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What pitfalls are associated with the NFT industry?

On Behalf of | May 30, 2024 | BUSINESS & COMMERCIAL LAW - Entrepreneurs

Some businesses and individuals looking to expand their holdings and diversify their portfolios are now turning to non-fungible tokens (NFTs) to generate funds. While it is true that profits can be made trading in NFTs, the industry still has a bit of the Wild West atmosphere about it.

At least one problem contributing to that is the way technology has thus far outpaced the legal ramifications of the creation, purchase and sale of NFTs, which fall under the cryptocurrency umbrella. Learn more about ways to protect your financial interests regarding investing in NFTs.

Abide by all existing copyright laws

Others may hold copyrights over the digital images of the innovations that you create, buy or sell. Running afoul of already existing copyright protections can land you in hot water with the legitimate copyright holders, so make sure you always exercise due diligence.

What about the regulations?

Federal and state laws have not yet fully addressed how to handle NFTs as resources, e.g., as commodities or other securities. Depending upon how the NFTs wind up classified, they must be fully compliant with the laws governing that industry.

However, it is easy to see how an investor could be confused about following the laws and regulations of the cryptocurrency system. It remains an emerging marketplace where regulations are still not yet up to speed, in flux or nonexistent.

Don’t hesitate to seek guidance

There’s no need to enter the fray of the NFT industry unarmed. Just as when companies expand their portfolios with other acquisitions and investments, it is vital that all rules, laws and regulations are followed to the letter. 

When in doubt, before dipping a toe into the world of cryptocurrency and NFTs, it is prudent to learn all that you can about the industry. Then, use that knowledge to develop a solid investment strategy that doesn’t expose you to more risk than you can afford to take on.