispute

Barcelona Commercial Court No. 9 issued the first ruling in Spain on the relationship between NFTs and copyright in January 2024. The lawsuit included the acquisition of five artworks by Spanish artists between 1998 and 2008 by the global fashion business Mango, based in Spain. Without the artists’ permission, the business commissioned crypto-artists to produce NFTs that included these works. These parodies were never placed on a blockchain; instead, they were only shown in the shop, on social media, and in the Decentraland metaverse.

The court completely rejected the writers’ suit, ruling that Mango had not violated the writers’ moral rights because the paintings had been made public long ago with the authors’ permission. The court concluded that because the NFTs were considered modifications rather than simple copies, they did not violate the authors’ rights and did not violate their right to reproduction. Using a “fair use” standard, the court determined that Mango’s activities were lawful since the NFTs were made only for display, had no commercial objective, and did not damage the authors’ brand or market.

Dolce & Gabbana Accused of Failing to Deliver on NFT Benefits in New Lawsuit

Luke Brown has initiated legal action against Dolce & Gabbana, contending that the esteemed luxury apparel brand reneged on its commitments to NFT holders and exploited both the primary and secondary markets for these assets. The lawsuit meticulously outlines how the DGFamily project, a joint venture with UNXD, fell short of its pledges, failing to deliver on the promised array of benefits, ranging from tangible garments to digital wearables and access to exclusive events.

The first digital wearables were only available for use on the Decentraland Metaverse platform and came one month later than expected. This lawsuit follows the $1.9 million settlement that former NFL player Rob Gronkowski paid to support the now-bankrupt crypto lender Voyager Digital. Dolce & Gabbana hasn’t posted anything about DGFamily on any of its platforms since April 2023, and as of right now, its NFTs are only being traded on OpenSea for a little fraction of an ether.

Requests for comment from the corporation have not yet received a response. In other developments, Pump.fun, a well-known meme coin trading site, saw its second-highest income day since its start on Thursday, when it was abused for about $2 million.

CryptoZoo Co-Founders Accused of Sabotaging NFT Project; Logan Paul Seeks Damages

Two co-founders ruined the cryptocurrency enterprise CryptoZoo by using their notoriety to push a complex NFT illegal scam. In addition to all of his expenses, Logan Paul is requesting punitive and compensatory damages. The buyback plan, with its time constraint and legalese, does not imply that Paul has acknowledged any legal right or liability regarding the numerous CryptoZoo scams. 

Buyers of base animal and basic egg NFTs have until February 8, 2024, to complete the claim form; beyond that date, all claims will be handled. Every qualified NFT, or around $240, will be awarded to eligible purchasers in the amount of 0.1 ETH. The goal of the game, as originally designed, is that the hybrid animal NFTs are not refundable. Paul states that the repurchase is not meant to make up for individuals who lost their money when they bet on the cryptocurrency market but rather as a means for him to make whole those who planned to play CryptoZoo.

California Court Allows Little Orbit’s Lawsuit Against Ultimax Digital to Move Forward

The move of Ultimax Digital Inc. to have Little Orbit Inc., a California-based video game publisher, drop its case alleging breach of contract, patent infringement, and trade secret theft was refused by the United States District Court for the Central District of California. According to Little Orbit, Ultimax recruited it in 2020 to create the video game “Tantra Rumble,” which was subsequently renamed “StoneHold,” and to create a digital card NFT marketplace. The complaint was submitted to the Central District of California in October 2023.

The court rejected Ultimax’s request, noting that the case originated from Ultimax’s interactions with California and that the court had intentionally taken advantage of the opportunity to do business in California. The court determined that Little Orbit’s trade secret misappropriation action against Ultimax had sufficient allegations. The judge let the California action against Ultimax proceed in its entirety.

Viktoriia is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.

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