Dividing Non-fungible Tokens (NFTs) in a Divorce

In a divorce, assets acquired by either party while they were wed typically become part of the marital estate that must be divided between the parties. Often, questions over who gets the house or car are the most difficult part of the marriage dissolution process. If you’re going through a divorce, you should remember that all assets are subject to distribution, including types of property that didn’t even exist a few years ago, such as non-fungible tokens (NFTs).

An NFT signifies that its owner has exclusive possession of a unique digital asset, in the same way that a person might own an original, unique painting. Many NFTs are digital videos or works of art, though even the NFT for a single Tweet fetched nearly $3 million. Instead of taking physical possession of the NFT in the way one would with a painting, an owner’s rights are secured through a blockchain, such as the Ethereum marketplace.

If one or more NFTs are included within your marital estate or you suspect that your spouse might be using an NFT to hide assets, there are some things you should know:

• Valuation — Each NFT represents ownership of something that is unique, so there is no simple way to establish its precise value. This differs from assets such as traditional stocks or cryptocurrencies that have a specific market price that fluctuates from day-to-day. You might need an appraiser to provide an objective, informed assessment of an NFT’s worth.
• Dividing ownership — Joint ownership of digital assets is possible, and many high-value NFTs belong to groups of people who have pooled their funds. So it is possible for an NFT to be split between divorcing spouses in a settlement or an equitable distribution order handed down by a judge. However, joint ownership could create problems later if the parties disagree about whether to sell or if one former spouse tries to commence a transaction without the other’s approval.
• Potential for fraud — Among some couples, one spouse might be a sophisticated buyer of NFTs, while the other is not nearly as familiar with digital assets. Without tangible property or records such as bank statements, there is a potential that a husband or wife might try to purchase an NFT without telling their spouse in order to reduce the value of the divisible marital property.

Working with a divorce lawyer experienced in property division matters involving NFTs, cryptocurrency and similar nontraditional assets is the first step toward safeguarding your interests as you end your marriage.

As the Long Island divorce leader, Bryan L. Salamone & Associates, P.C. represents New Yorkers during divorces where the allocation of NFTs and other digital assets are at issue. To discuss your situation with a skillful attorney, please call 1.631.479.3839 or contact us online.