skip to content

A Survey of NFT Licenses: Facts & Fictions

A Survey of NFT Licenses: Facts & Fictions - Galaxy Research

You can hear more about this topic in Episode 23 of Galaxy Brains, a podcast from Galaxy Digital Research's team.

What do you own when you buy an NFT?

Most people talk about purchasing NFTs as “buying jpegs,” the image files you see online in avatars and marketplaces like OpenSea. But the reality is that the issuers of the NFT collections retain full ownership of those images. We reviewed the licenses for all of the top NFT collections, and in all cases, except one, the issuers offer only a usage license to the NFT purchaser, with varying levels of commercial rights ranging from permissive to highly restrictive. In many cases, issuers are less than forthcoming about this point, either encouraging directly or by omission through their marketing content a widely held misconception that “you own the art.” Because of the lack of user ownership, and exacerbated by pervasive misconceptions, the promise that NFTs can usher in a new era in digital ownership and property rights remains far off. Without rectifying this, the vision of Web3 will remain elusive.


Non-fungible tokens (NFTs) have opened an arena of scarcity applications to be built on public blockchains. These unique tokens have already come to represent rights to access, liquidity positions, and artwork. NFTs seem poised to have a bright future with innovative applications both inside and outside the crypto-native ecosystem. Today, outside of certain DeFi use cases, NFTs representing artwork has seen the most adoption, with more than $118bn in value traded over a trailing 365-day period on Ethereum alone.

Monthly NFT Trading Volumes on Ethereum-based Marketplaces - chart

But despite this vast sum and the promise that NFTs will be revolutionary for ownership rights, the reality leaves much to be desired. Contrary to the ethos of Web3, most NFTs today convey exactly zero ownership rights for the underlying artwork to their token holders. Instead, the arrangements between NFT issuers and token holders resemble a distinctly Web2 maze of opaque, misleading, complex, and restrictive licensing agreements, and popular secondary markets like OpenSea provide no material disclosures regarding these arrangements to purchasers.

The crypto community has become more aware of the tenuous nature of intellectual property ownership and NFTs over the last several weeks, with two high-profile issuers substantially altering the usage license for their NFT collections. Moonbirds, the 8th most valuable NFT collection based on implied market value, changed its license to Creative Commons (CC0) after months of falsely stating on their website that token holders, “you own the IP.” And this week, Yuga Labs, by far the largest NFT issuer, owning more than 63% of the market value of the top 100 NFT collections, released new license agreements for CryptoPunks and Meebits, two of the oldest NFT collections.

In this report, we explain the difference between terms of service, usage licenses, and intellectual property (copyright) ownership. We examine major NFT collections by implied network value, categorize the most common licensing agreements, and highlight iconic examples. We uncover disparities between issuer marketing materials and legal terms of service, which in some cases are vast and misleading. And lastly, we argue that, for the Web3 dream of NFTs to become a reality, token holders must demand ownership rights over their NFTs or seek increased issuer transparency at a minimum.

Key Takeaways

  • The vast majority of NFTs convey zero intellectual property ownership of their underlying content (artwork, media, etc.)

  • Many issuers, including the largest Yuga Labs, appear to have misled NFT purchasers as to the intellectual property rights for the content they sell.

  • Only one NFT collection in the top 25 by market capitalization even attempts to confer intellectual property rights to the purchasers of their NFTs (World of Women).

  • The Creative Commons license, while seen as a solution to the restrictive licenses used by most projects, renders NFT ownership obsolete from a legal perspective as it moves the intellectual property fully into the public domain, making it impossible for NFT holders to defend their ownership rights in court.

  • Without improvements in the on-chain representation and transfer of intellectual property rights from NFT issuers to NFT token holders, the expansive vision of Web3 will remain unrealized.

What Actually Are NFTs?

The distinction between an NFT and the digital content to which the NFT points is not widely appreciated or understood, even among the most experienced and sophisticated NFT holders. Most seem to think that when you buy an NFT, you’re buying the digital image associated with that NFT—an image stored on some blockchain, like Ethereum or Solana. But this isn’t the case.

Instead, what you buy when you purchase an NFT[1] is actually a composite of two distinct things:

  1. a digital token, usually governed under Ethereum’s ERC-721 standard, that bears a unique cryptographic address and contains certain metadata stored on a blockchain. That metadata is not the image, however; it is data that describes (or “points to”) the location of the image—a location that is typically off-chain, stored in places like Amazon Web Services or within The Interplanetary File System (IPFS).

  2. a license—issued to the owner of the NFT by the NFT Project that created the image—that grants the owner the right to display (or, in some cases, commercialize) the image to which the NFT points.

The Digital Token

Fundamentally, non-fungible tokens, like all digital assets, are simply lines of code written onto a blockchain. What separates a non-fungible token, like a Bored Ape Yacht Club NFT, from a fungible token, like LINK or UNI or WETH, is that the former is governed by the ERC-721 standard while the latter group are governed by the ERC-20 standard. The ERC-721 standard specifies certain criteria that a token must comply with in order for it to be “non-fungible”. Among those criteria, the two most important are the tokenID—a unique identifier generated upon the creation of the token—and the contract address—essentially the address of the smart contract from which the token was generated. These data, among others (like “original creator,” “owner,” and “tokenURI”), are stored as metadata on-chain. The presence of both a tokenID and a contract address are the core metadata elements that render a digital token “non-fungible,” for no two Ethereum tokens will ever have the same tokenID and contract address.

A third element typically associated with ERC-721 tokens of particular relevance here is the tokenURI, which is the metadata that contains a link to a JSON object stored on the web, which itself contains a URL to an IPFS link where the digital content associated with the NFT is stored. It is the tokenURI that provides protocols like OpenSea and TwitterBlue the instructions on how to display the “art” associated with an NFT.

Technical Anatomy of an NFT - diagram

The License

The mere fact that an NFT “points to” a certain image does not, by itself, give the owner of that NFT any rights to the image, any more than minting an NFT of the Mona Lisa gives the minter rights to the Mona Lisa. Something more is required, and that “something” is a legal agreement between the owner of the image—known as the “copyright holder”—and the NFT holder specifying what rights the NFT holder has with respect to the image. To the extent an NFT purchaser has any rights to the image associated with his or her NFT at all, those rights flow not from his or her ownership of the token, but from the terms and conditions contained in the license issued by the NFT project governing the NFT holder’s purchase and use of the image. Accordingly, for the vast majority of NFT projects, owning the NFT does not mean you own the corresponding digital content that is displayed when you sync your wallet to OpenSea. That content, as it turns out, is owned and retained by the owner of the copyright associated with that digital content, typically the NFT project.

Copyright is the only legally cognizable form of ownership in digital content that we have in the United States. Without copyright, a purchaser of digital content does not own that content, but instead “licenses” that content from the copyright holder, on terms dictated by the copyright holder. In this sense, the copyright holder (i.e., the licensor) is the digital content landlord; the purchaser (i.e., the licensee) of that content is the digital content tenant.

Admittedly, for most digital content, this digital landlord-tenant relationship isn’t particularly problematic; no one thinks, for example, that buying a DVD or Blueray of the movie Goodfellas means you’re buying the exclusive rights to the content of Goodfellas. We understand, quite clearly, that buying the DVD or Blueray of a film is buying a copy of some digital content owned by whatever film studio produced the film—not a unique one-of-one collectible granting exclusive access to that content.

But NFTs are different. NFT projects purport to sell unique one-of-one digital collectibles that no one else can own. Indeed, NFT projects go through great pains to create 10,000-piece collections consisting of unique one-of-one images, with each image of which representing a wholly distinct work of art from all others. No one thinks they are buying a copy of an NFT with a super rare trait. They are buying the “rarity trait” themselves. In fact, the entire concept of “rarity traits” popularized by many NFT projects over the last year bespeaks of the idea that buying a particular NFT with a “rare trait” means buying a one-of-a-kind work of art unlike anything else, that no one else can own.

But someone else does own the rarity trait—not the purchaser of the NFT, but the issuer of the NFT (the NFT project). What you own is the token that points to an image containing the rare trait. In this sense, an NFT purchaser is, at most, renting the rarity trait from the true owner of the trait—Yuga Labs, in the case of Bored Ape Yacht Club, CryptoPunks and MeeBits; Proof, in the case of Moonbirds; Chiru Labs in the case of Azuki, etc.—who owns the copyright to the art.

To truly own that rarity trait, it’s not enough to simply own the digital token entitling you to a license, for the license could change at any time. Not only that, but without copyright, you can’t even prevent anyone else from displaying the art associated with your NFT. Only the copyright holder has that power, unless expressly provided otherwise by the copyright holder in the terms of the license.

After reviewing the most used license agreements for NFT projects, it becomes apparent that NFT standards and smart contracts do not recognize off-chain law. To conceptualize this thought in greater detail, we must first present some basics of the legal concepts that define ownership.

Ownership of NFTs

The fact that owning an NFT entails owning a composite of the (1) non-fungible token and (2) license entitling the holder of the non-fungible token to certain rights in the image to which the non-fungible token points raises important questions about the nature of NFT ownership vis-a-vis the copyright holder. It is essential that anyone interested in NFTs understands the basics of copyright.


U.S. copyright law protects “original works of authorship fixed in any tangible medium of expression,”[2] which automatically vests in an author as soon as the original, creative expression is fixed by the author in tangible form. What this means is that any artist gains enforceable copyright automatically in their work without having to do anything else—no registration required[3] —simply by virtue of expressing that work in tangible form.

Copyright law recognizes eight categories of protected works: (i) literary works; (ii) musical works; (iii) dramatic works; (iv) pantomimes and choreographic works; (v) pictorial, graphic, and sculptural works; (vi) motion pictures and other audiovisual works; (vii) sound recordings; and (viii) architectural works.[4] Accordingly, the images associated with NFTs are protected by copyright under (v) — pictorial and graphic works.

This copyright protection, once gained, confers to the copyright holder a monopoly over the right to (1) reproduce, (2) distribute, (3) publicly display and (4) perform the work and (5) create derivative works. Perhaps most importantly, however, copyright confers to the copyright holder the right to exclude others from doing any of the foregoing.

First Sale Doctrine

The second right listed above—the right to distribution—gives copyright owners the exclusive right to distribute copies of their copyrighted works, including within commerce, and prohibit others from engaging in any such distribution. Yet, this monopoly to exclusive distribution afforded to copyright holders over their copyrighted works is subject to an important limitation—the First Sale Doctrine (“FSD”). Under FSD, a copyright holder’s exclusive rights to distribution of copyrighted works are extinguished when he or she transfers ownership of a particular legal copy of such work to a third-party purchaser.

There’s a huge exception to the FSD when it comes to digital works, however. Under the Copyright Act, the FSD does not “extend to any person who has acquired possession of the copy or phonorecord from the copyright owner, by rental, lease, loan or otherwise, without acquiring ownership of it.” Because the FSD doesn’t apply to leases, an entire intellectual property architecture was created over the last 30 years to license—not sell—digital works, so as to allow copyright holders to retain their monopolies over distribution of copyrighted material.

Accordingly, when you buy a digital book on your kindle or a movie on Apple TV, you are merely purchasing a license to use the product under specific conditions, specified in the terms and conditions of sale. As digital books and movies are not tangible products but live in the digital realm, it is easier for the original owners of these goods to restrict use and withhold IP rights, particularly when the platforms upon which the license is issued is controlled by the issuer (Amazon, Apple). Evidently, the lack of FSD implementations in the digital world has made the concept of true ownership extremely complex, especially when it comes to NFTs.

This point is consequential: most NFT purchasers believe (or are led to believe) that, when they buy an NFT, they own the content to which the NFT points. In this report, we examine the top NFT collections and reveal that the vast majority of projects actually confer no unique ownership rights over the content sold to NFT token holders. Several projects are extremely misleading about giving NFT purchasers intellectual property (or copyright) rights over the content purchased. Some projects even state explicitly that token holders “own” the underlying content, but then expressly disclaim against this fact in their terms of service. The offenses in the reviewed projects range from benign to significant.

Copyright & Trademark

Unlike copyright, which is a protection afforded under U.S. law in favor of the author of copyrightable works, trademark is a protection afforded under U.S. law in favor of the public. A trademark in the U.S protects brand-related aspects such as name, look, logo, design, or a combination of all that distinguishes one’s brand from others. Trademarks are primarily established to protect the entity that owns the trademarks along with the consumers as the main function for a trademark is to eliminate consumer confusion. Protecting the consumer involves eradicating any brands that intend to represent another entity so consumers do not associate a fake brand with the real brand.

Main Differences Between Copyright & Trademark - table

How Copyright is Transferred in the Real World

Inherent in the right of copyright holders to distribute copyrighted works is the right of such holders to assign, transfer or sell their copyright to third parties. To effectuate such a sale, transfer or assignment, however, copyright holders must comply with certain statutory rules evidencing proper transfer of the copyrighted material. Under 17 U.S.C. § 204(a) of the Copyright Act, a valid transfer of copyright must (A) be in writing and (B) be signed by or on behalf of the transferring party. While there is no statutory requirement that a specific form be used to transfer legal title to a copyright, most copyright assignments are effectuated through what’s called an “IP Assignment Agreement”—the very same type of agreement Larva Labs executed with Yuga Labs when Larva sold its IP in CryptoPunks and MeeBits to Yuga Labs.

Types of NFT Licenses

We examined the top NFT collections by implied market capitalization (floor price * collection size). Based on our review, NFT license agreements fall into four categories:

  • Commercial Rights

    • You can monetize the artwork freely—no cap on revenue, in any venue or format, for any length of time.

  • Limited Commercial Rights

    • You can monetize the artwork up to a certain amount of revenue, or in limited formats or venues, or for specified periods of time. Often, this license applies only to low-dollar sales ($100k limit) of merchandise (i.e., t-shirts).

  • Personal Use Only

    • You cannot monetize the artwork in any respect. You have limited display rights.

  • Creative Commons

    • The artwork is placed in the public domain.

All of these licenses, regardless of the level of permissiveness, hail from the era of Web2. As we will discuss throughout this paper, the promise of Web3, that users will actually own digital property as opposed to leasing it, remains elusive.

Commercial Rights

An example of an NFT collection whose license grants token holders monetization rights is the Azuki collection from Chiru Labs on the Ethereum network. At the time of writing, Azuki is the 9th most valuable NFT collection by implied market value.

The Azuki license grants unlimited monetization rights with no cap on revenue and no limitations on venue, format, or duration. While Azuki’s are an example of a more permissive license than many other projects, Chiru Labs nonetheless confers zero intellectual property ownership to token holders. The license is alterable and revokable by Chiru Labs at any time for any reason or no reason.

Notably, while Azuki owners can use and create derivative works, although not for another NFT project, so too may Chiru Labs modify the underlying artwork for no reason at any time, or “create works of authorship similar or identical to your own adaptations, derivative works, and modifications.”

The ability of NFT holders to freely commercialize is powerful and distinguishing against many other projects. That being said, it’s unlikely that any serious entrepreneur would undertake significant commercialization based solely on a one-sided agreement that is revokable by the issuer at any time.

Yuga Labs’ projects Bored Apes Yacht Club, Mutant Ape Yacht Club, Bored Ape Kennel Club also fall into this category, but we discuss these projects in great detail further down in this report.

Limited Commercial Rights

An example of an NFT collection whose license grants limited monetization rights is the Doodles NFT collection from Doodles LLC. At the time of writing, Doodles is the 8th most valuable NFT collection by implied market value.

Unlike Azukis which can be monetized with no cap on revenue, the Doodles license limits revenues that can be earned by token holders through merchandise sales to $100k. Furthermore, the Doodles license also prohibits the alteration of the NFT artwork and expressly prohibits its use on any merchandise that is deemed “unlawful, fraudulent, libelous, defamatory, obscene, pornographic, profane, threatening, abusive, hateful, offensive, or otherwise objectionable or unreasonable.” Note, while these terms are so broad that the Doodles issuer can essentially prohibit any type of commercial usage (“unreasonable”), in practice they need no reason at all because they can update or modify the license at any time and then hold token holders to it.

The NFT License 2.0 (“NIFTY”) falls into the category of limited commercial rights licenses. Another NFT collection that falls into this category is the iconic CryptoKitties.

Personal Use Only

The Veefriends NFT collection is an example of a highly restrictive, personal use only license. At the time of writing, Veefriends is the 10th most valuable collection by implied market cap, and VeeFriends Series 2 is the 14th.

Holders of “VFNFTs” are granted a “limited license to such VFNFT and its content to access, use, or store such VFNFT and its content solely for their personal, non-commercial purposes.” The license continues to expressly state that VFNFTs are a “limited edition digital creation based upon content that may be trademarked and/or copyrighted by” VeeFriends. Finally, the license states that “unless otherwise specified, your purchase of a VFNFT does not give you the right to publicly display, perform, distribute, sell or otherwise reproduce the VFNFT or its content for any commercial purpose.”

Under this license, a VFNFT holder possesses no rights to monetize the underlying artwork in any way, shape, or venue, but the holder may display the artwork for personal use.

Other examples of personal use licenses include TIMEPieces, adidas Originals, and NBA TopShots.

Creative Commons

All of the licenses we have reviewed thus far impose a range of restrictions on licensees’ use and enjoyment of copyrighted material in favor of the copyright holder. A CC0 license, by contrast, places no such restrictions on licensees’ use and enjoyment of copyrighted works. By adopting a CC0 license, a copyright holder effectively commits to waiving all of its copyright and related rights in its copyrighted works to the fullest extent allowed by law. As a result, the work is effectively “dedicated” to the public domain. If, for whatever reason, the waiver isn’t effective, the CC0 governs the work as a maximally permissive license granting the public an unconditional, irrevocable, non-exclusive, royalty-free license to use the work for any purpose.

Several prominent NFT projects have adopted CC0 licenses, with mixed results. While there are no doubt benefits to the CC0 model over the existing licensing regimes described above, there are also significant drawbacks. On the benefits side, the holders of CC0-governed NFTs have no restrictions on commercializing the art in the NFTs or using them in any way they see fit. CC0-governed NFT holders stand, as it were, on an equal footing with the creators of the NFT project when it comes to ownership over the NFT’s art collection.

But while CC0-governed NFTs may benefit NFT holders by placing the owners of the NFT project on equal footing with the NFT holders, they also place the NFT holders on equal footing with non-holders, as well. For once a work of art goes CC0, no one owns the work of art—meaning anyone can use the art for any purpose, including for creating NFTs. This raises an immediate issue with respect to the value prop of a CC0-governed NFT: why would you spend a lot of money on one when neither you nor the NFT project can exclude non-holders from exploiting the art linked to your NFT?

For this reason, many consider the CC0 license problematic for NFTs because it enables anyone to use the images governed under the CC0 without owning the NFT. CC0 NFT holders can commercialize their NFT—but so can everyone else. And should CC0 NFT holders decide to commercialize their art, they will be unable to legally protect their commercialization since they do not own the copyright (and therefore have no right to exclude others from using the identical imagery). A perfect example to this is seen with the “lil nouns” project, which is a direct copy of the real Nouns project. Neither the Nouns DAO nor holders of Nouns NFTs are able to enforce any kind of copyright violation claim against Lil Nouns or holders of its NFTs because Nouns are released under CC0.

CCs function in a similar fashion as CC0s when considering the dynamics between the copyright holder and buyer. However, not all CCs are structured the same way, with variations typically coming in the commercial and modification rights. Currently, CC0s, CC-BY, CC-BY-SA, and CC-BY-ND, are the only CCs that allow for commercial use, and all but CC-BY-ND allow the creation of derivative works. The CC-BY-NC 4.0 license, which governs Fidenzas, is a CC derivative that requires attribution and prohibits commercial use.

CC0s Nouns and CC-BY-NC 4.0 Fidenza - diagram

The central issue pertaining to NFT license agreements is the asymmetric control that the copyright holder has over the license. Copyright holders have the right to modify and revoke an NFT license from NFT holders at their sole discretion if they believe the license agreement has been breached, or for any other reason, or for no reason at all. This ability to modify the license agreement at any time is a major flaw within the NFT architecture, as it means that each NFT holder’s rights (especially, to the extent available, its commercial use rights) can be limited or entirely revoked under the law. This could significantly inhibit the wider use and adoption of the NFT artwork. Many license agreements that we analyzed clearly provide that the NFT project (licensor) has no responsibility or obligation to notify NFT holders of any modifications or amendments to the license and that it is the responsibility of each NFT holder to continuously keep up to date with the most recent terms contained in a Project’s license agreement on its website.

That NFT projects can modify or revoke their NFT licenses at any time for any reason (or no reason) with or without notifying their users is a significant underreported risk facing NFT holders. This risk exists for every NFT license, even those whose terms and conditions are silent on modifications or amendments. The risk here is largely misunderstood—and underappreciated—within the NFT community, crystallized recently with the backlash observed when Yuga Labs, after purchasing MeeBits from Larva Labs, increased the royalty fee on secondary sales of MeeBits from 0% to 5%. This royalty on secondary sales will go directly to Yuga Labs. This sudden change in royalty fee was not proposed to the Meebit community before implementation.

Major NFT Project Licenses

Yuga Labs

Yuga Labs is a $4bn NFT behemoth that owns 63% of the implied market cap of the top 100 NFTs. Yuga has also created derivative projects in the BAYC ecosystem, such as Mutant Ape Yacht Club (MAYC) and Bored Ape Kennel Club (BAKC). In March 2022, Yuga purchased the intellectual property for several additional NFT collections from Larva Labs, including CryptoPunks, one of the oldest and most prestigious NFT projects. In total, Yuga Labs owns the intellectual property behind 5 of the top 10 NFT projects by implied market capitalization: BAYC, CryptoPunks, MAYC, BAKC, and Meebits. Yuga’s NFT collections today are worth more than 63% of the top 100 NFTs by implied market capitalization at over $4.2bn.

The license provided by Yuga to holders of BAYC, MAYC, and BAKC NFTs contains critical contradictions which reinforce our finding that license agreements struggle with properly transferring IP to NFT holders. Yuga describes its license as unlimited, exclusive, worldwide, royalty-free that allows for full commercial use. For our purposes, we classify the various BAYC licenses as “Commercial Use” in the section above. Under the ownership section of the BAYC license, Yuga Labs states that “when you purchase an NFT, you own the underlying Bored Ape, the Art, completely.

Bored Ape NFT Ownership

At face value, the above statement in the BAYC license agreement suggests that NFT token holders own the intellectual property that underlies the NFT. But the copyright holder is the entity that owns the intellectual property to the underlying art and Yuga’s license makes no assignment of intellectual property to holders of the NFT. Concretely, the copyright holder has the sole power to grant a license to use intellectual property they own. By clearly granting a license in their agreement, Yuga implicitly acknowledges that the NFT holder does not, in fact, own the art.

BAYC Yuga Labs Commercial Use NFT

Despite this contradiction, there have been instances of BAYC holders utilizing their Apes for commercial purposes, most notably the actor and writer Seth Green, who is reported to be developing a television show for Cartoon Network’s Adult Swim featuring his Ape. Given that Yuga can unilaterally alter or revoke the terms of its commercial use license, it’s hard to imagine that Seth Green and his production studio didn’t negotiate a separate deal with Yuga. Producing a television show is costly and no production company would use another’s intellectual property, let alone make it integral to the show, without ensuring that the licensor consented to this specific use. Said another way, no production studio is going to make a TV show with intellectual property that can be rugged at any time.

Cryptopunks New Official License

In March 2022, Yuga Labs purchased the intellectual property for major NFT collections CryptoPunks and Meebits from Larva Labs. Larva Labs was known for its highly restrictive license terms, making it essentially impossible for NFT holders to monetize their artwork, and the acquisition was seen as potentially positive given Yuga Labs’ more progressive stance on NFT commercialization by its holders and third-party usage. Having purchased the intellectual property, Yuga Labs is able to dictate the usage of the artwork for these collections solely at its discretion but had promised to formally update the license. After nearly 6 months, Yuga Labs finally released a new license agreement for the CryptoPunks and Meebits collections on Monday, August 15. This event has further placed the discussion regarding NFT license agreements into the spotlight due to Yuga Labs acknowledging that they have the right to unilaterally update or alter the license terms for these projects. The license is usually buried in the terms and conditions sections of issuer websites, and it is never clearly stated on secondary trading platforms like OpenSea.

While the BAYC license is unclear and potentially misleading, newer licenses from Yuga Labs including the new CryptoPunks and Meebits licenses are significantly more professional and explicit in the ownership and license terms. At this point, given the disparity between Yuga’s BAYC license and its newer licenses, it’s unclear whether Yuga Labs intends to confer identical commercial use rights to holders of Apes and Punks. If Yuga Labs does intend for the licenses to be functionally identical, they should update the BAYC license to remove misleading phrases like “you own the underlying Bored Ape, the Art, completely.”

Otherside License Agreement

Yuga recently announced the release of a metaverse project that will be interoperable with the NFT collections that are currently under Yuga Labs (BAYC, MAYC, BAKC, Punks, Meebits). Yuga’s metaverse project is called the Otherside and its foundation will be structured differently from other popular metaverses such as Decentraland and Sandbox. The main difference between Otherside and Decentraland and Sandbox is that the project is centered around the interoperability with Yuga’s existing NFT community. While Decentraland and Sandbox focus their application on user generated content, Yuga has designed Otherside to promote the utility of its existing (and future) NFT collections.

The Otherside consists of 200,000 plots of land, called Otherdeeds, each with variations in traits and rarity, and Kodas, which are in-game characters attached to specific plots of land. Each plot of land and Koda is its own individual NFT initially distributed by Yuga Labs.

Reviewing the terms and conditions for the Otherside metaverse is critical for understanding how a metaverse project with the mandatory use of non-user-generated products stacks up against a metaverse that predominantly uses user-generated products. Regarding the Otherdeed land NFTs, the terms and conditions explicitly state that the “purchaser has the property right to transfer the NFT, property rights do not include intellectual property.” Essentially, while NFT owners have the ability to use and transfer the virtual land they purchase, owners of Otherdeeds have no rights to the copyright for the artwork or other media associated with the virtual land. Notably, Otherdeeds are the first NFTs issued by Yuga Labs that confer no commercial rights. By contrast, the Koda License agreement, however, provides a full commercial license for the art to NFT token holders. Commercial rights for Kodas are defined as consistent with the BAYC license. Unlike the license for the BAYC NFT collection, however, the Otherside agreement is explicit that purchasing Otherdeed NFTs conveys no intellectual property rights.


The Moonbirds NFT collection presents a more striking case of misleading advertising based on discrepancies between its public statements and the Moonbirds license agreement. Issued by PROOF Collective, Moonbirds is the 6th most valuable NFT collection by implied market capitalization. On the official website as of August 8, 2022, users could clearly see a statement that reads “You own the IP,” which directly contradicts the expressed terms contained in the original Moonbirds license, which conveyed no intellectual property rights to Moonbirds NFT holders.

Moonbirds NFT - diagram

Recently, PROOF Collective announced that Moonbirds would be switching from the commercial use license to the Creative Commons license, moving the intellectual property for all Moonbirds into the public domain. The fact that PROOF can unilaterally change the terms of its license, and did so, is further proof that Moonbirds NFT holders did not, in fact, “own the IP.” While as of August 18, 2022 PROOF had not yet actually posted any updated license agreement, they did remove the reference to “You own the IP” from the Moonbirds website on August 8, 2022 as if the move to CC0 was the reason Moonbirds NFT holders no longer owned the IP, when in reality Moonbirds NFT holders never owned any intellectual property.

The announcement of the change to a CC0 license was made on Twitter, and during a Twitter Spaces meetup on August 5, 2022, it was clear that Moonbirds NFT holders had no idea that the license could be changed at all. One Moonbird holder stated that they were in the process of licensing Moonbirds art to a brand, but due to this announcement of license conversion, the brand pulled out of the deal. If Moonbirds moves to the CC0, the artwork will move into the public domain and the brand can use the artwork without owning any NFT or paying any NFT holder.

PROOFs ability to change the Moonbirds license, assuming they actually do publish a new CC0 license, highlights several important points. 

  • Moonbirds holders did not, in fact, “own the IP.” By changing the license, PROOF implicitly acknowledges that the statement on its website was, and always was, false.

  • IP owners can unilaterally alter or revoke commercial use licenses at any time without prior notification to NFT holders.

  • CC0 licenses are perhaps too permissive. While commercial licenses grant the NFT holder the ability to monetize their NFT artwork but retain intellectual property ownership for the issuer, and therefore convey some usage permissions upon NFT holders (albeit tenuous), CC0 licenses move the intellectual property fully into the public domain, which means no one owns the intellectual property. While the CC0 does relinquish the IP ownership rights of the issuer, it does not convey IP rights to the holder. Indeed, while a commercial use rights license can cause the NFT owner’s exclusive rights to become revoked at any time, the CC0 guarantees that the NFT owner possesses no exclusive ownership or commercial rights.

World of Women (WoW)

The World of Women NFT collection differentiates itself among all the other top 25 NFT projects by being the only to attempt to transfer full IP rights to NFT holders. WoW attempts this through the provision of a novel copyright assignment agreement. Under this copyright assignment agreement, WoW attempts to create a governance structure in which the copyright of each WoW NFT “runs with” the NFT, such that whoever owns the NFT owns the copyright. According to the WoW copyright assignment agreement, “[t]his copyright assignment agreement is intended to govern the terms and conditions of assignment of all rights, title and interest in and to the intellectual property rights on the Art.” In other words, the WoW project is attempting to transfer all the copyright to the artwork to whomever owns the WoW NFT.

The problem with the construct created by WoW, despite its noble effort, is that it is unclear whether the IP assignment agreement continues to govern downstream sales to secondary purchasers. Concretely, if an original minter sells their WoW NFT on OpenSea to a secondary purchaser, it’s not clear whether the seller is required to transfer the IP to the secondary buyer, despite the fact that WoW’s IP assignment agreement demands that be the case. Unless both minter and secondary purchaser agree to these terms, there’s no guarantee that the IP assignment agreement will pass from minter to secondary purchaser. This is compounded by the fact that the original assignment from WoW to the minter occurs on WoW’s website where this IP assignment agreement exists, but future secondary sales occur on marketplaces like OpenSea which neither display nor have any functionality to facilitate execution on such an assignment agreement.

Major Metaverse Licenses

Decentraland and Sandbox have established themselves as the two staple projects within the metaverse realm. We have reviewed their terms and conditions to build an understanding on how real-world copyright and trademarks are perceived in the metaverse landscape. Ultimately, both Decentraland and Sandbox do a decent job of attempting to assign IP ownership to their users for user-generated content while properly disclaiming what users do and don’t own.

In both cases, Decentraland and Sandbox retain all intellectual property related to the sales of land parcels in their metaverses (and merely assign usage rights to NFT purchasers). However, each tries not to take over the intellectual property rights for user-generated content, in each case keeping it in the hands of creators. Decentraland attempts to make the IP ownership transferrable between creator and secondary purchaser, stating in their terms and conditions, “transactions for the sale of NFT through the Marketplace will convey said title, ownership and Intellectual Property Rights to the purchaser. To the fullest extent possible, the creator will waive any moral rights over the NFTs upon transfer to third parties.” While Decentraland attempts to make IP transfer to secondary purchasers like WoW, it is unlikely that this language would result in the successful transfer of IP rights for the same reasons expressed in the section above.

Sandbox, alternatively, expressly states that “when you upload an Asset and make it available for sale in The Sandbox marketplace, you retain ownership of all intellectual property rights associated with such Asset but you agree to make a certain number of the Assets available for sale as NFTs.” Therefore, the purchaser of the in-game good receives a license from the seller, who still retains the copyright to the in-game good after the sale. This language seems more realistic than Decentraland’s attempt to make IP flow from creator to purchaser without an IP assignment agreement.

Regardless of how intellectual property is handled in the metaverse, however, there is no guarantee that the operator of a metaverse will support user-generated content within their virtual world. Simply owning the rights to a custom-made character skin, for example, does not guarantee that Decentraland or Sandbox will allow the skin to be used within the game. Each of these metaverses has specific content moderation policies that give them the right to ban or remove content from the game, regardless of intellectual property rights. Thus, pragmatically speaking, absent a third-party alternative world in which to deploy your user-generated content, its effective use relies upon the consent of the metaverse operator.


In this report, we analyzed the top NFT projects and categorized their associated licenses into several categories to assess what purchasers actually own when they buy an NFT. We found that all license, with the exception of one, retain all intellectual property rights in the artwork to which the NFT refers. Even in the case where a project nobly attempted to create an NFT collection in which intellectual property rights transfer from purchaser to purchaser, design limitations raise questions about the efficacy of such ownership transfers.

Some issuers have provided misleading statements directly, such as on websites, marketing materials, or in community chat rooms, that contradict the terms set forth in their associated licenses. In some cases, the reasons for these contradictions may be the result of ignorance of the confusing legal labyrinth governing intellectual property and digital rights. In other cases, issuers appear to have intentionally misled purchasers, or misled purchasers by not explicitly correcting the market’s misconception as to the ownership rights purchasers hold over their NFTs and underlying artwork, essentially allowing the misconception to go unchecked.

On the other hand, several projects have made clear disclosures regarding the fact that NFT token holders only own the token and have no intellectual property rights to the underlying artwork. While there is no requirement that NFT issuers specifically confer full intellectual property rights to purchasers (and in some cases perhaps there should not be), the lack of intellectual property rights undermines grand pronunciations by NFT and Web3 promoters that this technology will revolutionize digital ownership. If NFTs are to become widely used online, across metaverses, and for commercial purposes, a more durable framework for assigning and transferring intellectual property rights must be adopted. Even in the case of the Creative Commons variations, in which the issuer does not withhold the intellectual property rights to NFTs’ underlying content, no exclusive rights are conveyed to NFT holders, making it unfeasible for entrepreneurs to integrate NFTs into their businesses due to the lack of legal protections. To achieve a true digital ownership future requires action:

  • NFT holders should fight for their IP rights. Blockchains are powerful for tracking ownership, not merely licenses to artwork that issuers retain ownership over. If your usage of the content associated with an NFT is wholly reliant upon the permission from a third-party issuer, it’s not clear whether a blockchain is even required. Aside from that, relying on a license from an issuer places your use of the content in peril. Should the NFT issuer sell the underlying intellectual property to a third party, or be acquired outright, the new owner can unilaterally restrict, alter, or remove your license entirely.

  • These agreements must be fixed now for Web3 to have a chance. There is also the problem of how a limited commercial license, which is revocable at will and does not transfer ownership of the digital content, lives in harmony with the ethos of Web3—for if Web3 stands for anything at all, it stands for the proposition that the internet of the future will be owned by its users, not the Big Tech conglomerates. Yet, as described in this report, this promise is nowhere to be found in the Terms & Conditions of most NFT projects today, largely because those terms do not confer ownership of the underlying intellectual property to their holders; they merely extend a limited Web2 license in that intellectual property, failing to provide NFT holders with any say or control over the future of the art their NFTs are connected to. As NFTs are still in its infancy stage, it is critical for the NFT community to begin working on a framework to properly give out IP rights to users before mass adoption. In the scenario where mass NFT adoption begins without solving these detrimental problems of IP ownership, then the NFT landscape will evidently formulate into Web2 products that are marketed and disguised as Web3 products.

  • The decentralized metaverse requires intellectual property rights. If these problems are not addressed now, the supposed decentralized metaverses will not materially differ from those being built by Web2 giants like Meta (Facebook). In that case, decentralized metaverses will be decentralized in name only, utilizing public blockchains and tokens solely to enable efficient off-chain secondary markets, but conveying no actual property rights. If the digital property of the metaverse is not owned by its users, but is instead licensed to them at someone else's sole and absolute discretion, the promise of empowering new technology could instead provide the designs for something like an all-encompassing social credit system. 


  1. For ease of explanation, the term “NFT” will hereinafter be used to describe the composite of (1) the non-fungible digital token and (2) the license to the image to which the non-fungible digital token points, whereas the term “digital token” or “non-fungible digital token” will refer solely to the token component separate and apart from the image or license.
  2. 17 U.S.C. § 102(a).
  3. While registration is not required for an enforceable copyright, it can enhance copyright protections. Notably, a registered copyright is required to sue for copyright infringement in federal court, as well as gives a copyright holder options to receive different forms of compensation when bringing a lawsuit.
  4. 17 U.S.C. § 102(a).