Is It Permissible to Trade in Non-Fungible Tokens (NFTs)?

Answered by Shaykh Irshaad Sedick

Question

Is it permissible to trade in Non-Fungible Tokens (NFTs)?

Answer

In the Name of Allah, the Most Merciful and Compassionate. 

NFTs are unique digital codes/tokens that render digital content ‘one of a kind,’ the way a work of art is one of a kind and, therefore, potentially valuable. Therefore, the Sacred Law ruling of each NFT depends on the permissibility of trading with the attached digital content, and Allah knows best.

What Are NFTs?

A non-fungible token (NFT) is a unique and non-interchangeable unit of data stored on a digital ledger (blockchain). NFTs can be associated with easily-reproducible items such as photos, videos, audio, and other digital files as unique items (analogous to a certificate of authenticity) and use blockchain technology to give the NFT a verified and public proof of ownership. Copies of the original file are not restricted to the owner of the NFT and can be copied and shared like any file. The lack of interchangeability (fungibility) distinguishes NFTs from blockchain cryptocurrencies, such as Bitcoin. [Wikipedia]

How Are NFT’s Used?

The concept is a relatively young one and will likely see growth in the future. Only time will tell how useful it is. The most well-known and ubiquitous NFTs exist in the following industries: Art; Collectibles; In-game items; Data and licensing; Media, Ticketing.

In each of the above-listed industries, the digital content could be anything from a unique piece of calligraphy to pornography (Allah forbid). Therefore, the ruling of the NFT (or Digital Certificate for our understanding) depends on the nature of the digital content, and Allah knows best.

I pray this is of benefit and that Allah guides us all.

 

Follow-Up Question

I already asked you if NFTs are halal or haram, and you said halal, but there are exceptions. But something was on my head, which was, isn’t it haram to draw a human or animal?

I will not make NFTs; I will trade in NFTs so that I won’t be a drawer, just a buyer and seller. So if drawing is haram, is trading in it haram too? Or is it okay if I buy and sell later?

Answer

In the Name of Allah, the Most Merciful, the Especially Merciful.

It is impermissible to trade items with no lawful benefit. Since unlawful NFTs have no lawful benefit, trading them is impermissible; Allah knows best.

Five conditions must exist in any article transacted.

It must:

(a) be pure (in itself, or if affected with filth, it must be capable of being purified by washing);

(b) be useful;

(c) be deliverable (by the seller to the buyer, meaning that the buyer can take possession of it);

(d) be the property of the seller or the person whom the seller has been authorized to represent;

(e) and be determinately known (ma’lum) (to the buyer and seller, as to which particular thing it is, how much it is, and what kind it is, to protect against chance or risk (gharar), because of the hadith related by Muslim that the Prophet (Allah bless him and give him peace) forbade the transaction of whatever involves chance or risk) [Keller, Reliance of the Traveller]

Usefulness

It is invalid to transact something which is not useful (whether the reason for invalidity is the article’s baseness or the smallness of the amount being dealt with,) such as vermin, a single grain of wheat, or unlawful musical instruments [and unlawful drawings] since there is no lawful benefit in them. [ibid.]

I pray that this benefits.

[Shaykh] Irshaad Sedick
Checked and Approved by Shaykh Faraz Rabbani

Shaykh Irshaad Sedick was raised in South Africa in a traditional Muslim family. He graduated from Dar al-Ulum al-Arabiyyah al-Islamiyyah in Strand, Western Cape, under the guidance of the late world-renowned scholar, Shaykh Taha Karaan. 

Shaykh Irshaad received Ijaza from many luminaries of the Islamic world, including Shaykh Taha Karaan, Mawlana Yusuf Karaan, and Mawlana Abdul Hafeez Makki, among others.

He is the author of the text “The Musnad of Ahmad ibn Hanbal: A Hujjah or not?” He has served as the Director of the Discover Islam Centre and Al Jeem Foundation. For the last five years till present, he has served as the Khatib of Masjid Ar-Rashideen, Mowbray, Cape Town.

Shaykh Irshaad has thirteen years of teaching experience at some of the leading Islamic institutes in Cape Town). He is currently building an Islamic online learning and media platform called ‘Isnad Academy’ and pursuing his Master’s degree in the study of Islam at the University of Johannesburg. He has a keen interest in healthy living and fitness.