Meta-Versus: Part 1 - Introduction to disputes in the Metaverse

As we covered in our ‘What is the Metaverse?’ Insights article earlier this week, the Metaverse will involve the creation and development of large scale, persistent and interoperable virtual spaces allowing people to interact with each other in richer ways and via an intersection of emerging technologies, including real-time 3D software; AI; blockchain; augmented, virtual and extended reality and many others.

The creation of these new spaces raises important questions about the types of disputes that will arise from them, how those disputes will be decided, and how any decisions will be enforced. This article is the first in our ‘Meta-Versus’ series, which will explore those questions, and set out our view on what some of the answers are likely to be.

What the Metaverse is and why it matters: a brief recap

The Metaverse ‘market’ contains numerous players, all of whom have differing ideas of what the Metaverse is - which often depend on the service they offer. Some Metaverse companies are focussed on the infrastructure (e.g. the tech hardware through which Metaverse content is consumed), whilst others are building the platforms (i.e. the virtual spaces) or the content which will be consumed on them. Understanding the differences between these actors is essential to understanding the types of disputes that may arise from their offerings. For example:

• Many BigTech companies (e.g. Meta, Microsoft) are producing self-contained virtual 3D worlds or platforms in which users will be able to interact with each other (known as ‘centralised’ metaverse platforms).
• Other participants in the market contend that the Metaverse comes hand in hand with the next evolution of the internet: Web3.0. (or Web3). Whereas the development of Web 2.0 (Web3’s predecessor) involved the creation of new internet platforms where users could write their own content as well as read it (see Facebook, Youtube, Twitter), the theory behind Web 3 is that it will allow users to ‘own’ internet content as well as read/write it.
• Many thought leaders in the Metaverse consider that the Web3.0 vision is dependent on the proliferation and use of blockchain technology – and various metaverse platforms have been produced on the blockchain (e.g. Decentraland, Sandbox), with users given the ability to own blockchain content on those platforms. These are known as ‘decentralised’ metaverse platforms.

One thing that almost all participants in the Metaverse market seem to agree on is that there is money to be made. A recent report by McKinsey, which surveyed 3,400 consumers and executives, predicted that by 2030, the value of the Metaverse could reach ~$5 trillion, equivalent to the size of the world’s third-largest economy today, Japan. Bloomberg has previously predicted that global Metaverse revenue could approach $800 billion in 2024 (vs. circa. $500 billion in 2020). 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.

The next stage of the internet: new scope for disputes

The Metaverse involves the proliferation of new fora and methods of interacting with other individuals and companies. Just as the creation of the internet brought with it new species of disputes – so too will the Metaverse provide fertile ground for new types of disputes to thrive.

Whilst some Metaverse companies have developed platforms which are inward facing and do not involve users making commercial transactions (e.g. corporate meeting platforms, digital twins for manufacturing), a significant proportion of Metaverse platforms allow users to participate in constantly evolving economies within virtual worlds. These types of virtual economies are already thriving in the gaming sector (see e.g. Rockstar Games’ popular GTA V Online, regarded by some commentators as a proto-Metaverse platform).

Each of those economies will (and in some cases already do) attract investment of varying scale: consumers invest their fiat / crypto currencies into the local currency of each platform so that they can make transactions on the platform. Businesses, for example, purchase virtual real estate to secure their presence in the virtual environment, or create digital items using their IP that are available for purchase on the platform. Users within a platform can transact with each other and exchange goods and services for the platform’s currency.

Those investments and transactions are made against the backdrop of a patchwork of different rules and governance systems across the different platforms within the Metaverse. In some instances (e.g. Roblox, Fortnite), a single corporation has ultimate control over everything that happens in the platform. In others (e.g. Decentraland), decisions as to what happens in the platform are taken by a Decentralised Autonomous Organisation (a DAO), a type of decision-making body into which users can input.

As with any economy (whether nascent or developed) there is scope for disputes to arise in the Metaverse. Many of the types of disputes that we see in the real world will find analogues in the Metaverse. Users of a Metaverse platform may have cause to bring claims against the platform provider itself if, for example, they consider that it has taken action which interferes with the user’s investment (akin to an investment treaty claim against a State). Equally, users may wish to bring claims against each other – e.g. if they disagree about the outcome of a transaction that has taken place on the platform. Part 2 of this series will explore some of the types of disputes which may arise in the Metaverse.

The proliferation of Metaverse disputes presents a novel challenge. The nature of the Metaverse means that traditional methods of dispute resolution may not comfortably be able to accommodate many of the types of disputes that may arise from it. Correspondingly, many Metaverse users will not want to use traditional dispute resolution methods to resolve their disputes. The question then arises: how will Metaverse disputes be resolved? Part 3 of this series will seek to provide some answers to that question.

The resolution of a dispute is meaningless if its outcome cannot be enforced by the successful party. If Metaverse economies are to thrive, users will need assurance that they will be able to enforce the outcome of any procedure put in place to resolve their dispute with another user. This gives rise to difficulties in light of the anonymity afforded by many platforms. In addition, enforcement solely within the user’s ‘home’ platform may not go far enough; some will be looking for ways to enforce decisions in the real world, and potentially in other platforms. Part 4 of our series will look at how decisions resulting from Metaverse disputes may be enforced, and some of the issues that may arise from attempts to do so.

Part 2 of our series is currently live, and can be found here.