The Property Law of Tokens

65 Pages Posted: 23 Sep 2021 Last revised: 12 Sep 2022

See all articles by Juliet M. Moringiello

Juliet M. Moringiello

Widener University - Commonwealth Law School

Christopher K. Odinet

University of Iowa - College of Law

Date Written: November 1, 2021

Abstract

Non-fungible tokens—or NFTs, as they are better known—have taken the world by storm. The idea behind an NFT is that by owning a certain thing (specifically, a digital token that is tracked on a blockchain), one can hold property rights in something else (either a real or intangible asset). In the early part of 2021, NFTs for items ranging from a gif of a pop-tart cat with a rainbow tail, to Twitter CEO Jack Dorsey’s first tweet, to a New York Times column (about NFTs!) have sold for millions of dollars over the internet. Promoters assert that NFTs are the “future of digital property,” and that they herald a day when “government will lose its unique power to mint currency and protect property.” And these promoters reach beyond the typical crypto crowd. Giants of finance and industry are promising to extend the use of NFTs to securities, industrial assets, and real estate in the coming years. Moreover, this crypto token craze comes at a time when the American Law Institute and the Uniform Law Commission are in the midst of recommending revisions to U.S. commercial law to accommodate the digital age. In this Article, we take a more sober look at the tokenization phenomenon and, in doing so, describe what exactly it means when it comes to property rights. What can a purchaser of a token expect? How is a token actually connected to the underlying asset, if at all? What does the law—not the hype—have to say about it? We show that tokenization under the law actually has a long history, backed by practical economic considerations and animated by strong theoretical underpinnings. We also show that NFTs have neither of these attributes. Additionally, our Article surveys a dataset of terms of service from the most prominent NFT platforms in order to exploit both their disconnect from real legal effects and their puzzlingly contradictory promises about the relationships between buyers, seller, and the platform. Our project aims not only to inform current commercial law reform efforts, but it also offers a policy prescription for policing the NFT market.

Keywords: Tokens, Crypto, NFT, Blockchain, UCC, Article 9, Property Law, Exclusion, Platforms, Assets, Tangible, Intangible, American Law Institute, Uniform Law Commission, Securities, Negotiable Instruments, Deeds, Bills of Lading, Property Theory, Consumer Protection, Arbitration, Class Action Waivers, CFPB

Suggested Citation

Moringiello, Juliet M. and Odinet, Christopher K., The Property Law of Tokens (November 1, 2021). 74 Florida Law Review 607 (2022), U Iowa Legal Studies Research Paper No. 2021-44, Widener Law Commonwealth Research Paper, Available at SSRN: https://ssrn.com/abstract=3928901 or http://dx.doi.org/10.2139/ssrn.3928901

Juliet M. Moringiello

Widener University - Commonwealth Law School ( email )

3800 Vartan Way
Harrisburg, PA 17110-9380
United States
717-541-3917 (Phone)

Christopher K. Odinet (Contact Author)

University of Iowa - College of Law ( email )

130 Byington Road
Iowa City, IA 52242
United States

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