Non-Fungible Tokens in Family Law

Last post, we wrote about some cursory copyright issues regarding non-fungible tokens (NFTs). Today, we are going to dive into what happens when NFTs are part of a divorce. While divorce itself is nothing uncommon or new, the NFT craze and how they will be split up is surely uncharted territory for the courts.

While unconfirmed, at least one “crypto-bro” has run into issues with divorce and NFTs–one spouse borrowing $186k to buy a NFT might certainly seem like grounds for divorce. While that instance seems a little exaggerated, I am almost certain that NFTs will eventually go through the court pathway for property division. To that end, how would the court treat NFTs and, as a spouse, what are some ways to find out if NFTs have been purchased during your marriage?

If your situation is anything like that of the early investor, general discovery for bank documents and debt documentation will show that someone took out a massive loan. Further documentation of digital wallets can confirm the existence of the NFT. Most likely though, your spouse will talk to you about it; after all, NFTs are exciting. A family law expert understands where and how digital assets like NFTs are acquired and stored.

Valuing NFTs can be difficult. The market is volatile, and value may fluctuate wildly from day to day. There are a few anchoring points for valuation though, including the acquisition price, the value on the date of separation, or the value on some other agreed upon date. There are no appraisers for NFTs, at least, none akin to expert fine arts appraisers. But, thankfully, their virtual nature makes them easier to trace. And, as some NFTs are considered collectable artworks, it is likely rare that they are being secretly hoarded; they are being shown off to the world. Many purchasers make it well known that they own such-and-such NFT. While not an easy task, the blockchain itself may reveal the identity of NFT owners, when combined with some traditional discovery tools.

Unlike virtual currency, NFTs cannot be split the same way bitcoins can. But they can be transferred from one party to the other, in the same manner that a car title can be transferred to convey ownership of the car. But for distribution purposes, a single NFT cannot be split into two; think of the Mona Lisa: no one is splitting that artwork into two and walking away with a half-Mona Lisa. Either one party will get value, or the parties can sell and split the proceeds. This emerging realm of virtual assets is tricky, but family law experts understand the nature of these assets. Talk to one today if you believe NFTs and virtual currency are an issue in your case.