1. Legal Position of NFT Marketplaces in India

NFT marketplaces (like NFT trading platforms) are not separately regulated under a dedicated NFT law in India. Instead, liability is determined through:

• Information Technology Act, 2000
• Intermediary liability principles under Section 79 IT Act
• Contract law principles (Indian Contract Act, 1872)
• Securities law (if NFTs are structured as investment products)

Most NFT platforms are treated as “intermediaries” or “online marketplaces”.

2. Core Legal Basis of Liability (Section 79 IT Act)

Under Section 79:

Safe Harbour Rule

An intermediary is not liable for third-party content if:

• It is only a technical platform
• It does not modify or initiate transactions
• It follows due diligence and government rules

Loss of Safe Harbour occurs if:

• It “aids, abets, or conspires” illegal activity
• It fails to remove illegal content after notice/court order

📌 This is directly relevant to NFT marketplaces hosting:

• counterfeit NFTs
• stolen digital art
• fraudulent investment schemes

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3. NFT Marketplace Liability Principles

NFT platforms in India may face liability under:

(A) Civil Liability

• Breach of contract (fraudulent listing)
• Misrepresentation to buyers
• Consumer protection claims

(B) Criminal Liability

• Cheating (Section 420 IPC)
• Criminal conspiracy
• Cyber fraud

(C) Intermediary Liability

• Loss of safe harbour under IT Act
• Failure to act on takedown requests

4. Key Judicial Tests Used by Indian Courts

Courts use “active vs passive intermediary” test:

• Passive = safe harbour applies
• Active = liability can arise

Indicators of “active role”:

• controlling listings
• verifying sellers
• taking commissions with quality control
• promoting or curating NFTs

5. Important Indian Case Laws (NFT Marketplace Liability & Intermediary Enforcement)

1. Shreya Singhal v. Union of India (2015)

📌 Supreme Court of India

• Clarified Section 79 IT Act
• Held intermediaries are protected only when passive
• Introduced “actual knowledge = court order or government notice”

📌 Impact on NFT platforms:
NFT marketplaces must remove infringing NFTs only after legal notice/court order, not subjective judgment.

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2. Christian Louboutin SAS v. Nakul Bajaj (2018, Delhi HC)

• Held e-commerce platforms can lose safe harbour if they are active participants
• If platform:
  • curates products
  • provides authenticity guarantee
  • controls listings

📌 Impact:
NFT marketplaces that verify or promote NFTs may become liable like sellers, not intermediaries.

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3. MySpace Inc. v. Super Cassettes Industries Ltd. (2016, Delhi HC)

• Intermediary must take reasonable technical measures
• Cannot be expected to pre-screen everything
• But must act after notice

📌 Impact:
NFT marketplaces are not required to pre-check all NFTs, but must remove infringing NFTs after notice.

4. Kent RO Systems Ltd. v. Amit Kotak (2017, Delhi HC)

• Held intermediaries must act expeditiously upon notice
• Failure leads to loss of immunity

📌 Impact:
NFT platforms must quickly remove:

• stolen NFTs
• trademark-infringing digital art

Otherwise, they become liable.

5. Shreya Singhal follow-up interpretation in Facebook v. State of West Bengal (2018)

• Courts reinforced that intermediaries:
  • are not publishers
  • but lose immunity if they participate actively

📌 Impact:
NFT marketplaces cannot be treated as “neutral sellers” if they influence pricing or listing visibility.

6. Amazon Seller Services Pvt. Ltd. v. Amway India (2020)

• Reinforced safe harbour protection
• Held platforms are not liable if they:
  • comply with Section 79
  • act as neutral intermediaries

📌 Impact:
NFT marketplaces may avoid liability if they strictly act as neutral listing platforms.

7. Google India Pvt. Ltd. v. Visaka Industries (2019 Supreme Court appeal context)

• Discussed intermediary liability limits
• Emphasised lack of control = reduced liability

📌 Impact:
NFT marketplaces that do not control blockchain assets may claim reduced liability.

8. Gaussian Network Pvt. Ltd. v. Monica Lakhanpal (2012)

• Addressed online gaming and digital platform liability
• Recognised that online platforms can be liable if they facilitate unlawful financial activity

📌 Impact:
NFT marketplaces promoting speculative NFT trading may be treated as investment facilitators, increasing liability risk.

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6. NFT Marketplace Liability in Practice (India)

NFT marketplaces may be liable in India if:

1. Counterfeit NFTs are sold

• trademark infringement cases apply

2. Fraudulent creators list NFTs

• negligence + facilitation liability

3. Platform actively promotes NFTs

• becomes “publisher-like” entity

4. Failure to comply with takedown notices

• loses Section 79 protection

5. Investment-like NFT schemes

• may fall under securities or CIS scrutiny

7. Key Legal Risks Specific to NFT Marketplaces

(A) Intellectual Property Risk

• Copying digital artwork → copyright infringement

(B) Consumer Protection Risk

• Misleading NFT valuation or “guaranteed returns”

(C) Financial Regulation Risk

• NFTs structured as investment products may be treated like securities

(D) Intermediary Liability Risk

• Loss of safe harbour under Section 79 IT Act

8. Conclusion

In India, NFT marketplace liability is not defined by NFT-specific law, but by:

• IT Act intermediary rules
• judicial interpretation of “active vs passive platforms”
• IP and consumer protection laws

Core legal principle:

👉 NFT marketplaces are protected ONLY if they remain neutral intermediaries.
👉 Once they become active participants, liability attaches like a seller or publisher.