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NextGen Investing: Jay-Z suit reveals rap on NFTs

Jay-Z and former partner Damon Dash are embroiled

Jay-Z and former partner Damon Dash are embroiled in a legal fight over nonfungible tokens. Credit: Icon Sportswire via Getty Images/Icon Sportswire

As a young rapper, Jay-Z once teamed with Damon Dash to sell CDs of his music out of a car in the Brooklyn projects. Today, the co-founders of Roc-A-Fella Records are embroiled in a legal fight involving one of the most cutting-edge investments: non-fungible tokens.

The lawsuit is among a flurry involving NFTs as courts begin to grapple with the novel legal issues surrounding ownership and regulation of the assets, which have exploded in value. More than half a dozen suits citing NFTs have been filed in federal courts since the start of 2020, as monthly trading volume in the world’s biggest NFT marketplace, OpenSea, soared from $8 million six months ago to more than $1 billion in August.

The dispute began in June, when Roc-A-Fella sued Dash, seeking to stop him from auctioning off the copyright to Jay-Z’s debut album, "Reasonable Doubt," as an NFT, which represents ownership of a digital object on a blockchain. Roc-A-Fella says that while Dash holds a one-third stake in the company, it owns the album itself, and he has no legal right to sell the NFT.

More litigation involving NFTs is likely, as authorities haven’t given guidance on how they will be regulated and laws surrounding them are unclear.

Gary DeWaal, a financial markets attorney, says because of a lack of meaningful regulatory guidance, private litigation cases can impact how the NFT space evolves. "This whole industry, the whole crypto space, suffers from a paucity of clear regulation, and as a result, folks are sort of left on their own to figure it out the best they can."

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