Media & Entertainment9 July - Sept, 2021different approach. It enables different token info to be stored in a single contract with minimal data needed to distinguish one token from another. The contract contains configuration data per Token ID and all the behavior governing the collection.NFTs are tradeable on digital assets marketplaces. These marketplaces enable users to buy and sell digital assets, including game assets, digital collectibles and other tokens. A perceived advantage of these marketplaces is that users can transact these items through a smart contract, meaning that no central authority ever holds custody of the items. A smart contract is self-executing code that runs on a blockchain network thereby avoiding intermediaries or centralized control by a single entity, such as a game publisher. Using smart contracts, a digital asset is transferred to the smart contract and the program runs its code to automatically validate the programmed conditions for a valid contract and it automatically determines whether the transaction should be executed. The advantages of NFTs come with a price. In-game items issued by game publishers and useable solely within their game avoid many legal issues because they can only be used in-game. NFTs come with potentially increased legal complexity. Various federal agencies have declared that if an entity deploys a smart contract it can be responsible for the foreseeable legal consequences of the operation of the smart contract. Among the legal areas that can be of concern for NFTs are securities law, money laundering and gambling, to name a few. Many crypto currencies and tokens are deemed to be securities by the SEC. Operating a digital asset marketplace where securities are transacted can result in the marketplace being a securities exchange, subject to securities law. The SEC has been increasing its crypto enforcement efforts. The increased use of chance-based mechanics in games (e.g., lootboxes, social casino games) has led to growing scrutiny under gambling laws. Many traditional games have prevailed in gambling lawsuits filed against them because their terms of service grant only a license to the in-game items and prohibit their sale, transfer or exchange. This basis may not apply with NFTs where game companies promote the true ownership and ability to sell the NFTs. The risk of money laundering through digital asset exchanges requires vigilant compliance with AML and KYC regulations where applicable. FinCEN has issued guidance that the definition of money transmitter does not differentiate between real currencies and convertible virtual currencies. Accepting and transmitting anything of value that substitutes for currency makes a person a money transmitter under the regulations implementing the Bank Secrecy Act. Blockchain and NFTs hold great promise. If your business gets involved with these technologies it is critical to get solid legal advice before you get too far down the road. Click here for more information on these issues. The risk of money laundering through digital asset exchanges requires vigilant compliance with AML and KYC regulations where applicable
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