As with most technology advances legal rights and remedies often need to play catch up, writes Hilary-Stewart Jones, Chair and CEO of Skywind Group.

If the internet changed our world forever, the metaverse will put our working, learning, socializing and playing experiences on steroids, but in spanning the virtual and physical worlds, what legal protections and rights exist for the participants? Does it merit wholesale adoption by industries and consumers? What impact, for example, will there be on the gambling industry?

If we go back to basics, the metaverse. Non-capitalized. Facebook gave the clearest of messages when it rebranded to Meta in 2022 (presumably meaning any metaverse it creates will be a Metaverse). For the rest of us ordinary mortals, it is essentially a virtual realm enabling us to fully replicate physical interactions, underpinned by a digital economy and augmented reality.

Avatars will be our metaverse doppelgangers. We have seen the movies and it would be easy to dismiss the technology as largely only benefitting the gamer’s market, but the anticipated benefits will not just be entertainment, albeit the legal issues that the games market has already addressed will at least guide other industries who look to deploy products in the metaverse. There will be economic benefits for the currently 1.7 billion unbanked individuals in the world with quasi-branch support, and alternative economies such as crypto, deFi, (decentralized finance for crypto and non-crypto) separate gaming “fiat” and tradeable tokens, albeit the “immersion” for unbanked customers may still may be limited via mobile and in any event less avatar driven.

There will be health care benefits in speeding up diagnostics and dispensing of medicines as well as teaching, pastoral care and mental health support. However, lawyers always want to rain on any parade, not least when they are asked to address problems late in the process, where the art of the possible blinds people to the art of the responsibly possible. As stressed though, the games industry has at least started to consider some of the more pressing problems.

One of the most important issues to arise is who owns the rights to any avatar deployed, its look and feel and anything it is directed to create or do as an avatar. Will image rights be protected if they are based on facial mapping of the creator, or are clearly recognisable, and will the law prevent image high-jacking? ?Assuming we create a whole new image/persona, the sophistication of the output is not the same as the limited palette usage of say a text personalization and the gamer’s personalizing in-play representation in the ?early rudimentary games so does that mean we can protect the work effort? How will we address cross-border protections? Also, will copyright and similar rights apply? We cannot copyright performance in our daily interactions, but there is not the same unique creativity afforded there, as exists in some metaverse experiences, where there is clear scope for potential entertainment of others and elevated streaming potential.

Copyright laws and performance rights cover myriad processes of creativity, with slightly different protections depending on who was responsible for what was created where, not easy to determine in a multi-jurisdictional or no jurisdictional metaverse. In addition, some of the tools deployed will include the programmer’s input and creativity. Is the IP to be in split ownership? In the gamer’s world this is normally covered by strict licensing and terms of contractual engagement, but that does not mean this approach has adequately resolved the conundrum. Dispute resolution in the gamer’s world is becoming more sophisticated and courts will not necessarily allow the games provider to have the last word; a case reported in China in December 2022 afforded the gamer opportunity to challenge the capped compensation offered by the provider in the terms and conditions, which was the fixed asset value of the wallet (participation costs) despite the market value being more, due to the effort of securing in-game items and the popularity of the game. The court not only sided with the gamer but urged courts and lawyers to understand the dynamics of the gamer’s world and potential consumer legal rights in connection with the games community generally, without which, it stated, it would be impossible to be equitable in judging the binding nature of licensing terms.

Certainly, in the gambling environment the provider will have in most cases, by comparison to the gamer’s universe, a vested interest in the outcome (unless the gamer is betting against the “home-team” and even then it will not be like a banker’s gambling game designed to give a house edge) so the operator will not only need to monitor the game, but also interact with players. Also, a gambling provider will need to be licensed to use and capture a wagering avatar’s actions to ensure fairness of play, but whether there will also be widespread permissions sought and given for re-streaming of play is too early to tell. However, this will impact proprietary IP and privacy/data protection of which more below. Nonetheless, what is highly likely is that the average regulator will insist at the very least, that any player rights being waived are properly explained prior to a player being obliged to agree to terms and conditions.

Much has been written too about the value of the de-centralizing metaverse and the removal of the “big data” tech companies, who have shamelessly harvested and exploited data, and personal data whist acting as the critical exchange or middleman. Supporters certainly believe it to be the heralding of a new data democracy, with personalized tools of encryption which will allow safe peer to peer exchanges as well as storage and movement. Others are more cynical; users will still be reliant on technology providers, including those who produce or enable tokens to be used, as well as say, the metaverse VR headset manufacturer.

Are we really ensuring control of data and privacy or merely moving data repositories? At least the big data companies are now heavily regulated; de-centralization will take us into the unknown. Also, the avatars will still be sharing personal data/habits and ultimately identity composite clues with unknown persons who themselves are only identified by unique tokens/persona but are otherwise avatar strangers. The latter may not have the exploitative reach of say a Facebook, but what prevents them from making disclosure and/or commercializing the other avatar’s data, especially where they have scant understanding of the law. There may not be the same data protections that apply to companies controlling and processing personal data, but privacy protections may still bite, even if full protections are deemed in law not to exist (because they only apply to humans). Perhaps, for example avatars and their hosts will be deemed to have rights to be able to protect their image and related details being re-published outside the expected parameters of use by reliance on rudimentary privacy protections.

There will always be governmental/regulatory overrides too. There have already been tensions between gambling regulators, and operators, where the regulators, who may have had the best of intentions in protecting players, nonetheless cheerfully violate their privacy in reviewing their spending and gambling habits, where the player has not requested regulatory intervention nor has any knowledge of the same. In the gambling world therefore, it seems that the player may never have full sovereignty over personal data. Likewise, with the use of the metaverse to facilitate crimes. There will need to be monitoring, whistleblowing and blacklisting so maybe we will end up with regulators and governments as the de-facto big data gatekeepers with smaller tech companies only having a smattering of knowledge. The problem with the latter, is that we still have no idea what data leakage there may be, and who will be able to co-ordinate/cross refer that data outside scrutiny and regulation.

This gives rise to other issues, namely accountability and policing. If we are taking back (or partially) our rights to our virtual selves, who do we blame (and who can we sue/complain to) when our rights are nonetheless misused and violated or our identities hacked?? It is unlikely that governments and regulators will step forward and the smaller tech companies will deny ownership and hence responsibility. Crimes and torts can still take place in the metaverse where abusers and trolls can defame, harass and abuse in a more terrifying way. If social media usage in part booms because it allows anyone to have a voice “heard” by millions, it is also the cause of its fundamental flaw – people are encouraged by the anonymity and the reach of the platform to become nastier versions of themselves. There also appears to be encouragement to do the unthinkable – gamers are groomed to normalize violence as part of the games and to pillage, destroy etc., and there are already disturbing stories of a child avatar being gang raped in the metaverse. Governments will be likely to only want to give priority to more serious crimes potentially leaving a concerning gap where metaverse abuses may go unchecked.

Certainly, use of technology can be subject to the manufacturer’s or licensor’s terms and conditions, in the same way as games will have game play rules as well as expected behaviours and rules of engagement, but policing becomes problematic especially where there are non-linear interactions like debate and discourse rather than a set activity and game start and finish, with a provider who can intervene/monitor as needed.

Technology is already addressing issues of identity to ensure the end user behind the avatar is verified – the concept of self-sovereign identities – using a combination of real-world verification data, and up to date biometrics, but one still needs to set the legal parameters for accountability and usage (will there be an age bar for example?). Some have suggested a registration process for all avatars (which could include image registration for those with the courage to break with anonymity). However, for those who elect to divorce from their real image, this will not necessarily deter bad behaviours, unless one can prosecute and fine the avatar’s creator and host. Others have suggested a compulsory insurance requirement, but this is always likely to be controversial where the many will not want to pay for the failings of the few.

What will be fascinating also is to see how gambling games may appeal in the metaverse. Currently there are the commercial challenges that do not exist online (e.g. requiring gamblers to buy headsets) and hardened online gamblers may not want to replicate a bricks and mortar environment, or even find it appealing. Moreover, those whose preference is the latter may not be of the age demographic to embrace the metaverse. Also, if regulators struggle to address crypto and gambling, imagine the head-scratching that tokens (fungible and non-fungible) will provoke given their range of use and value – we are not just talking about in-game trophies but a whole variety of value propositions with roots in ICOs, creativity and even personal “credit” ratings for “good” interaction or behaviours.

However, what is clear is that the metaverse is not the flying car future but a reality and an imminent one.? What governments and regulators cannot afford to do is only regulate after widespread adoption, and plainly there needs to be some international standardizations before the cross-jurisdictional issues become uncontainable. Finally, do certain industries embrace the technology simply because it is there, or wait for the real value proposition and interest to manifest. In the gambling industry, the most likely outcome is that the bigger companies will look to the small tech VC funded companies to build the products, and they will then swoop in and buy at some point in the pre-revenue/ break even cycle.