Georgetown Law
Technology Review

The COVID-19 pandemic proved to be a boon for digital currencies and assets, particularly for non-fungible tokens (NFTs), which gained massive prominence and skyrocketed in price during 2020, 2021, and 2022. With this frenzied market reaching its peak during late 2021 and early 2022, NFTs were regularly selling for millions of dollars. Because of the massive amount of money to be made in this relatively unregulated wild-west market, legitimate creators and malicious actors both jumped into the NFT space seeking to capitalize on a market hungry for NFTs. With millions to be earned, NFTs started to be regular fixtures on the secondary market for resale, where owners and creators stood to earn many multiples of their initial investment. Despite the tremendous amount of capital diving headfirst into this novel industry, government regulation and guidelines surrounding NFT transactions were and remain relatively limited.

The focus of this Note is on the capabilities and historical similarities that NFTs share in common with other regulated art- adjacent industries. Because NFT marketplaces operate in a similar manner to modern-day art and antique auction houses, it would likely be wise for regulators to place similar regulatory frameworks on these digital asset traders. Without the proper safeguards, this promising new industry in its infancy will become overrun by frauds, scams, and criminals taking advantage of everyday Americans. As this Note recognizes, this has already started to become a reality: NFT scams have proliferated due to lack of regulation and criminal actors have been able to make off like bandits. Given the importance of safeguarding Americans’ capital and financial security, it is imperative to understand how appropriate legislation and regulatory action could prevent future frauds.

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