An investing business paid almost $4 million for 2,000 acres of land in 2021. Usually, this would not make the news, but the land was virtual in this instance. It only existed in The Sandbox, a metaverse platform. The company acquired the equivalent of 1,200 city blocks by purchasing 792 non-fungible tokens on the Ethereum network. But did it work? Legal ownership in the metaverse turns out more challenging than you may anticipate.
According to the popular but legally problematic narrative among crypto enthusiasts, NFTs provide actual ownership of digital goods in the metaverse for two reasons
decentralization and interoperability.
Some argue that because of these two technical advantages, tokens give unchangeable evidence of ownership that may be utilized across various metaverse applications, settings, and games. Because of this decentralization, some believe that you may purchase and sell virtual objects on blockchain for the price you choose, without the consent of anyone or any corporation.
Despite these statements, the legal position of virtual “owners” is much more complex. Indeed, the ownership of metaverse assets is controlled by contract rather than property law. As a property law, technology policy, and legal ownership expert, I think what many corporations term “ownership” in the metaverse is not the same as ownership in the real world and that customers are being deceived.
Buying and selling in the metaverse
When you buy anything in the metaverse, it’s recorded in a blockchain transaction, a decentralized digital ledger where transaction records can’t be removed or changed. You will be given ownership of an NFT, which is a unique string of bits resulting from your purchase. The NFT is kept in a crypto wallet that only you have access to and that you “carry” around with you everywhere you go in the metaverse. Each NFT is associated with a virtual object.
It’s easy to believe that since your NFT is stored in your crypto wallet, no one can access your NFT-backed virtual residence, clothing, or magic wand without knowing your wallet’s private key. As a result, many individuals mistakenly believe that the NFT and the digital object are the same things. Even experts mix up NFTs with their digital counterparts, claiming that since NFTs are personal property, they enable you to possess digital stuff in the virtual world.
When you join a metaverse platform, you must agree to the platform’s terms of service, terms of usage, or end-user licensing agreement before you may use it. These legally binding contracts outline the users’ and metaverse platform’s rights and responsibilities. Unfortunately, nearly no one reads the terms of service, which is expected. Only 1.7 percent of consumers in one research discovered and questioned a “child assignment clause” in terms of service agreement. The rest of the world naively donated their firstborn kid to the fictitious internet service company.
Metaverse platforms set out the legal complexities of virtual ownership in these long and often unintelligible agreements. Unlike the blockchain, each metaverse platform’s terms of service are centralized and under the sole authority of a single firm. This is a massive issue in terms of legal ownership.
The metaverse’s distinguishing traits are interoperability and portability, which means you should be able to transport your non-real-estate virtual property — your avatar, your digital art, your magic wand – from one virtual environment to another. However, today’s virtual worlds aren’t interconnected, and there’s nothing in an NFT that identifies it as, say, a magic wand. Currently, each platform must connect NFTs to its own unique digital assets.
The fine print in virtual form
The NFTs bought, and the digital products supplied are nearly never the same under the terms of service. On the blockchain, NFTs exist. The metaverse’s land, products, and characters, on the other hand, live on private servers that run proprietary programming and have secure, inaccessible databases.
This implies that digital assets’ visual and functional properties — the same characteristics that give them value – are not present on the blockchain. The private metaverse platforms have total control over these aspects, which they may exercise autonomously.
Platforms may even lawfully destroy or give away your stuff by delinking the digital assets from their original NFT identifying codes according to their terms of service. Finally, although you may own the NFT that came with your digital purchase, you do not have legal ownership of or possession of the digital goods themselves. Instead, the platforms only provide you with access to digital materials for as long as they see fit.
For example, you may possess a $200,000 digital painting for your metaverse dwelling one day and then be barred from the platform the next, with your painting, which was previously saved in its private databases, being wiped. Although you would still technically hold the NFT on the blockchain with its original identifying number, it is now operationally and monetarily worthless.
This isn’t a far-fetched possibility, even though it’s disturbing. Although it may not be a sensible commercial decision for the platform firm, the law does not prohibit it. According to the terms of use and premium NFT terms of use that govern the $4 million in virtual real estate purchased on The Sandbox, the metaverse company – like many other NFT and metaverse platforms – reserves the right to terminate your ability to use or even access your purchased digital assets at its sole discretion.
If The Sandbox “reasonably believes” you engaged in any of the platform’s prohibited activities, which require subjective judgments about whether you interfered with others’ “enjoyment.”Â
it may suspend or terminate your user account and delete your NFT’s images and descriptions from its platform immediately. It has the potential to do so without warning or accountability to you.
In fact, The Sandbox claims the right to seize any NFTs you may have gained due to the unlawful conduct. It’s unclear how it would effectively grab blockchain-based NFTs, but this raises further doubts about the legitimacy of what it refers to as “virtual ownership.”
The Sandbox was contacted for comment by The Conversation, but no answer was received.
Legally enforceable
As if these clauses weren’t enough, many metaverse platforms reserve the right to change their terms of service at any time and with little to no notice. Users would have to continuously refresh and reread the rules to ensure they are not engaging in any newly forbidden activity that might delete their “bought” assets or perhaps their whole accounts.
Actual ownership of digital assets in the metaverse will not be possible without the help of technology. NFTs can’t get beyond metaverse platforms’ centralized control, which they have now and will continue to have under their contractual terms of service. Finally, legislative change and technical innovation are required before the metaverse can evolve into its promises.
