In the era of ever-changing technology and with the development of digital
assets in virtual reality, the difference between real life and the digital
world is imperceptible. Metaverse- being one such buzzword in the recent tech
industry involves the propagation of new fora and manner of interacting with
other individuals in a virtual world.
It is an iteration of the internet that provides a user with a far more
immersive experience by way of an avatar in a virtual reality platform. The
emerging market contains several players, all of whom have a unique
understanding of what the Metaverse is and how it relates to the services it
Although some Metaverse businesses are concentrating on the monetization of the
content they provide on their platform, others are focusing on providing a
unique way of participating through digital market creation and socialization.
The latest augmentation to Metaverse is immensely driven by the very recent
ability to fully own and purchase virtual objects, characters, and properties by
way of Non-Fungible Tokens (NFTs), which allows the formation of a new kind of
decentralized asset that can be built, owned and monetized.
Block-chain technology also known as the 'crypto finance hub' makes it possible
in defining a virtual thing in monetary terms so that it can be bought and sold
by the user. As there are entire metaverse worlds based on this new economy, it
becomes extremely important to regulate such affairs at times when such
transactions may lead to a dispute between the user and the host.
The fact that there is money to be made is one thing that practically all
players in the Metaverse market appear to agree. As per the detailed market
report called "Value creation" by McKinsey & Company, the predicted market value
of Metaverse and allied technologies will surge up to $5 trillion by 2030 which
is equivalent to the size of the world's third-largest economy as of now i.e.
This market forecast is indeed a grand number. The space has been the subject of
significant venture capital interest. It seems almost inevitable that the
complexity of this area, combined with the level of capital invested, will lead
to mismatched expectations on the part of investors, giving rise to disputes.
Next stage of the internet: the ever-increasing popularity of Metaverse
Whilst some of the companies developing the Metaverse Technology are only
experience-oriented and not involving users making commercial transactions, a
significant proportion of such platforms allow a user to participate in economic
transactions within the virtual reality. A few of the platforms like Sandbox and
Decentraland allow people to buy virtual parcels of land and assemble their own
These set of constructive economies are already booming in the gaming sector and
as such these economies will attract investments of varying scales as now a user
can invest in cryptocurrencies by converting them into the local currency of a
The new platform with the endless scope and various possibilities has introduced
a new way of transacting by allowing users to buy or sell virtual property
through Non-Fungible Tokens. With an investment of over $138 billion in 2021,
the market pool would bring several developments in the area of virtual gaming
The Indian market for Metaverse and allied technology is still at a niche stage
however, it is anticipated that India will play a significant role in the
Metaverse domain due to the presence of various crucial factors including the
rising young population, booming domestic markets, active start-up ecosystem,
and a big talent pool. Knowing the potential in the market, the Government of
India has formulated the National Blockchain Strategy, 2021 which enlists the
incentives and policies that will help in framing and building the blocks of the
Despite the fact that a proper policy for the development of the metaverse is
present in India, much deliberation is required in regulating the new virtual
environment. As being in an initial stage, there would be a variety of legal
issues which will create complexities as an end number of players around the
world will be investing and transacting.
Additionally, when an investor buys a particular piece of "land" or any other
service through NFT on a platform, the rights one can enjoy as the owner of such
a digital asset are uncertain. Even if the disputes on such platforms mirror
physical world disputes, the litigation regarding cross-border dispute
resolution remains problematic.
Legal Dilemmas in the Metaverse
Over the past 10 years, we have seen the growth of blockchain technology and
digital assets. As stated earlier, transactions in the metaverse are typically
funded using crypto currencies or NFTs (non-fungible tokens), which are special
digital assets that can be anything from an image, a piece of music, or 3D art.
Some of the most significant legal subjects governing metaverse business
activities are intellectual property rights; data processing and market
These sets of transactions create some intricate legal problems. One such issue
is with regard to the applicability of existing laws and how they can be
utilized in order to protect the rights of the stakeholders.
A number of brands have filed trademark dilution and infringement cases
concerning the purchase and sale of goods and services in the metaverse. For
instance, the French fashion company Hermes has sued Mason Rothschild for
trademark infringement for his creation and subsequent sale of "Metabirkins"
NFTs, depicting bags that resembled the original Herme's Birkin bags.
Additionally, Nike has filed a lawsuit against StockX for marketing and
distributing NFTs bearing its trademarks. Given that Metaverse platforms permit
the users to style their avatars with wardrobes and other commodities held as
NFTs, these kinds of disagreements are only expected to become more common as
user demand for branded will rise subsequently. Since many platforms have a
common orientation with regard to user-preferred content, it seems likely that
the market will witness a booming counterfeit sector as seen in the real world
Along with the rise of the Metaverse, technology in both hardware and software
components has seen a surge in the filing of patent applications so as to
safeguard financial investments. Like with any other technology, as the
Metaverse develops, brands will definitely try to replicate such technology in
order to gain an edge over the market. Therefore, the types of disputes
resulting from the Metaverse are expected to include a significant amount of
Data and its interaction among the users is yet another potential legal
repercussion of the metaverse. For instance, the personal data will be processed
in a new way, involving the virtual avatar's facial expressions, gestures, and
other reactions, which the avatar could replicate during interactions in the
When interacting virtually, users may engage in altercations that, if happened
among actual people, would be considered criminal offenses The criminal
procedures code (involving assault, theft, extortion) and the law of torts
(involving civil claims for negligence) would apply in such cases however due to
the fact that there is an absence of an "actual physical damage", proving the
same would be much more complex.
Further, the metaverse also increases the possibilities of interaction between
the user and AI, opening up a new avenue for data collection. To reduce the
dangers associated with inappropriate data vulnerabilities, the platforms will
need to re-evaluate their consent and data protection policies in these
How can disputes be resolved in the Metaverse?
Currently, there is no set of rules or legislations which govern the legal
disputes that may arise out of the metaverse platform. In addition, it is
apparently unclear how such issues will be handled. The distinction between a
user's virtual identity and actual physical identity makes the process much more
complicated. A majority of disputes resulting from such transactions usually
revolve around an in-game item or one user stealing another's originally created
content by way of deliberate misrepresentation.
These sets of disagreements can be arbitrated between the users of the platform
following the steps outlined in their terms of service. For instance, the Terms
& Conditions of Roblox which is a virtual gaming Metaverse platform clearly
mentions that any disagreements among the users and the platform can be reached
out to the company's customer care, after which they will assess the query and
may decide to take action in order to settle the dispute.
The T&Cs likewise stipulate that users must accept Roblox's judgment as final.
In this way, minor disputes and user disagreements are effectively resolved by
the platform immediately without any additional action on the part of the users.
Furthermore, arbitration would be helpful in resolving the questions with regard
to jurisdiction and applicability of relevant laws as the majority of nations
lack legislation recognizing intellectual property rights in a virtual world. As
the number of users and investments in the Metaverse would increase
exponentially, there will be a shift from the traditional mode of dispute
resolution. The parties would prefer arbitration over any other mode of dispute
resolution as they will have greater autonomy to choose the applicable rules and
laws that would govern their dispute.
Further, the arbitrators possessing the relevant understanding of the metaverse
will make the dispute resolution process much more fair and equitable as the
platform in itself entails various complexities. Any arbitrator may participate
in the process and maintain anonymity. This will also help in building a more
faithful adjudication mechanism as the arbitrator is well-versed with such
technicalities. For that purpose, the user contract must clearly specify the
rules which will govern the interactions in the metaverse.
Although many decentralized platforms are yet to have any recognized
platform-centric dispute resolution mechanisms for the users, it is plausible
that some users would agree that their disagreements should be settled by
delegating decision-making to other users, perhaps through a DAO (a
decentralized autonomous organization).
Leading companies in the blockchain Metaverse platform have made efforts by
giving control over platform-related decisions through DAOs, which let users
vote on proposals and often assign voting power based on the number of tokens
they possess. This would enable the users to communicate and work together in
new ways that aren't possible with a centralized system. Contribution from such
communities will indicate a more invested and concerned community.
The Metaverse and its emerging market have transformed the way of interactions
among individuals by making the use of virtual and augmented reality devices.
The most appealing feature is how realistic it feels, but this can also lead to
unexpected complexities. In order to deal with the nuances of the market, a
robust legal framework from the global community is required before the
technology develops with an increased user dependency.
The stakeholders be it tech giants or other entities, must possess the relevant
understanding of the platform and should consider the dispute resolution
mechanism prior to making any investment. In particular, the dispute resolution
mechanism of the platform should be considered before making any investments.