Musings of Metaverse Arbitration

What is the internet’s current favorite buzzword? Metaverse. In simple terms, the metaverse is an interactive three-dimensional virtual world. The metaverse is a combination of the virtual reality, augmented reality, and digital hologram technology where users occupy physical space and can even live within a digital universe.[1] People can do anything they can do in real life, including shopping, hanging out with friends and trading land, buildings, and other digital assets. Imagine scheduling a time to hang out with friends. You put on goggles or headgear to enter the metaverse. From there, imagine entering a common space with your friends, or maybe a virtual hotel or house rented through cryptocurrency.

            Technology advancements are rising at an increasingly high rate. JPMorgan signaled in a report that the metaverse is a $1 trillion opportunity, allowing companies of all shapes and sizes, like Nike, PWC, Hulu, Gap, and others, to create realistic workspaces in digital realms.[2] As Mark Zuckerberg said, the Metaverse is the “next chapter of the Internet. . . an embodied internet where you’re in the experience, not just looking at it.”[3] Regardless of whether or not we agree with the metaverse, far too many steps have been taken in its direction to stop it. The metaverse is in our future, at least in terms of human connectivity, but perhaps as the inevitable future of life itself.

            While the metaverse can turn into the world’s main market for digital assets, many legal issues are arising. Cybercriminals are targeting metaverse investors with phishing scams. Individuals are experiencing sexual assaults in the metaverse. Cyber trespassing, deception, obscenity, harassment, and violence are occurring in the metaverse. From encouraging suicide to sexual assault to trademark infringement and data breach, disputes between anonymous parties are rapidly increasing. As disputes continue to rise in the metaverse, significant questions include how big a problem these disputes are, whether courts are ready for the influx of cases, and whether a form of online dispute resolution is better suited to dispose of these disputes.

Currently, there is no set of rules and regulations that apply to legal issues arising in the metaverse. Moreover, it is unclear how legal issues will be resolved with respect to the metaverse. This is troubling due to the separation between a person’s virtual identity and their real, physical identity. Avatar users can behave in ways they never would and that are not possible in the real-world.[4] What it means to experience harm in a digital environment is vastly different than experiencing harm in the physical world. Even if metaverse laws mirror physical world laws, litigation regarding disputes remains problematic. What punishment exists for anonymous users committing criminal acts? What remedies exist for a party who brings a civil claim? How do you know who to sue if the avatar is anonymous? What court would have jurisdiction? It seems nearly impossible to obtain remedies with respect to harms that occur in the metaverse.  

The physical world bases the legal system on geography, while time, location and identity become fluid perceptions in the metaverse where anonymous users from around the world are interacting with each other. Jurisdiction creates a hurdle for litigating metaverse disputes. It becomes nearly impossible to discover the identities of the parties and compel them to one jurisdiction when harm may occur in multiple jurisdictions due to the metaverse’s cross-border nature. Furthermore, judges are not best suited for resolving these disputes, as most are generalists who may not even know what the metaverse is.

At the same time, parties could choose arbitrators with the requisite expertise. The metaverse is a complicated virtual world and arbitrators with expertise in the area will provide more fair and equitable decisions with their knowledge. Any arbitrator can be part of the process – and everyone can be anonymous. Those that operate in the metaverse may also feel more trust in an arbitrator in the same venue—the metaverse.

A new, revolutionary dispute resolution system, based in part on online dispute resolution, must be constructed to resolve disputes in the metaverse. Rules that will govern interaction in the metaverse must be defined by the contract signed to participate. Most employment and consumer contracts contain arbitration clauses specifying the resolution process should a dispute arise. When first joining a metaverse platform, users must agree to the platform’s terms of service, which are legally binding documents and should contain an arbitration clause. Parties must also abide by the terms of the agreement when entering into a contract with someone in the metaverse. Arbitration processes can be directly incorporated into these agreements, removing issues of jurisdiction.

Additionally, arbitrators in the metaverse could be anonymous in order to sync with the anonymity of the metaverse. Of course, disclosures will still be required, and it will remain essential to protect the impartiality of the arbitration process. This means that an administrative body would have to oversee the arbitration and arbitrators, and know the identity of arbitrators in order to check their neutrality. Furthermore, other procedures would have to be in place to assure the fairness of the process in the metaverse.

Of course, these are only initial thoughts. However, at this point, it seems that metaverse arbitration makes sense. We know that traditional litigation is incongruent with metaverse dispute resolution. This opens the door to ideas like metaverse arbitration. Indeed, if you are living and interacting in the metaverse, it is expected that you would deal with disputes in the same way.

[1] Mike Snider and Brett Molina, Everyone wants to own the metaverse including Facebook and Microsoft. But what exactly is it?, at https://www.usatoday.com/story/tech/2021/11/10/metaverse-what-is-it-explained-facebook-microsoft-meta-vr/6337635001/ (last visited June 1, 2022).

[2] Opportunities in the metaverse, How businesses can explore the metaverse and navigate the hype vs. reality, https://www.jpmorgan.com/content/dam/jpm/treasury-services/documents/opportunities-in-the-metaverse.pdf

[3] Elizabeth Chan and Graham Rhodes, The Rise of Digital Identities and Their Implications for International Arbitration, at https://www.jurist.org/features/2022/02/06/the-rise-of-digital-identities-and-their-implications-for-international-arbitration/ (last visited June 2, 2022).

[4] Mary Anne Franks, “Unwilling Avatars: Idealism and Discrimination in Cyberspace” (2011) 20(2) Columbia Journal of Gender and Law 224, 232.

author

Brittany Munn

Brittany Munn is a third-year law student at The Ohio State University Moritz College of Law. She is a member of the New York City Bar National Moot Court Team, the Vice President of Auction Fundraising for the Public Interest Law Foundation, and on the Long Range Planning Committee for…

author

Amy Schmitz

Professor Amy Schmitz is the John Deaver Drinko-Baker & Hostetler Chair in Law at the Ohio State University Moritz College of Law. From 2016-2021 Professor Schmitz was the Elwood L. Thomas Missouri Endowed Professor of Law at the University of Missouri School of Law and the Center for Dispute Resolution.…

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