The Metaverse and The Law

By Arthur Ddamulira

Neal Stephenson became a technological Nostradamus after the publication of his novel, Snow Crash. This status came mainly due to the Metaverse which he created in the book. His characters used digital avatars to explore the internet and escape their dystopian reality. When Mark Zuckerberg announced Facebook’s rebranding to Meta on 28th October, he effectively gave power to Neal’s idea by endorsing the Metaverse as the next internet frontier.


The "metaverse" is a futuristic concept of the internet, made up of persistent, shared, 3D virtual spaces linked into a perceived virtual universe. This will be a virtual world where you can interact with other people and places using avatars. Even the screen you are using to read this article, and the article itself, along with all real-world entities will have a place in this utopian world. While this may seem ridiculous, the same goes for anyone who would have described the iPhone in 1994. Similarly, the Metaverse is the next leap, and with it, new challenges, risks, and opportunities. This article will explore some of the legal issues that may arise in relation to the Metaverse and how this new technology will stretch the law and its application.


One key issue will be intellectual property ownership. The US District Court for the Eastern District of Virginia held that an AI system cannot be an inventor on a patent. In the Metaverse, humans will take up avatars to engage with all aspects of that world. Issues may arise where virtual creations are made by avatars and AI aspects embedded in them. These creations may not gain certain types of intellectual property protection but will still be valid inventions worthy of this protection. Currently, the centralized nature of cyber technology means that governing bodies can enforce the law against online companies. Shifting commercial and social activities into a mixed reality would pit established legal orders against the virtual world, which is the realm of code. Variations of blockchain technology could be used to enforce IP protections and this may start to appear like self-regulation. If this develops and expands to purchases and interactions within the Metaverse, it could lead to a system of legal guidelines, regulations, and enforcement which regulatory bodies must be careful to avoid or control.


Technology companies envision that the metaverse will have multiple platforms. Some platforms will use blockchain and allow individuals to purchase and build environments using NFTs and cryptocurrencies. Let’s unpack this.


First, blockchain technology, while arguably safe, is still largely unregulated. There is no blockchain-specific legislation or regulatory rules in the UK. The absence of clear legal guidance regarding this technology now will lead to greater difficulties once it is utilised in the Metaverse. Secondly, any purchase within the Metaverse is most likely to be done using cryptocurrencies. Assuming the Metaverse is inevitable, the current attitude held by regulators will have to change significantly evolve. In late 2020, the FCA announced that retail cryptocurrency derivatives would be banned to protect consumers. Stable coins also continue to be banned in the UK. However, considering that individual users of the Metaverse will have to utilise digital currencies, regulators ought to develop frameworks that recognise and integrate these currencies into mainstream finance. Conversely, regulatory bodies should be set up to engage and collaborate with virtual developers to secure the use of cryptocurrencies in these virtual spaces. The law should also ensure that ownership in NFTs can be enforceable in rem since virtual users may easily evade enforceability depending on their location in the world at any point. Post- Brexit, the UK recognised crypto assets as property but still has no cryptocurrency laws. Considering that most of the Metaverse will allow avatars to purchase assets backed on a blockchain, the courts may be faced with increasing cases over ownership, control and use of these assets.


For consumer law to protect users from abusive practices in the metaverse, it will need to scrutinize the commercial ways in which users transact in the metaverse and the marketing campaigns within the metaverse. To avoid making written terms redundant within Metaverse interactions, our legal rules could ensure that consumer protection laws are transposed directly into code, leading to an ab initio compliance. Furthermore, it should be possible to imply pre-contractual information in the Metaverse. From an antitrust perspective, regulators should be able to access the metaverse to monitor market practices, identify anti-competitive conduct, and removes barriers to accessing vital facilities for new market entrants. For example, this may involve allowing competition authorities access to source code. However, all this should be done in the best interests of users and good competition.


Clearly, the Metaverse will compete with the physical world and our legal orders. Current laws will not necessarily be apt for issues arising and new legislation will have to be enacted. However, it is crucial that regulation does not stifle the benefits these technologies can bring about in our lives.