The world of Indian entertainment is stepping boldly into the digital frontier, with Bollywood celebrities leading the charge in adopting non-fungible tokens (NFTs). From legendary actors to rising stars, NFTs are being leveraged as a new medium for fan engagement and monetization. However, beneath the glamour lies a complex web of legal ambiguity, regulatory uncertainty, and intellectual property challenges.
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What Are NFTs and Why Are They Gaining Popularity?
NFTs—unique digital assets verified using blockchain technology—are reshaping how artists and content creators interact with their audiences. Unlike cryptocurrencies such as Bitcoin or Ethereum, which are fungible (interchangeable), each NFT is distinct and cannot be replicated. This uniqueness makes them ideal for representing ownership of digital art, music clips, videos, and even autographed memorabilia.
In India, the appeal of NFTs was amplified when iconic actor Amitabh Bachchan launched his own NFT collection, reportedly earning close to $900,000. The collection featured rare recordings of him reciting his father’s famous poem Madhushala, along with signed movie posters and personal messages—items transformed into verifiable digital collectibles.
This direct-to-fan model allows creators to bypass traditional intermediaries like galleries, record labels, or auction houses. But while the financial potential is clear, the legal framework remains murky.
Understanding the Legal Status of NFTs in India
Currently, India has no specific law governing NFT transactions. However, regulatory signals have begun to emerge. The Income Tax Act of 1961, as amended in 2022, now includes NFTs under the broad category of "virtual digital assets" (VDAs). This means any profit from NFT sales is subject to a flat 30% tax, plus applicable surcharges and cess.
While this tax treatment acknowledges the economic value of NFTs, it stops short of defining their legal nature.
Are NFTs Considered Goods?
Under the Sale of Goods Act, 1930, an asset must have utility to qualify as a "good." Given that NFTs represent ownership of digital content and can be traded for value, they may legally qualify as goods. If so, buyers could benefit from implied warranties—such as fitness for purpose—offering some protection against defective or misrepresented digital assets.
Additionally, the Consumer Protection Act, 2019, and its associated E-Commerce Rules (2020) apply to all products and services sold on digital platforms. These rules could extend consumer rights to NFT purchasers, enabling them to file claims for fraud, misrepresentation, or intellectual property violations.
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Advertising and Disclosure Requirements
Marketing NFTs in India must comply with the Advertising Standards Council of India (ASCI) guidelines. Advertisers are required to include risk disclaimers, especially given the speculative nature of NFT investments. Furthermore, the 2022 Guidelines for Prevention of Misleading Advertisements and Endorsements apply equally to digital promotions, ensuring transparency in influencer-driven NFT campaigns.
The Cryptocurrency Conundrum
One major hurdle for NFT adoption in India is the unresolved status of cryptocurrencies, which are the primary means of purchasing NFTs.
In 2018, the Reserve Bank of India (RBI) issued a circular banning banks from servicing crypto-related businesses. However, in the landmark case Internet and Mobile Association of India v. RBI (2020), the Supreme Court overturned this restriction, ruling that it violated the fundamental right to carry out lawful trade.
Despite this victory, regulatory clarity remains elusive. A proposed Cryptocurrency and Regulation of Official Digital Currency Bill, 2021, aimed to ban private cryptocurrencies—but it has not been enacted. As of now, cryptocurrencies exist in a gray zone: neither illegal nor formally regulated.
This uncertainty affects NFT marketplaces, which rely on crypto payments. Without a clear legal pathway for digital currency use, mainstream adoption faces significant roadblocks.
Global Legal Precedents: Lessons for India
Though Indian courts have yet to rule on NFT-related disputes, international cases offer valuable insights into potential legal risks and interpretations.
1. Shenzhen Qice v. Hangzhou Yuanyuzhou (China, 2022)
In China’s first NFT copyright case, a court ruled that an NFT platform could be held liable for hosting infringing digital art based on the “Panghu” comic series. The Hangzhou Internet Court rejected the platform’s defense of being a neutral intermediary and ordered the deletion of the infringing NFTs and payment of damages.
2. Juventus FC v. Blockeras (Italy, 2022)
Italian football club Juventus successfully sued an NFT creator for selling digital collectibles featuring players in club jerseys with official trademarks—despite having permission to use player likenesses. The court emphasized that trademark rights are separate from image rights.
3. Nike v. StockX (USA – Ongoing)
Nike alleges that StockX’s “Vault NFTs,” linked to physical sneakers, constitute trademark infringement and false advertising. StockX argues these NFTs act as digital receipts under the “first sale doctrine,” allowing resale of authentic goods. The outcome could redefine how physical-digital hybrid assets are treated legally.
4. Hermès v. Mason Rothschild (USA – Ongoing)
Luxury brand Hermès sued an artist for creating “MetaBirkin” NFTs—furry renderings of its iconic Birkin bag. The artist claims artistic expression protects his work. The court will decide whether the use is transformative or misleadingly commercial.
5. Miramax v. Quentin Tarantino (USA – Settled)
Miramax blocked director Quentin Tarantino from auctioning NFTs based on Pulp Fiction, claiming ownership of all film-related rights. The case settled out of court, highlighting how contractual agreements can override creative freedom in IP disputes.
Key Legal Implications for India’s NFT Ecosystem
Even without domestic rulings, these global cases point to several critical considerations:
- NFTs as Property: Courts increasingly treat NFTs as forms of property with enforceable rights and liabilities.
- Jurisdiction: Despite blockchain’s borderless nature, courts assert jurisdiction based on where parties operate.
- Copyright Infringement: Unauthorized minting or selling of NFTs based on protected works can lead to liability—both for creators and platforms.
- Platform Liability: While platforms may claim “safe harbor” under Section 79 of the IT Act, 2000, their active role in curation, commission collection, and content moderation weakens this defense.
- Trademark Rights: Use of brand logos—even in digital art—can trigger infringement claims, especially if consumers might be confused about origin.
- Transformative Use: Courts may evaluate whether an NFT adds new expression or meaning to existing works before dismissing copyright claims.
FAQ: Your Questions About NFTs in India – Answered
Q: Do I own the copyright when I buy an NFT?
A: Not necessarily. Purchasing an NFT typically grants ownership of the token—not the underlying intellectual property. You may not reproduce, modify, or commercialize the artwork without permission.
Q: Can I resell an NFT in India?
A: Yes, but profits are taxed at 30%. Ensure you comply with tax reporting requirements and avoid infringing third-party rights.
Q: Are NFT marketplaces liable for illegal content?
A: Potentially. If a platform profits from or controls content and fails to prevent infringement, courts may deny safe harbor protections.
Q: Is cryptocurrency legal in India?
A: It’s not banned, but it’s also not regulated. The government is still formulating a comprehensive policy.
Q: How can artists protect their work when launching NFTs?
A: Clearly define usage rights in smart contracts, register copyrights where possible, and use licensing terms that specify what buyers can and cannot do.
Q: Could India introduce an NFT-specific law soon?
A: While no draft exists yet, growing adoption suggests future regulation is likely—especially around consumer protection and taxation.
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As Bollywood continues to explore the potential of NFTs, creators and investors alike must navigate a landscape where innovation outpaces regulation. While the technology offers unprecedented opportunities for monetization and fan connection, legal prudence is essential. With clearer laws on the horizon and global precedents offering guidance, India’s NFT journey is just beginning—and its next chapter will be shaped by both creativity and compliance.
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