NFT Ownership Disputes: The Evidentiary Questions Courts Haven't Resolved

Non-fungible tokens (NFTs) generated billions of dollars in transactions between 2021 and 2023 and left behind a wave of disputes that courts are only beginning to work through. The legal questions surrounding NFT ownership are largely unsettled, the evidentiary questions are technically complex, and the gap between what blockchain ownership means and what legal ownership means is wider than many practitioners realize. This article identifies the key issues for attorneys handling NFT-related disputes.

What NFT Ownership Actually Means On-Chain

An NFT is a unique token on a blockchain, typically following the ERC-721 or ERC-1155 standard on Ethereum. Each token has a unique ID and is associated with a smart contract that records who currently holds it. The ownerOf(tokenId) function on any ERC-721 contract returns the current owner's address.

This is what blockchain records: that a specific token ID is currently associated with a specific address. The blockchain does not record legal title. It does not record whether the transfer was authorized, whether consideration was paid, whether the transferor had the right to transfer, or what rights the token holder has in any underlying intellectual property.

NFTs are commonly described as "owning" the underlying artwork, collectible, or digital item. As a legal matter, this is almost never true. What the NFT holder typically has is what the associated terms of service or smart contract code actually provides — which varies enormously by project and is frequently far less than buyers were led to believe.

The Off-Chain Rights Problem

The asset that most buyers believe they are acquiring when they purchase an NFT — the image, video, music, or other digital content — generally exists off-chain, hosted on a server or a decentralized storage network like IPFS. The NFT token contains a metadata URI pointing to that content. The content itself is not stored on the blockchain.

This creates several problems in disputes:

URI mutability — Many NFTs use a metadata URI that points to a centralized server. If the project operator changes or removes the content at that URI, the NFT no longer references anything meaningful. Buyers of such NFTs may discover that their token points to a 404 error. Whether this constitutes breach of contract, fraud, or neither depends on what representations the project made.

Rights ambiguity — The legal rights associated with holding an NFT are defined by contract, not by blockchain ownership. Most NFT projects provide minimal rights: a personal, non-commercial license to display the image, for example. Holders who built commercial ventures on the assumption they had broader rights have faced disputes. The Bored Ape Yacht Club intellectual property litigation illustrates the complexity when a project grants commercial rights to NFT holders but the legal scope of those rights is contested.

IPFS permanence — NFTs using IPFS for storage reference content by its content hash, meaning the content cannot change without changing the hash. This is more durable than centralized hosting but does not guarantee permanence: if all IPFS nodes hosting the content go offline, the content is inaccessible.

Types of NFT Disputes

Theft through private key compromise — The most common NFT dispute. If an attacker obtains access to a wallet's private key, they can transfer all NFTs in that wallet to their own address. The blockchain records show the transfer executed with a valid signature. Proving that the transfer was unauthorized requires establishing the key compromise — typically through device forensics, phishing evidence, or malware analysis. This is not a blockchain forensics issue alone; it requires coordination with digital forensics specialists.

Marketplace fraud — Counterfeit NFTs (NFTs claiming to be associated with a legitimate project but created by a different contract), wash trading (artificial price inflation through coordinated self-trading), and fraudulent listing practices on secondary markets have all generated disputes. Blockchain forensics can document wash trading patterns and contract authenticity.

Creator royalty disputes — Most NFT smart contracts include a royalty mechanism that routes a percentage of secondary sale proceeds to the creator. Disputes arise when marketplace platforms override or disable royalty payments, when contracts are structured to circumvent royalties, or when the ownership structure of the creator's wallet is contested.

Smart contract disputes — NFT projects have released collections with bugs in their smart contracts that affected mint mechanics, rarity distributions, or royalty calculations. These disputes require reading and interpreting the contract code to establish what the contract was intended to do versus what it actually did.

DAO and community disputes — Some NFT collections are associated with decentralized autonomous organizations (DAOs) that govern treasury assets or project decisions. NFT holders who participated in DAO governance have asserted claims when treasury funds were misappropriated or governance processes were allegedly manipulated.

What the Blockchain Evidence Establishes

For any NFT dispute, the blockchain provides:

Ownership history — Every transfer of the NFT token since minting is recorded in the contract's event log. The transfer history is complete and immutable. Who held the token, when, and what address received it next is established on-chain with certainty.

Mint records — When the NFT was minted, by what address, from what contract, and at what time.

Sale transactions — If the NFT sold on a marketplace, the sale transaction records the buyer, seller, price paid, and any royalties distributed.

Contract code — If the contract is verified on Etherscan, the full source code is publicly readable. If unverified, it can be decompiled. The code establishes what the contract actually does, as opposed to what the project claimed it would do.

Wash trading patterns — When the same addresses or closely related addresses cycle an NFT through a series of apparent sales at increasing prices, the pattern is detectable from transaction data. Wash trading is documented by analyzing the transfer graph for circular flows and related-party transactions.

The Questions Courts Have Not Resolved

Several fundamental legal questions remain unsettled in NFT disputes:

What law governs? NFT transactions are typically pseudonymous, cross-jurisdictional, and involve no executed contract between buyer and seller in the traditional sense. Applicable law depends on where the parties are located, the terms of the platform through which the transaction occurred, and the specific claims at issue.

Does blockchain ownership create a property right courts will enforce? Courts have recognized cryptocurrency as property in various contexts. Whether NFT ownership as recorded on a blockchain constitutes a recognizable property right — one that courts will enforce with injunctions, replevin actions, or conversion claims — has not been consistently addressed.

What is the effect of a valid blockchain signature on claims of unauthorized transfer? In theft-by-key-compromise cases, the blockchain records a valid cryptographic signature. The defendant may argue that the valid signature proves authorization. Courts have not extensively addressed whether a valid blockchain signature is conclusive evidence of authorization or whether it can be rebutted with evidence of key compromise.

Are NFT project terms of service binding on secondary purchasers? Many NFT projects' terms of service create rights and obligations between the project and original purchasers. Whether those terms bind secondary buyers who purchase on a marketplace is legally uncertain and contested in ongoing litigation.

Practical Guidance for Attorneys

For attorneys handling NFT disputes, the most important preliminary steps are:

Establish the complete on-chain ownership history immediately. Unlike physical property, the ownership record is publicly accessible and will not change. Obtaining a certified or authenticated record of the token's transfer history early in the matter is straightforward.

Preserve off-chain evidence promptly. Project websites, Discord and Telegram archives, and marketing materials may be deleted after a dispute arises. These materials establish the representations made to buyers and are critical for fraud and misrepresentation claims.

Obtain the smart contract and have it analyzed. If the dispute turns on what the contract was supposed to do versus what it did, a technical analysis of the verified contract code is the foundation of the technical evidence.

The on-chain record is typically the clearest evidence in an NFT dispute. The legal questions surrounding what that record means — what rights it creates, what remedies are available — remain the more uncertain territory.