What Are the Legal Implications of the Metaverse?
While the metaverse offers numerous opportunities for businesses across industries, a number of metaverse legal implications must be addressed in order for it to be successful. These issues will only become more pressing as platforms mature and user adoption grows.
Today, technological advancement does not stop, and neither should the regulator. Indeed, we may have passed the point where we do not have complete control over the spread of such a digital big bang. The future will be teeming with unprecedented technologies that are inextricably linked to our daily lives. Actions taken in virtual environments will have real-world consequences, and vice versa; thus, regulators should make every effort to protect the public from such effects. Several relevant tech-related laws have already gone into effect, with many more on the way. Nonetheless, research into a number of contemporary issues that may emerge with the advent of the so-called Metaverse is still in its early stages.
This article sheds light on a few rarely debated critical legal points that a future systematic reform to the current legal framework should address, as a single component of the reforms that would accelerate the legal domain beyond its ordinary boundaries.
The Concept of the Metaverse
Although the concept of the ‘Metaverse’ has evolved rapidly since it was first coined in a piece of speculative fiction called Snow Crash by Neal Stephenson in 1992, it has recently come into the spotlight due to recent technological developments. In this article, we define the Metaverse as a collection of technologies that create a visible image of cyberspace, allowing users to interact virtually through digital avatars using features from social media, online gaming, augmented reality, virtual reality, and cryptocurrencies in e-marketplaces where individuals can trade in the Metaverse’s intangible assets.
We could argue that we are already in the Metaverse. However, according to Metaverse specialists, the Metaverse cannot achieve this duality until it goes through three sequential stages: (1) digital twins; (2) digital natives; and (3) a physical-virtual reality in which the Metaverse can become a self-sustaining private shared virtual realm that co-exists with the physical world with a high level of independence. Regardless of where we are now, regulators should take a proactive approach to modernize the existing legal infrastructure, accommodating ongoing development, and achieving the coveted economic objectives driving the Metaverse’s existence.
What Legal Problems Will the Metaverse Pose?
Data Protection and Privacy
One of the most significant metaverse legal implications issues that platform owners will face is the security and privacy of users’ data. While these concerns are not new to technology companies, with Facebook serving as a prime example, data in the metaverse will be exponentially more valuable than it is now. Technologies will become deeply embedded in almost every aspect of users’ lives.
“A virtual reality world,” explains Frances Haugen, “will necessitate people installing many, many more sensors in their homes and workplaces.” The sensors would have real-time access to human lives. AR glasses and headsets, in particular, can pose significant privacy risks by acting as microphones and cameras inside homes and offices.
The metaverse’s behavior will be able to reveal intrusive information about people’s interests, such as biometric data and head and eye movements. There are currently no rules governing who and what companies can collect, who owns it, and how it can be used. Because the metaverse aspires to be a global environment, determining which data protection laws apply would be difficult.
As more businesses begin to sell digital assets and services, the metaverse legal implications of financial technology will grow. In the metaverse, brands distribute digital goods by either selling identical goods to many users or selling rights or indicia of ownership to individual goods. Those who purchase the latter can do so as an investment or to add to their personal collection, which may include displaying them in a virtual environment. The blockchain could be used to validate the art’s authenticity.
It is only natural for legal concerns to arise regarding proper ownership verification or potential infringement. As more people acquire digital goods, platform operators will face new challenges in ensuring the security of digital assets.
Acquisitions and Other Investment Activity
Whatever shape the metaverse takes, its ultimate success will necessitate massive capital investments in digital content, assets, infrastructure, and hardware to create virtual spaces.
Venture capital has already poured into the sector, with gaming, augmented reality, and virtual worlds raising more than $10 billion last year. Major technology companies will continue to expand their metaverse activities through mergers and acquisitions. This is happening all over the world, and cross-border transactions necessitate a closer examination of metaverse legal implications.
Conduct Control in the Metaverse
Another major legal issue confronting the metaverse is the legal limits of conduct in the metaverse. When users interact with their avatars, it is possible that some altercations will occur. Any wrong that could happen in the real world could happen in the metaverse.
Consider what would happen if one avatar attacked another. Would we be able to apply assault laws to this situation? How can we hold avatars accountable for their actions in the metaverse? This is not a made-up scenario. Sexual predators are already appearing in the metaverse, hiding their identities behind avatars. The metaverse has seen instances of groping.
While sexual harassment laws do not require physical contact in order to be considered sexual harassment, it is important to consider whether the current laws are adequate to deal with such issues. Who is in charge of ensuring user safety in the VR and gaming environments?
Legal Documentation Is Required for the Launch of A Metaverse
While there are no set metaverse regulations defining the documents an organization should have before entering the metaverse, the following are recommended for drafting and implementation.
A term of service (ToS) document specifies the rules that users must follow in order to use your website, application, software program, and so on. ToS covers a wide range of topics, including, but not limited to:
- Provisions for accountability and liability
- Policies on privacy
- User rights and obligations
- Payment information for memberships, subscriptions, and so on
- Copyright and content use
- When interacting with other users, users must follow certain rules
An excellent example of this can be found in The Metaverse Insider’s Terms of Service document. Their agreement establishes clear guidelines for copyright, service marks, limited license and permitted use, advertisers, third-party content, illegal activity, and other topics.
The popular metaverse platform The Sandbox is another example. Their Terms of Service outline the rules for asset and game creation, the purchase and edition of virtual land, the sale of assets and games and the corresponding payment structure to be used, ownership of the platform’s native content, ownership of the users’ assets and games, and the governing law and forum that will take precedence in the event of any issues.
The nature of the service a brand intends to provide in the metaverse will heavily influence the ToS clauses. The first step is to get a basic grasp on the general structure and nature of these rules.
Registration of a Trademark
Companies that plan to sell branded virtual goods and services in the metaverse should file trademark applications as soon as possible. Nike, Converse, Elvis Presley Enterprises, Jerry Rice, Walmart, Hot Wheels, and Vanity Fair are just a few examples.
Trademarking the name, logo, designs, and/or slogan you use to promote your virtual products and services is the best way to protect your brand in the metaverse. The following items can be included in a trademark application:
- Virtual items
- Downloadable software that allows users to search for, view, browse and purchase virtual goods
- Products for use in online, virtual, and augmented reality environments
- Services for entertainment
- Services provided by retail stores that include virtual goods
- Virtual reality software for interactive entertainment and gaming
- Software used to create, produce, and/or modify digital characters, avatars, overlays, skins, and so on
While the laws governing the metaverse are not yet complete, it would make sense to apply for a trademark under the existing legal categories. The more applications examined by authorities, the more likely it is that standardized guidelines will be implemented.
Because the metaverse aims to create a virtual existence, community standards are only natural. These will assist users in understanding acceptable behaviors and will protect them in the event of a problem.
The metaverse connects virtually every aspect of life—work, leisure, shopping, banking, and so on—all over the world. As a result, organizations should focus on developing community standards that value everyone’s voice, are non-discriminatory, and respect different values and beliefs, particularly from marginalized or overlooked communities.
Brands can consider the Roblox community standards in order to gain a thorough understanding of the concept.
The metaverse is expected to have its own economy, which means that virtual goods and services purchased in the metaverse will inevitably be taxed. Policies governing the taxation of virtual digital assets are already being released.
Activities liable to taxation include renting, buying, or selling virtual land, operating an e-commerce business, and so on. Organizations involved in these or similar activities should clearly state their users’ taxation policies in order for them to use these services.
Policies Concerning Privacy
As previously stated, user privacy is a growing concern in the metaverse. As a result, organizations must develop and implement privacy policies that clearly define the purpose and scope of collecting and using users’ personal information.
The privacy policies of Decantraland are a good starting point for this. It specifies the type of personal information collected by the platform, how it is used, how platform changes and updates affect these rules, and the privacy rights that users have.
We cannot predict the exact trajectory of the metaverse’s legal framework’s development and evolution. Structured documents and policies, on the other hand, will benefit organizations in the long run. Paying close attention to the issues listed above and developing potential solutions can help businesses beat the competition and excel in the metaverse.