What Laws Govern the Metaverse?

• Blockchain Council
• January 16, 2023

Imagine the scenes from action-packed science fiction films when heroes battle ferocious monsters or fly spacecraft. Exhilarating!

They have largely filled a sizable chunk of the imaginary world we had as children. The giddy feeling that tickled our stomachs when holding those 3D glasses remains one of the softest memories of our younger selves. Holding those ordinary-looking glasses gave us the power to run our imagination free and enjoy everything the movie creator had planned on offering from his sci-fi treasure trove.

If we think about the period a few years back, we realize that sci-fi fiction and 3D animations were considered to be rare, something unrealistic. However, presently, they have become more mainstream. Technology has made creators think beyond the limits of human power. We can now enjoy advanced versions of animations, special effects, and virtual engagement using the new-age resources.

Exploring the virtual world has always been a major push point for the curious human mind. We always try to find answers to the unknown, the unexplored, and the unchallenged. While pulling all the strings of our great minds, we finally discovered ‘Metaverse.’ The next-gen technology opens doors for a virtual world where people can connect, interact, and experience real-life scenarios. It exists as a digital space on the Internet where users can immerse themselves in an intuitive virtual environment.

Stuffed with an array of unprecedented features, Metaverse is everything we want our future to be like. In no time, the virtual world technology has emerged as one of the most popular destinations for social networking, e-gaming, and business activities. In this article, we will learn more about Metaverse technology and its evolution. We will also discuss the laws that govern the Metaverse realm. Let’s jump to our main topic quickly:

Tit-Bits about Metaverse Technology

Metaverse is a term used to describe an ecosystem that combines virtual reality and mixed reality to offer real-time interactions between people. It comprises concepts such as blockchain technology, Virtual Reality, Augmented Reality, and AI to help users engross themselves in immersive experiences. The technology unlocks the potential of a simulated real-life environment where people can talk, work, and play using specialized glasses, headsets, controllers, and related resources.

With the Metaverse cluster, participants use digital avatars as their representatives to build a community in the virtual space. Users navigate through the Metaverse using voice commands, eye movements, or controllers. The VR or AR headset makes the user delve into the virtual realm through the simulation of physical sensations. This makes the users feel that whatever they are seeing or experiencing in the virtual setup is real and they are enjoying it by actually being there. Games such as Horion Worlds, Rec Room are some of the popular examples of Metaverse applications.

Metaverse blockchain strives to create a virtual space independent of the physical elements of the real-world using modern technologies. The ecosystem allows people to socialize and interact in a plethora of virtual experiences. Using Metaverse’s in-built digital economy, the users can indulge themselves in a world of entertainment, experience, and earnings. The users can store their virtual assets in a metaverse wallet and rest assured of the security of their funds.

Check out our Guide on What is the Metaverse?

Growth of Metaverse 

It is a well-known fact that technology evolution took its bullet-train speed in the 1900s when the World Wide Web came into light. Technologies such as 3D and Virtual Reality (VR) gained popularity in the marketspace. Despite all the developments, Metaverse made its first appearance only in 1992 when Neil Stevenson highlighted the concept of virtual reality through the characters of his novel ‘Snow Crash.’

Further in the early 90s, a firm called Sega launched VR gaming solutions such as SEGA VR-1 to offer immersive gaming experience to players in arcades. All these inventions can be seen as the starting push for the thriving Metaverse industry we are seeing today.

Metaverse was growing slowly and steadily but then ‘something’ happened that brought the technology to the mainstream field. This was Facebook changing its name to ‘Meta’ in a bid to show its newly-developed focus in the sector. Last year, when the social media giant rebranded itself into Meta, CEO Mark Zuckerberg confirmed his plans of expanding the brand to new-age technologies like Metaverse, NFTs, etc.

The scope of Metaverse is expanding quickly. Where earlier it was limited to gaming projects, today the technology has become an inevitable part of multi-billion-dollar worth industrial realms. Its application is widely appreciated in the sports sector, entertainment world, business field, etc. Global music brands and producers are shifting to Metaverse for hosting concerts and interacting with fans. Popular sports clubs like Manchester City are building virtual stadiums for sports lovers to enjoy their favorite matches from the comfort of their homes. Metaverse unlocks opportunities for brands and celebrities to launch their official merchandise for fans to purchase.

A Look Into Laws Governing the Metaverse Industry 

Despite being around for more than a decade, Metaverse is still in its primary development stage. There is a lot to be explored, deciphered, and decoded before we finally make progress in the field. When it comes to a regulatory framework, Metaverse fails miserably as presently there are no laws that can be directly attached to it. This makes it a risky spot for those who advocate the necessity of regulations and laws for proper functioning of a global industry. To make things somewhat better, the Metaverse realm has accepted to abide by the general laws that apply to the web so as to bring a sense of uniformity, security, and transparency within its ecosystem. In the pointers given below we will learn about the Internet laws that apply to the Metaverse and related virtual spaces. Let’s learn metaverse laws here:

• Copyright Law

Copyright law strives to provide protection to the original work of creators, artists, and writers. When we talk about Metaverse, the statute incorporates user-generated digital content such as avatars, virtual real estate, and other artwork. Platforms such as The Sandbox allow users to build, develop, and own virtual areas called ‘LANDS.’ People are spending bills worth thousands of dollars to grab a piece of the Metaverse real estate. With the surge in popularity of digital assets, copyright law becomes significant for the Metaverse domain.

The creator of a copyrighted item has the exclusive right to recreate, trade, and display the work out to others. They can authorize other people as well to do the work on their behalf. If the authorized person violates the law, then the original creator can sue them for copyright infringement. If an artist creates content in Metaverse that is similar to a copyrighted content in the physical world, then they can be held liable for infringement of the copyright.

For instance, if a person created an avatar of an NFT similar to a copyrighted avatar or NFT, the copyright owner can sue the former for infringement. They can seek court’s help to stop the other party from distributing the items any further to investors. The party at default might also have to pay money for the damage caused to the original creator.

• Intellectual Property Laws 

The IP law preserves the right of creators against their inventions, trademarks, or other creations. With the rise in the popularity of Non-Fungible Tokens, which are an inevitable part of the Metaverse space, IP law has become quite important for proper governance. Technology firms will soon compete to develop more advanced AR and VR tools including high-tech eyewear, headsets, etc. This will unlock new opportunities for Intellectual Property Rights in the sector like new patents for software and devices. New brands will come up paving the way for new trademarks for the virtual world users. For instance, some prevailing trademark guidelines that apply to Metaverse items are:

• Class 9- Downloadable virtual items
• Class 35- Retail store services encompassing virtual products
• Class 41- Online entertainment services

The creation of enhanced online portals will lead the way for new patent and copyright safety measures for software-focused inventions and games related to blockchain and crypto.

• Contract Law

In Metaverse, contract law levies the formation and enforcement of contracts made between the users. The agreements made here incorporate a plethora of activities such as trading virtual goods and renting virtual lands. Like any other contract, an agreement in Metaverse compels both the parties to follow the terms of the pact. In case one party fails to comply with the terms of the contract, the other party has the right to sue them for breach of contract.

Suppose, a user agrees to sell a virtual product on Metaverse to another user and they enter into a contract for the same. However, the purchaser fails to make the payment for the good. Then, the plaintiff can request the court to seek the principal amount as well as the damages from the defaulter.

• Tort Law

Tort law directs towards civil wrongs including property damages and personal damages. In Metaverse, the statute governs any harmful activity caused by the users to other participants. This can include emotional stress, physical assaults, and property damages. For instance, if a person physically injures another person within the Metaverse ecosystem, then the latter can sue the other for it. The accused party will then be forced by the law to pay for the injuries, medical expenses, and related damages pertaining to the act.

• Defamation Law

The statute protects people from false accusations and damaging comments by any other person. In Metaverse, it refers to user-generated content that is critical of another brand. Falsely accusing someone and damaging their social status can make the defaulter get charged under the defamation law. Metaverse training programs often provide elaborate knowledge on metaverse laws for better understanding on the subject.

• Regulation of NFTs and Tax 

Non-Fungible Tokens in the Metaverse are subjected to traditional financial regulations such as commodities, banking, and securities laws. The way in which these assets are created and exchanges might establish them as investment contracts and thus bring them under the purview of securities laws. The issuance, lending, and trading of cryptocurrencies in the metaverse is likely to apply banking, money transfer, and other financial regimes to the system.

The purchase and sale of virtual goods attracts tax implications involving sales tax and income tax regimes. Financial authorities have already brought virtual assets or crypto under the tax umbrella making the profits taxable for the earners. This makes the NFTs used in Metaverse also attract tax implications similar to crypto.

Conclusion

Metaverse is growing exponentially with constant support from investors and business entities. The virtual world makes users enjoy real-life experiences in a simulated environment with unmatched potential for entertainment and earnings. The laws explained in this article will help the readers get a clear picture as to what they might come across when exploring the Metaverse field. If you are willing to learn more about metaverse, then Blockchain Council can be your best partner. The platform offers a wide range of metaverse certification programs. The metaverse course list available offers subjective knowledge and practical training to the users.