New York judge dismissed case over who owns “world’s first NFT” worth $1.5 million (£1.2 million)

A New York court has dismissed a case over an artist’s right to “the world’s first NFT” (non-fungible token), which sold for $1.5 million (£1.2 million) at Sotheby’s in 2021. It represents the first legal case in the US to examine how blockchain technology affects the ownership of digital art.

Kevin McCoy and Anil Dash invented the NFT Quantum at a conference in 2014, before Ethereum had launched or the term ‘NFT’ ever existed. McCoy had minted the work using NameCoin, a blockchain software that required the artist to renew ownership every 250 days or so. In 2021, McCoy sold the historical NFT at Sotheby’s for $1.5 million to game developer Alex Amsel.

It transpired that McCoy had failed to renew his ownership of Quantum, and a Canadian company called Free Holdings eventually created a dupe of McCoy’s original metadata and alleged that they were the new rightful owners of the NFT.

In February 2022, Free Holdings filed a lawsuit against McCoy and Sotheby’s for slander and commercial disparagement. They claimed that the Sotheby’s catalogue entry was “inaccurate and misleading because the Namecoin record had not been ‘burned’, but was still active and controlled by Free Holdings”.

A year later, James Cott, a magistrate judge for the US District Court for the Southern District of New York, has now dismissed the case. Cott concluded that “Free Holdings has demonstrated nothing more than an attempt to exploit open questions of ownership in the still-developing NFT field to lay claim to the profits of a legitimate artist.

This case proved an interesting intersection between Web3 and the law. Speaking about the ruling, McCoy noted that “when you take a matter to federal court it’s the opposite of code is law—law is law.

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