Metaverse Law: Property, Identity & Disputes In Virtual Worlds

🕒 4 min read.

The metaverse — a shared, persistent digital universe where people interact through avatars — is rapidly becoming a new legal frontier.
What was once science fiction now drives billions in digital real estate, NFT transactions, and cross-border commerce.

But as people buy land, trade goods, and even get married in the metaverse, one pressing question emerges:
How do we regulate a world without borders?

In this evolving landscape, the law is racing to catch up with technology — and the answers will shape how we live, work, and own property in the virtual age.

The Metaverse: From Game to Global Economy

Originally popularized through gaming platforms like Second Life and Roblox, the metaverse has expanded into a full-scale digital economy.
Platforms such as Decentraland, The Sandbox, and Meta’s Horizon Worlds allow users to buy land, build businesses, and host events — all using blockchain-based currencies like Ethereum or platform-specific tokens.

In 2022, global spending on metaverse-related technologies exceeded $120 billion, with projections expecting it to reach $800 billion by 2030 (source: McKinsey & Company).

But with this explosion of virtual wealth comes a familiar problem:
Where there’s money, there’s dispute.

1. Virtual Property Rights: Who Owns What?

Ownership in the metaverse is not as straightforward as it seems.

When you “buy” virtual land or a digital asset, you don’t own it in the same sense you own physical property. You typically own:

A license to use digital assets within the platform’s terms of service, or
A token (NFT) on the blockchain that represents ownership of a digital object.

This distinction is crucial because platform providers retain ultimate control. They can suspend accounts, revoke access, or even delete assets — raising questions about due process and contractual fairness.

Legal Grey Areas

Decentralised worlds (e.g., Decentraland) grant ownership through blockchain tokens, but still depend on real-world governance for dispute resolution.
Centralised platforms (e.g., Meta’s Horizon Worlds) can unilaterally alter rules or delete content, leaving users with little recourse.

The issue becomes: Does digital ownership deserve the same protection as real property?
Courts haven’t fully decided, but early cases suggest an emerging recognition of virtual assets as property capable of legal protection.

2. Identity, Reputation & Digital Personhood

In the metaverse, your avatar is more than a character — it’s a digital extension of your identity.
But what happens when someone impersonates your avatar, uses your likeness, or commits fraud in your name?

Under existing law, identity protection depends on jurisdiction:

In the U.S., rights to likeness and identity fall under privacy and publicity laws.
The EU’s GDPR extends to virtual data, meaning avatars tied to real individuals are considered personal data.
Some Asian jurisdictions, such as South Korea, are pioneering frameworks for “digital personhood”, recognising avatars as quasi-legal extensions of the user.

Yet no global standard exists. This creates a troubling vacuum for cyberstalking, virtual harassment, or avatar-based impersonation, which can cause real psychological and financial harm.

3. Contracts & Commercial Disputes in the Metaverse

As virtual businesses flourish — from digital fashion houses to concert venues — so do contracts and disputes.
These often take the form of smart contracts, self-executing agreements stored on blockchain that automatically enforce terms.

However, they pose unique legal challenges:

What happens if a smart contract malfunctions?
Which jurisdiction applies when the parties are avatars from different countries?
How do you sue an anonymous blockchain address?

Traditional conflict-of-law principles falter here. In most cases, the platform’s Terms of Service quietly determine jurisdiction and applicable law — often defaulting to the country where the platform operator is based (e.g., the U.S. or Singapore).

This raises new ethical and legal debates about digital sovereignty and consumer protection in cross-border virtual environments.

4. Crime and Misconduct in Virtual Worlds

Virtual worlds have seen a rise in financial fraud, harassment, and even sexual misconduct.
In some cases, victims of “virtual assault” have reported real trauma — but law enforcement remains unsure how to prosecute such acts.

For instance:

Virtual fraud (e.g., stealing NFTs or crypto assets) may constitute real-world theft, as seen in a 2023 case where Dutch courts prosecuted the theft of in-game digital property (Rechtbank Midden-Nederland, ECLI:NL: RBMNE:2023:1324).
Harassment or stalking in VR platforms may violate platform policies, but rarely results in criminal charges.

The central question: Can intent and harm in a virtual world be treated as real-world crime?
Legal systems are divided, but trends indicate growing recognition of digital conduct as real conduct when it causes tangible harm.

5. Jurisdiction Without Borders

The metaverse operates beyond geography, but the law does not.

Which court has authority when a dispute arises between avatars in different countries?
For now, answers depend on:

The platform’s registered headquarters,
The user’s country of residence, and
International private law principles such as forum conveniens.

However, the absence of harmonised global frameworks makes enforcement slow and inconsistent.
Some experts propose a Metaverse Arbitration Court, modelled on the Internet Corporation for Assigned Names and Numbers (ICANN) or the World Intellectual Property Organisation (WIPO) domain dispute system — but such mechanisms remain theoretical.

6. Intellectual Property (IP) in the Metaverse

From virtual fashion to architectural designs, intellectual property law is already clashing with metaverse creativity.

Who owns user-generated 3D content?
Can virtual sneakers infringe real-world trademarks?
Do NFTs confer copyright ownership or only digital display rights?

Courts are beginning to clarify:

In Hermès International v. Rothschild (2023), a U.S. court ruled that “MetaBirkin” NFTs infringed the Hermès trademark, affirming that digital representations can still violate IP rights.
Meanwhile, artists argue for “fair use” in digital art, setting the stage for new creative boundaries in virtual economies.

7. Governance and the Future of Virtual Justice

Some metaverse platforms experiment with community-based governance, where token holders vote on rules — a kind of “digital democracy.”
Yet critics argue these systems resemble corporate states, with unequal voting power and opaque decision-making.

As metaverse societies evolve, they will need:

Constitutional frameworks for user rights,
Accessible dispute resolution, and
Interoperable digital identities that respect privacy and ownership.

The law must evolve not to dominate virtual worlds, but to anchor them in justice.

Conclusion

The metaverse is not lawless — it is pre-law, awaiting structure.
It challenges our understanding of ownership, identity, and even existence itself.

Lawyers, technologists, and policymakers must therefore collaborate to design frameworks that protect both creativity and accountability in virtual spaces.

Because as the line between physical and digital life continues to blur, one truth remains: justice must follow us wherever we go — even into the metaverse.