Key Takeaways
- An NFT royalty is code in a smart contract that sends a share of resale proceeds back to the creator, but whether it is actually paid often depends on the marketplace where the resale happens.
- Buying an NFT does not automatically give the buyer copyright or other rights in the underlying work; those rights depend on separate licenses and platform terms of service.
- U.S. law has no general resale royalty right for artists, and NFT projects can still face scrutiny under securities, anti-money-laundering, and consumer protection laws.
When a digital artwork resells for many times its original price, can the artist get a cut? Non-fungible tokens promised exactly that: royalties paid automatically, not just on the first sale but on every resale, perhaps far into the future.
In this TalksOnLaw Brief, Pratin Vallabhaneni and Adam Chernichaw, then partners at White & Case, explain how NFT royalties work, how far they can be customized, the legal limits of so-called smart contracts, and the regulatory questions surrounding NFTs.
Royalties Written in Code
Chernichaw explains that when a creator sets up an NFT, a smart contract can be coded to push a portion of resale proceeds back to the original creator. But a smart contract is not really a contract in the legal sense; it is code that executes when an event occurs, and its legal bindingness remains an open question. Vallabhaneni adds that the terms are highly customizable, limited only by creativity and the technology. Early platforms favored perpetual royalties, but he expects more finite terms over time, varying by platform and by the asset attached to the token, from digital art to concert tickets. Whether a resale outside the original platform triggers the royalty, Chernichaw notes, depends on the platform’s terms and on whether tokens can move to outside wallets, so users must understand what they are agreeing to.
Neither Smart Nor Contracts
U.S. property and intellectual property law generally do not recognize a perpetual royalty; once an item is sold, the creator’s rights in that copy typically end. Vallabhaneni explains that an NFT bundles several distinct pieces: the underlying reference asset, which may have its own legal existence and royalty framework; the token itself, which is property that can be bought and sold; and the platform’s interface, documents, and contracts that tie the pieces together. Because smart contracts “are neither smart nor contracts,” real-world agreements still do the legal work. Buyers should read the terms of service to know what they are getting, and creators should read them to know what they are giving away.
The Regulatory Landscape
NFTs can implicate securities law, payments law, and anti-money-laundering rules. Collectibles have a long tradition of not being treated as securities, but the details matter, including whether the overall platform construct is a security. Regulators are also watching high-value transfers for money laundering, and many rules apply to ecosystem players, such as wallet providers and consumer-facing businesses regulated by the CFPB or the FTC.
What to Know Now
The guests’ caution that code alone cannot guarantee a royalty has proved prescient. In 2023, OpenSea retired the tool it had used to enforce creator fees and made them optional, after rival marketplaces bypassed it; for many collections, royalties now depend on marketplace policy rather than on the token. In 2024 the U.S. Copyright Office and Patent and Trademark Office concluded that existing law is adequate for NFTs and stressed that owning a token does not necessarily confer rights in the underlying work. On securities, the SEC settled enforcement actions in 2023 treating certain NFT offerings as investment contracts, then in 2025 closed its investigation of OpenSea without action. Some see that shift as a welcome recognition that most NFTs are collectibles; others warn it leaves buyers with fewer protections. Either way, the guests’ advice to read the terms still applies.
