Metaverse and rights – The Cryptonomist

If 2021 was the year of NFTs, 2022 promises to be the year of the Metaverse. But this abstract entity cannot be without rights. Therefore, the Metaverse must also have its own legal status.

Facebook and other giants choose the metaverse

It was of course the launch of Mark Zuckerberg’s Metaverse that set the wheels in motion, pushing virtual reality (VR) technologies beyond the boundaries of gaming and entertainment.

In the eyes of Facebook’s billions of users, a powerful narrative was put forward: there were endless possibilities in terms of applications and convergence of existing technologies. 

The race to the Metaverse has begun, and major web and IT giants, Microsoft among them, have started or are preparing to pour billions of dollars of investment into this new field.

It is easy to foresee that many activities and businesses of a digital nature will find a natural place of expression in this developing ecosystem.

Defining the metaverse

In an attempt to understand the phenomenon, many have tried to give a definition of the Metaverse, mostly using the inevitable reference to Neal Stephenson’s novel Snow Crash, or experiences such as Second Life.

The truth is that it is still such a fluid concept that any definition today risks being inadequate with respect to future developments.

In the meantime, however, the Metaverse is already perceived by many as a sort of parallel universe in which it will be possible to give shape to existences that are alternative to the real and physical dimension, a realm that can offer a sort of extraterritoriality, in which local rules apply, still to be written.

However, this kind of perception is largely illusory and mistaken, and requires an effort of awareness on many legal aspects.

It is inevitable that, for a certain period, until the boundaries and dynamics of the Metaverse become clearer, a kind of Wild West will be unleashed in the conduct of those who will operate or simply move in this new world.

Rights in the metaverse

Today, there is obviously no legal definition of the Metaverse.

This is essentially because, in the eyes of the law, the Metaverse is nothing more than a set of legal entities (persons, companies, etc.) that use a series of technologies to perform acts that, depending on the case, may have a certain legal relevance.

For instance, if I buy a certain application or subscribe to a certain service available in the Metaverse Store, there will not be a contract perfected in a sort of no-man’s land by my avatar with a virtual entity that lives and exists in that no-man’s land.

Instead, there will be a contract, valid and in force in the real world, between me and the company that made that application or that provides that kind of service on the Metaverse platform.

The same is true if I create a marketplace for the sale of NFTs in Metaverse: I, and only I, will assume a series of obligations and I will be the owner of rights towards those who put their work up for sale through my marketplace and those who then decide to buy it. Not the respective avatars.

Another example: if I decide to start a business that takes on the task of collecting investments on the Metaverse for the purpose of realizing initiatives that basically have the connotations of speculative or financial instruments, it will be my problem to make sure that I have all the papers in order to do so. So, I will have to have all the requirements of the legislation (e.g. licences and registrations in the appropriate registers), I will have to comply with all the rules of transparency and disclosure, anti-money laundering regulations, etc.

And, of course, I and I alone would be responsible for any violations. Certainly not my avatar and certainly not before a virtual judge.

The first critical points of the metaverse

It is clear that the immaterial nature of many activities and the global extension of a platform like the Metaverse and of what will probably be future alternative platforms, entails practical difficulties (such as, for instance, that of understanding each time which law is applicable, or which judge or authority to turn to in order to claim one’s rights).

Now, apart from these practical difficulties, which are bound to be resolved with time and practical application, it is worth reflecting immediately on what may be the areas of law of greatest interest in the affirmation of the Metaverse.

A first critical area is certainly the collection and processing of personal data.

Whatever activity is carried out in the Metaverse (today, let us say, mainly in the Metaverse of Meta), all data will inevitably pass through the servers of the owner of the platform. This poses a first problem, since it is true that there is already an important body of law regulating (even in a very strict way) the whole matter. On a practical level, however, one has to reckon with the difficulty for users to verify the actual compliance with the rules by the various service providers. Moreover, for multinationals such as Meta (which, in particular, was directly involved when it was still called Facebook), the questions raised by the Court of Justice of the European Union in the Schrems I, II and III judgments on the export of data collected outside the EU and the protection thresholds granted to users in the various third countries remain open and on the table.

A second issue is that of the various service contracts: very often the “terms and conditions” submitted to users have cryptic wording, obscure clauses, obligations that are not clearly defined, and just as often have an extremely questionable legal standing.

Another extremely sensitive area is that of all the rules, and in particular anti-money laundering rules, when services of a financial nature are offered on the market.

And this leads to another crucial issue. That is, that of the correct identification of users hiding behind an avatar, in all those cases in which ascertaining the actual identity is crucial for the correct imputation of legal relations and effects.

This, for example, is necessary in those cases in which it is essential to verify that a provider of legally qualified services (let us say, precisely, in the financial field) is in possession of the titles and authorizations to supply that type of service and if they offer adequate levels of guarantee. 

All of these cases have already been seen in the vast prairie of online business. But the technological peculiarities of this particular medium open the door to other possible unprecedented cases.

One example is the case of sexual harassment raised in Canada, which has recently received a certain amount of media attention, allegedly involving a female user on the Horizon World platform. It is worth noting that augmented reality accessories, which are rapidly spreading, allow the perception and transmission of a series of tactile sensations that directly enter the physical sphere of users. This implies that the actions of one user are potentially able to determine physical consequences for another user.

In short, the frontiers of development of the Metaverse are still to be explored, but it is certain that in order to venture into this new world, whose boundaries are still undefined, it will be increasingly useful to have a good lawyer at hand.