NFT: Contractual Risks and Consumer Risks Highlighted as Art Collector Files Legal Action Against NFT Marketplace

In October, global annual NFT art sales reached $3.5 billion. Given the volume of high-value NFT sales in a largely unregulated market, it’s no surprise that we’re starting to see legal challenges surface. In our next two articles, we look at two recent ongoing cases in the UK involving NFTs.

Amir Soleymani vs. Nifty Gateway

In October, art collector Amir Soleymani (known as “Mondoir”) filed a High Court complaint against NFT marketplace Nifty Gateway. Soleymani claims that the terms of sale he agreed to (prior to participating in the auction) were changed by Nifty Gateway and bidders were not notified of the changes.

What happened:

Nifty Gateway held the auction in May 2021. Soleymani lost out on securing the highest NFT bid ($1.2 million), and its $650,000 bid placed third. According to the final (and allegedly amended) terms of the sale, the remaining 99 highest bidders were to pay a graded amount for a second edition of the work. Uninterested in buying a second edition (and lower value) NFT, Soleymani refused to pay Nifty Gateway. Nifty Gateway then froze Soleymani’s account and blocked access to his assets (about 100 NFTs).


Soleymani has filed lawsuits in the United States and the United Kingdom. The UK lawsuit, which has been filed with the High Court, claims that the terms of sale Soleymani signed in February were changed in April (shortly before the auction began), and that the true nature or reality of the ranked auction was not specified to the bidders before the sale. Soleymani’s claim also challenges the enforceability validity of arbitration clauses under the terms with the customer’s “right to be sued in that country” on the grounds that the Consumer Rights Act 2015 exempts UK residents of Nifty Gateway (a New York based company) Terms of Service. Soleymani also challenges the overall validity of the “ranked” auction format.

Why is this important:

Unlike a traditional auction where the lot is a unique tangible asset, NFT auctions involve a unique token on the blockchain, but the underlying digital asset is not necessarily unique. When assets are digital (and reproducible), the edition you buy can be vitally important in terms of value. Additionally, the type of classified, publishing-focused auction that Soleymani participated in was unusual for the art market. A bidder of a tangible painting in a traditional auction, for example, should not buy an alternate lot, or a print edition of the painting they bid on if they failed to bid for the lot. major.

Traditional art auctions often require months of preparation, with marketing of upcoming sales, printed catalogs and authentication of works. This usually means that potential bidders have weeks, if not months, to do due diligence on any lots they’re interested in, and the ability to contact the auction house directly for questions and answers. Contrast this with NFT declines in NFT markets which are often short term (24 hours – to days), and the timeframe for any due diligence is much shorter. While traditional auction houses generally use the same proven standard terms of sale in their auctions, NFT terms of sale vary widely depending on the platform/market and the particular NFT(s) being sold.

As with any contract, it is essential to read the conditions of sale carefully. When the asset is digital, reproducible and the rights attached to the asset depend on the conditions of sale and a smart contract, the adage of Caveat Emptor (shopper aware) is essential. But could we see new challenges to this in the world of smart contracts? Does the auctioneer provide enough information when auctioning NFTs?

“Imagine bidding to win an item, finishing second, and getting almost the same as the third bidder, but with a significant difference in the amount of the bid,” says Soleymani, to whom one asked to pay $650,000 for the second edition of the book. “This auction method maximizes revenue for the platform and artists but hurts collectors.”

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Norma D. Ross