Given their meteoric deployment outside government control, you might assume that metaverses are digital frontiers where the law doesn’t apply.

But is it true we can do anything and everything in these alternative worlds, where users interact in real time through their avatars?

• Read more: What is the Metaverse?

 

Is it like the Far West?

The basic legal principles remain the same in the metaverses as they are in "real life.” However, equivalencies specific to virtual platforms must be found for those principles, since the platforms aren’t subject to the same frameworks as conventional reality.

Litigation has already started in the metaverses. As a result, we now know that criminal law, civil liability and contract law provisions apply there too.

Even though the metaverse is a dematerialized world, the legal issues related to its regulation are very real. The metaverse is currently embodied as a horizontal power, without state intervention. It is therefore necessary to carefully examine the interactions that take place in this new alternative universe, before it turns into a digital lawless zone. [Translation] 

Emmanuel Pierrat — Metavers et droit d'auteur (I/II)

 

Buying and selling in the metaverses

Digital real estate transactions are a concrete example of how the law is applied in the metaverses.

According to Forbes magazine in 2021, the value of the smallest digital land parcels in the Decentraland metaverse had risen from US$1,000 to US$13,000 in barely one year.

Users can develop their virtual land however they want: build a home, open a store, set up an amusement park, etc.

As with "real" neighborhoods that are undergoing gentrification, this popularity is driven by investors who anticipate that their land will become more valuable in a few years as individuals and businesses decide to develop their own digital facilities there.

Land sales in a metaverse are subject to the same contractual rules as those on the web (for a domain name for example) or in the real world, with or without the involvement of a real estate broker.

 

NFTs are a key component

Ownership of digital property has been facilitated by the development of NFTs (non-fungible tokens). In a metaverse, an NFT guarantees the authenticity of a property, which could be a digital land parcel.

When a transaction is carried out, the NFT associated with the virtual land is stored in a digital wallet, such as the ones offered by OpenSea.io, MetaMask and Binance.

Transactions involving goods available in the metaverses are usually done through those digital wallet platforms.

• Read more: What the bleep is an NFT?

 

Advantages and disadvantages of using NFTs

NFTs are based on blockchain technology, which allows all transactions to be recorded and stored securely.

This method ensures that each transaction is completed properly and makes it possible to trace all the people who have owned an NFT back to its origin.

The downside is that NFTs are currently traded through digital wallets. If these intermediary platforms experience technical issues or are hacked, then the owners of the NFTs may find themselves left high and dry!

• Read more: Understanding blockchain

 

Is the metaverse secure?

Let’s say your friend Addison buys some land in the Decentraland metaverse so she can build a virtual home. A few months later, her land has disappeared from her digital wallet; it’s been stolen! Can Addison assert her ownership rights?

As mentioned earlier, criminal law applies in the metaverses so there are consequences for the theft of her property.

However, the metaverses aren’t monitored by law enforcement. What’s more, very few organizations govern the activities taking place there.

Addison will also have to prove that a theft actually occurred before an investigation can be launched.

 

Liability, contracts and metaverses

In our example, if it turns out that an IT issue caused the virtual land in Addison's wallet to disappear, she could take legal action against the company administering her digital wallet.

The problem is that the company holding her portfolio has probably made her sign Terms of Use which state that Addison has no right of recourse in case of IT issues.

That means Addison may spend months without being able to take advantage of her digital land, simply because of a technical screw-up. 

• Read more : Copyright — Social media and Terms of use

 

Where are the authorities?

Addison’s situation would be easier to sort out if regulatory authorities were operating in Decentraland.

The reality is that most of the regulatory authorities that oversee online business transactions have not yet adapted their practices to the metaverses.

For instance, Quebec’s Autorité des marchés financiers and Office de la protection du consommateur don’t oversee the metaverses.

For that reason, even though contract law applies in the metaverses, it’s more difficult to put it into practice and exercise your rights there.

 

What about criminal law?

As is the case for the Internet, criminal law also applies to metaverses but adjustments are needed.

It’s no surprise that this new technological ecosystem opens the door to fraudulent practices, illegal transactions and digital crime.

Unfortunately, a case of sexual harassment has already been reported in the Horizon Worlds metaverse operated by Meta (formerly Facebook).

Meta’s response was to recommend that the user block the offending users and change her Horizon Worlds settings.

Criminal investigations are still rare for crimes committed in metaverses because the relevant authorities have been slow in gaining the knowledge and resources to take the necessary steps.

 

Takeaways

Although the law applies to the metaverses, the technical nature of the methods used in metaverses (such as NFTs) make it more difficult to enforce the law. Plus, at this point in time, the absence of regulatory authorities makes applying the law even more difficult.