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NFTs are not art.
Don't shoot the messenger, we didn't say it. Instead, a nine-person federal jury in Manhattan said it, and their ruling added $133,000 to the balance sheet of the acclaimed luxury brand Hermès.
While we might be paraphrasing the court, its decision leaves little doubt in the eyes of the law. Per the ruling, NFTs should not receive the same preferential treatments awarded to artwork.
The lawsuit, which was filed by Hermès against NFT "artist" Mason Rothschild, targeted Rothschild's project "MetaBirkins." The luxury brand entered the courtroom armed with an argument that Rothschild had infringed on trademarks established by the company, and the court ultimately sided with Hermès, a decision that delivers a crushing blow to the NFT creator economy.
For some context, traditional art is shielded by the First Amendment and protected by free speech laws which promote the right of self-expression. While it's still commonplace for lawsuits to emerge, they're largely unsuccessful, and artists using corporate imagery (see: Andy Warhol x Campbell's Soup) often fall within a protected class. The Hermès v. Rothschild verdict makes it clear that, at least for now, NFTs are to be considered commodities and must abide by trademark and copyright laws as opposed to protections granted to artworks.
As if winning in federal court wasn't enough, the good news continued for Hermès, but this time at auction. Last week, Hong Kong billionaire Joseph Lau sold 76 luxury Hermès handbags through Sotheby's, which represented the largest single owner collection ever transacted through an auction in Asia. The total sales reached $3.2 million, good for an average price per bag of more than $42,000. In total, eight handbags realized six-figure prices, and the auction was led by a 2006 Bleu Jean Shiny Porosus Crocodile Birkin 25 which hammered for $193,626.
Altan's Insight: Luxury has long been a staple within the ever-expanding universe of alternative assets, and Hermès stands as its leader. While the wristwatch world is filled with competition from iconic brands like Rolex, Audemars, and Omega, Hermès runs handbags, and valuations have remained relatively stable through a trying period of economic uncertainty. NFTs and digital might have their day in the future, but the past week assured us that day will have to wait as physical continues to reign supreme.
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