Crowell’s Crypto Digest Blog sat down with MakersPlace’s Head of Legal and Trust and Safety, Kayvan Ghaffari, to learn about the NFT marketplace and the current legal landscape regarding NFTs.
What does it mean to be the Head of “Trust and Safety”?
Trust and safety revolve around ensuring the platform is secure and safe, and ensuring that whoever interacts with the website has a trusting relationship with the platform.
To me, it involves four buckets.
One, is content moderation. Essentially, how are we thinking about the content that is being provided on our platform? We are thinking through these murky issues to make sure people are safe and that there is nothing inherently wrong, illegal, or harmful on our platform.
Second, is fraud. How do we prevent fraud and scams from occurring on our platform? This is a big issue in the art world and also the digital assets space. We want to make sure we have a reputable platform that people engage in.
Third, is cybersecurity. How do we maintain our infrastructure and secure it?
Finally, intellectual property. How do we approach potential IP theft? All of these encapsulate trust and safety at a high level.
How did you come into your role at MakersPlace?
MakersPlace was a client of mine when I was at Crowell. What I did for them for the most part was IP due diligence. They would send artistic works from creators before they were launched and I would look at them and see if there were any IP issues. I was really fascinated by this work. There’s a lot of IP issues around art, including licensing, copyright, and trademark issues.
I never anticipated being an art lawyer. Working with any startup is a fascinating opportunity. They don’t take no for an answer and you are required to think creatively about a solution. Regardless of where they are located in the world, they have this ethos of “break it and then fix it.” As a lawyer, you’re saying “alright, here’s a set of items you want to achieve, I can’t tell you, ‘you can’t do this.’” That doesn’t work, because the startup will go to another law firm. Instead, I find ways to mitigate that risk and look at the startup’s risk tolerance. You don’t get that same issue with large institutional clients. With startups, you’re forced to reckon with that. From that perspective, it always fascinated me and interested me – it’s something I always enjoyed in my career. When they asked me to take this role, it was a hard decision, but it was an opportunity to flex my creativity and I couldn’t say no to it. I have a chance to operate at the cutting edge of IP issues.
What’s the mission of MakersPlace?
Our company is called MakersPlace, a place of makers. Our goal is to empower creators and to give them a platform to speak. We want to connect these creators with collectors who value and appreciate that art and expression. We haven’t wavered from this mission. This is evident by the fact that we have not deviated from being a curated marketplace. It’s also why in our smart contracts there’s a built-in royalty flow where an artist will gain royalties for any secondary sale of that particular art in perpetuity. This is a revolutionary system for creators. This has never happened before in the “traditional” art world.
What’s exciting you right now at MakersPlace?
The first thing that comes to mind is O(V.)Erturned.This month-long exhibition featured women creators. The idea behind this came after the Supreme Court overturned Roe v. Wade. We as a company took issue with that decision and we issued a public statement condemning the decision. So, we wanted to empower women voices and amplify them. We had a curated exhibition, just of women creators, where we donated all of our commissions to Planned Parenthood, the ACLU Reproductive Freedom Project, and the Brigid Alliance. Each week we had a Twitter Spaces with some of our women creators. It was such a remarkable, moving, powerful experience to hear these women and hear about their inspiration and their thoughts on the Supreme Court’s decision. Hearing the raw vulnerability of these creators was so moving.
What are the goals of MakersPlace moving forward?
We want to really lean in and maintain our message of being a curated digital marketplace for leading artists. In many ways, we want to be premier destination of digital art. We want people to think about and be proud of owning a beautiful piece of digital art. It is art. It’s just using another medium – a new technology – to communicate that art. We want to become the go-to for art. And we want to be able to cultivate that community of collectors who value and appreciate it in a material way.
And, as a I mentioned earlier, trust and safety is a big deal, MakersPlace is taking and making strides to lean in on trust and safety. We want to be totally transparent about issues that are happening on the platform, and being transparent on what our views are on content and moderation. I want to ensure that anyone that spends any money at MakersPlace can trust that they are receiving the value for what they spent money on.
On the flip side, what are some challenges that are on the horizon?
The biggest challenge is the unknown. The regulatory uncertainty is challenging. We don’t know who is going to regulate us. What they are going to regulate us with. We don’t know how everything is going interplay with laws in other countries. We’re starting to see hints of it, but it will be interesting to see how it all plays out. In many ways, it’s helpful to be regulated because it creates some certainty.
Of note, the SEC recently announced that they are doubling the size of their digital assets division and for the first time the SEC has identified NFTs as an area of focus.
In general, how would you use outside counsel and how can outside legal counsel be helpful to MakersPlace?
There are a few things that outside counsel can do to help MakersPlace and any NFT company.
First, monitoring what laws are happening. What’s the noise on the ground? What is the SEC saying? What is the CFTC saying? What is Congress saying on NFTs? This all goes to what regulations will be applicable. I think law firms need to keep their ears to the ground and immediately notify companies like MakersPlace about any developments and, critically, to provide insight on how it may affect us.
Outside counsel would also be helpful in IP litigation. Or any litigations. The non-digital art world is full of litigations both in terms of IP litigation but also a “who owns it?” litigation, what is the commission split, breach of contract stuff. I suspect we’ll start to see additional activity in that domain in the next few years. Scam and fraud are happening a lot in this ecosystem as well. It’s not just isolated to NFTs and crypto. It happens all the time outside of this space.
Most importantly, and lastly, when I’m asking outside counsel for advice, I’m asking, “what should I do?” I’m not asking for a recitation of the law. Take the law and tell me what to do with it. First and foremost, I’m paying you to tell me what to do first. I don’t necessarily need or want a memo or full-blown analysis of the law. I need lawyers to give me solution and provide a pathway of how we’re going to mitigate those risks.
What predictions do you have for the NFT ecosystem in the next few years?
I think we are starting to see a lot of consolidation of marketplaces. I think people are being smarter about NFTs, and digital assets in general because there have been a lot of rug pulls recently. We’ve launched an education hub on our platform which is designed to actually educate people on NFTs, including on what it takes to become a creator and collector on our platform.
I also think we’re going to see a bifurcation and trifurcation of the industry. We’re going to see companies like OpenSea that are open marketplaces. And we’re going to see curated marketplaces. And we’re also going to see studios that are facilitating creators that will feed into these marketplaces.
Anything else that you want to communicate about MakersPlace and the NFT space?
It’s a young space. If we think about the internet and where it is and how many issues there are, it’s like what my mentors Gabe Ramsey and Warrington Parker would always tell me, “it’s kind of like an adolescent riding a bus.” We kind of know what it is. We kind of have an understanding of its full potential, but we don’t really know, and don’t really have the capacity and the maturity to really understand it. With NFTs, we’re like children driving a bus. It’s an exciting industry that needs to be taken seriously. The industry needs to do a better job of educating people about its capacity and about instilling trust and safety within the industry, and we’re trying to do that through our MakersPlace Education Hub. From an intellectual perspective, there are a lot of opportunities to pave the way and be leaders from a business and artistic perspective. It’s scary, but also really fun. There are so many ways this industry can mature and adapt. I found it both exciting and impactful.