Digital Artist Kevin McCoy Prevails in Ownership Dispute over First-Ever NFT in U.S. Court

Artist Kevin McCoy, known for his creation of the first NFT, has successfully defended his ownership of the token in a lawsuit which could form an important precedent.

Kevin McCoy, Quantum (2014). Image courtesy Sotheby's.

Artist Kevin McCoy, known for his creation of the first NFT, has successfully defended his ownership of the token in a lawsuit filed against him and auction house Sotheby's. The suit, filed by an anonymous plaintiff represented by Canadian holding company Free Holdings, contested the propriety of McCoy's sale of the NFT for $1.47 million at Sotheby's in 2021. U.S. Magistrate Judge James L. Cott issued a detailed 43-page decision on March 17, dismissing the case and setting a significant legal precedent for NFT ownership disputes. The lawsuit centered on McCoy's use of a different blockchain, Ethereum, to preserve the metadata of his original 2014 creation of Quantum, which was created using a blockchain called Namecoin. McCoy's sale of Quantum at Sotheby's included the Ethereum token, which was challenged in the lawsuit.

The legal ruling, which involved complex technical details related to NFTs and blockchain, ultimately favored Kevin McCoy and Sotheby's in their ownership dispute over the first NFT. Despite the technicalities, the decision was straightforward in supporting McCoy's creation of the NFT and the innovative marketing and sale strategy employed by Sotheby's during its "Natively Digital" sale in June 2021. Judge Cott's dismissal of the case was based on several grounds, including the "failure to state a claim upon which relief can be granted" and the lack of subject matter jurisdiction over the claims.

He went on on to write: “Free Holdings has demonstrated nothing more than an attempt to exploit open questions of ownership in the still-developing NFT field to lay claim to the profits of a legitimate artist and creator. It does not allege that it took any part in the creation of Quantum or the blockchains used to record it. Free Holdings has thus failed to plausibly allege that unjust enrichment occurred in these circumstances.”