NFTs (Non-Fungible Tokens) opened new doors for creators, brands, and artists to monetize digital assets in unprecedented ways. One of the most attractive features? NFT royalties—automated payouts that reward creators every time their work is resold.

But here’s the catch: on-chain royalties aren’t always enforceable, and many marketplaces are now bypassing them altogether. If you’re relying on smart contracts to protect your income, it’s essential to ensure they also stand up to legal scrutiny.

🎨 What Are NFT Royalties?

NFT royalties allow creators to receive a percentage (usually 5–10%) each time their token is resold on secondary markets. These payments are typically embedded in a smart contract, a piece of code on the blockchain that executes automatically.

✅ But here’s the legal gray area: most smart contracts alone don’t create enforceable contracts under the law.

⚖️ Legal Challenges to NFT Royalties

1. Smart Contracts ≠ Legal Contracts
   A smart contract must meet the elements of a legal agreement: offer, acceptance, consideration, and mutual intent. Without these, you may have code—but not a contract enforceable in court.

2. Marketplace Bypass
   Major NFT platforms like Blur and OpenSea have moved toward optional royalties. This means that even if your smart contract specifies a royalty, the platform might not enforce it—unless it's coded into the token itself and tied to a compliant marketplace.

3. Jurisdictional Ambiguity
   Because NFTs and blockchains operate globally, jurisdiction and governing law can be unclear. If a dispute arises, where do you sue? Which laws apply?

🛠️ How to Draft a Legally Enforceable Royalty Agreement

1. Pair Smart Contracts With Legal Terms

Always back your smart contract with a traditional legal contract. This can be embedded in metadata, included in a licensing agreement, or referenced in your platform’s terms of use.

2. Use a Royalty-Respecting Token Standard

Explore custom smart contracts that enforce royalties at the protocol level. This gives you more control over royalty execution, even across marketplaces.

3. Include IP Licensing Language

Define what the NFT buyer actually owns. Is it just the token? Or are there commercial rights to use the image or content?

🧑‍⚖️ Work With Blockchain-Savvy Attorneys

At Shperun Law, we help creators, developers, and brands draft NFT smart contracts that:

• Include enforceable royalty terms

• Protect your intellectual property

• Comply with securities and tax regulations

• Avoid loopholes on popular platforms