By: Franklin Smart
Edited by: Melineh Kalantar Ohanian
Digital Ownership and Licensing in Video Games
Video game players typically do not own the digital content they purchase. [1] Instead, End User License Agreements (EULAs) grant only a revocable license, allowing publishers to control access and usage. [2] Therefore, even after significant spending on in-game items, players can lose access at a publisher’s discretion. [3]
The Role of NFTs in Digital Ownership
The emergence of non-fungible tokens (NFTs) could give players ownership of digital assets. NFTs are unique, verifiable, and potentially transferable outside of games. [4] Some games, like NBA Top Shot, already use NFT-based assets, raising hopes that blockchains could establish digital property rights. [5]
However, NFTs do not override existing legal frameworks. [6] EULAs define software as licensed rather than sold, giving developers full control over NFT-linked assets. [7] Furthermore, NFTs may trigger securities regulations. [8]
The tension between digital licensing and ownership becomes even clearer when analyzing how EULAs and the first sale doctrine restrict player rights, making resale and transferability difficult. [9] NFTs offer a potential workaround by introducing blockchain-backed proof of ownership, but whether this establishes meaningful property rights depends on the agreements that govern digital assets. [10] While NFTs promise a shift toward greater player control, their success depends on how courts, regulators, and publishers navigate these legal and technical challenges.
Current Legal Framework for Digital Game Ownership
EULAs dictate player rights, often stating that all in-game assets remain the developer’s property. For example, in MDY Industries, LLC v. Blizzard Entertainment, Inc., the Ninth Circuit ruled that World of Warcraft players only had a limited license, while Blizzard retained ownership and control. [11] Under U.S. copyright law, 17 U.S.C. § 202, owning a digital item does not confer copyright, reinforcing these restrictions. [12]
The first sale doctrine permits reselling copyrighted works without authorization [13] but primarily applies to physical copies. Courts determine if a transaction constitutes a license or a sale by analyzing whether: (1) the copyright owner designates it as a license, (2) the user’s ability to transfer the software is significantly restricted, and (3) notable use restrictions are imposed. [14] If the transaction is deemed a license, then the application of the first sale doctrine is precluded. [15] Since EULAs typically establish a license, digital assets including accounts, skins, and in-game currencies are not protected by this doctrine. Given this limitation NFTs have emerged as a proposed solution to create more robust digital ownership for players.
NFTs and Their Legal Limitations
NFTs ownership is largely defined by contractual terms rather than traditional property law. An example of this is NBA Top Shot, where players can purchase NFTs of video highlights, but intellectual property rights to the video remain with the NBA. [16] Buyers own the NFT, yet their usage rights are restricted by the platform’s terms of service, [17] illustrating how NFTs may provide limited user control, not full ownership.
There is also the potential for SEC scrutiny. [18] Courts determine whether an NFT qualifies as a security by evaluating if it involves (1) an investment of money, (2) in a common enterprise, (3) with a reasonable expectation of profits, (4) derived from efforts of others. [19] Digital collectibles are unlikely to meet this standard; however, if an NFT is marketed with promises of future financial returns, it may become subject to SEC regulation. [20]
Arguments For and Against NFTs in Video Games
Proponents argue that NFTs could enhance digital ownership through secondary, allowing players to store in-game assets independently on blockchain wallets, and smart contracts that grant resale royalties to creators. They also suggest that NFTs could create scarcity-driven value in digital economies, making in-game items more unique and valuable.
Critics, however, argue publishers retain control over how NFTs function, meaning ownership remains dependent on the developer’s support. [21] If a game discontinues NFT support or shuts down, the NFTs may become worthless, regardless of their presence on the blockchain. [22] Additionally, critics warn that NFTs could lead to prioritizing financial gain over gameplay. [23]
Conclusion
NFTs introduce new possibilities in gaming but remain constrained by existing laws. While NFTs offer opportunities such as smart contracts and interoperability, they also present legal risks, including regulatory scrutiny. Whether courts and regulators will redefine digital ownership remains uncertain, making NFTs an evolving legal frontier.
1 See generally Nathaniel Ansari, Game Ownership in the Digital Age: Who Owns Your Games?, MEDIUM (Jan. 22,
2021), https://medium.com/super-jump/game-ownership-in-the-digital-age-who-owns-your-games-c5ce3158f324 [https://perma.cc/D8BH-97MB].
2 John Holden & Mike Schuster, Copyright and Joint Authorship as a Disruption of the Video Game Streaming Industry, 2020 Colum. Bus. L. Rev. 942, 957 (2020).
3 MDY Indus., LLC v. Blizzard Ent., Inc., 629 F.3d 928, 939 (9th Cir. 2010).
4 Id.
5 Eric Esposito, What Are NBA Top Shot NFTs? A Guide to Owning Sports Legends, NFT.COM (Mar. 14, 2023), https://www.nft.com/articles/what-are-nba-top-shot-nfts-a-guide-to-owning-sports-legends [https://perma.cc/WU23-Q8DF].
6 Stuart Levi et al, Blockchain & Cryptocurrency Laws and Regulations 2025 Legal considerations in the minting, marketing and selling of NFTs, GLOBAL LEGAL INSIGHTS,
https://www.globallegalinsights.com/practice-areas/blockchain-cryptocurrency-laws-and-regulations/legal-considerations-in-the-minting-marketing-and-selling-of-nfts/# [https://perma.cc/33QB-PMEF].
7 Adobe Sys. Inc. v. One Stop Micro, Inc., 84 F. Supp. 2d 1086, 1092 (N.D. Cal. 2000).
8 Harper v. O’Neal, 746 F. Supp. 3d 1360 (S.D. Fla. 2024).
9 See Sarah Reis, Toward a “Digital Transfer Doctrine”? The First Sale Doctrine in the Digital Era, 109 Nw. U. L. Rev. 173 (2015).
10 Rakesh Sharma, Non-Fungible Token (NFT): What It Means and How It Works, INVESTOPEDIA (June 12,2024), https://www.investopedia.com/non-fungible-tokens-nft-5115211 [ https://perma.cc/5V45-A8Y5].
11 MDY Indus., 629 F.3d at 939.
12 17 U.S.C. § 202.
13 17 U.S.C. § 109.
14 Vernor v. Autodesk, Inc., 555 F. Supp. 2d 1164 (W.D. Wash. 2008).
15 Id.
16 NBA Top Shot End User License Agreement, DAPPER LABS, INC. (Aug. 8, 2024), https://nbatopshot.com/terms [https://perma.cc/9JAR-FQP3].
17 Id.
18 Id.
19 Id.
20 Id.
21 Harish Chengaiah, NFTs and Video Games Are a Bad, Unsustainable and Forced Marriage. Here’s Why, MEDIUM (Dec. 28, 2021),https://medium.com/@harish.chengu95/nfts-and-video-games-is-a-bad-unsustainable-and-forced-marriage-heres-why-99c4f07f4fa4 [https://perma.cc/HS2D-DTRQ].
22 Id.
23 Id.
