UPDATE, May 7: Linden Lab relatively recently updated its TOS to address the issues discussed below — read this follow-up post.
With hype over NFT digital art still hyping, Second Life users are asking the next inevitable question:
Is it possible for an SL photographer to sell their digital photos as NFTs? Lately, selling NFTs is a hot topic. We see digital art selling at marketplaces like Nifty Gateway for obscene amounts. Obviously, that's rare. Still a number of photographers have come to me lately asking if photos taken in Second Life are saleable as an NFT for a profit — even a small profit — on marketplaces like Nifty Gateway or Rarible. The TOS is so confusing.
The short answer is Yes, but the actual answer is much, much more complicated. That's because Linden Lab the company allows users to retain ownership to anything they make on the Second Life platform, which has led to game companies, book publishers, TV networks, movie studios, even fashion brands, creating and profiting from content that was originally made in SL — all totally permissible, from Linden Lab's point of view.
However, the very fact that SL users retain the IP rights to anything that they make in the virtual world leads to many "gray interesting mysteries" — in the words of Fred von Lohmann, who said them when he was staff attorney for the Electric Frontier Foundation:
Regarding copyright infringement potential, Von Lohmann noted, "Second Life in some ways is worse than real life." That's because users retain the underlying intellectual property rights to their SL creations. And after all, as Fred pointed out, you can walk down the street in real life without worrying that the textures in the sidewalk are copyrighted. "In Second Life these are gray interesting mysteries" around the law, he added. Something worth considering for people who publish screenshots or machinima extracted from SL. It's been argued that if you run a photo of a Second Life street, you don't really need to get the permission from the creator of every single item in the frame, just as you don't need to do so when you take a photo of a New York City street. However, that assumption has not yet been tested in court.
As Von Lohmann added, most of the Second Life community is unlikely to be aggressively litigious. But if Second Life continues growing, I believe that sense of good faith won't always hold.
Fred was talking about legal concerns around making professional machinima in Second Life and not NFTs (this was back in 2009), but the underlying principle applies: If you create a Second Life screenshot, Linden Lab's gives you the right to sell it, including as an NFT.
However, if the screenshot depicts any SL content created by other users, you must technically get their permission to depict it.
So consider an SL screenshot of a fashion model on a virtual street. Before selling it as an NFT, you must technically get permission from the user who owns the avatar — and all the content creators who made fashion accessories, avatar textures, even poses depicted on that avatar model…. and all the creators of all the content depicted in the background. (Street signs, buildings, the street itself, etc. etc.)
So what happens if you don't get all those permissions, and sell the image as an NFT anyway? Probably nothing — unless the NFT becomes profitable. Which is usually when rights holders and their lawyers come calling. And given the fact that top content creators in Second Life make six or even seven figures in US$ sales, you can bet they will.
Don't believe me? Consider the notorious Bunny v. Horsie case, for starters.
Pictured: Afrofuturist artist Nettrice Gaskins who sometimes shows off her NFT-ed neural network art in Second Life.
Wagner James Au / New World Notes 
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