Jacqueline Watts is the author of Law in the Metaverse.
This is included in our Cyber Law Online Service.
The biggest misconception legal practitioners have about the Metaverse is that it is either just a video game-like space with no real-world impact, or a speculative tech bubble that either already has, or will in the near future fizzle out like previous digital fads. Many still perceive it as a niche space limited to tech enthusiasts, gamers, or high-risk investors interested in virtual real estate and NFTs. This ignores the current realities and future potential of the Metaverse that will increasingly blur the lines between virtual and physical realities.
Whether termed the Metaverse, spatial computing, Web3, or Virtual Worlds, it represents an evolution of the internet and is quite literally reshaping the way that people live, work and interact. It is characterised by offering its users an immersive and interactive environment and uses either virtual reality, augmented reality or mixed reality (together termed as XR or extended reality). It is already having a profound impact on many sectors, such as in medicine to train surgeons. The EU considers that by 2030 many will be using the Metaverse daily[1], and by that time, Mckinsey believe that the Metaverse will have generated businesses $5 trillion in revenue[2]. The Industrial Metaverse alone is estimated by the World Economic Forum to be worth $100 billion by 2030[3].
Whether fully immersed, or currently just operating at the periphery, many people are already embracing the Metaverse in one form or another. This may be through the Industrial Metaverse, using digital twin technology, or trading virtual assets on the ‘proto-metaverses’ of Roblox or Fortnight. This makes it an increasingly relevant space for lawyers to understand. People are interacting in the Metaverse, business is being conducted in the Metaverse, people are dying with virtual assets in the Metaverse and there are serious considerations around safety in the virtual world.
For lawyers, ignoring the Metaverse is simply not an option, the need for legal clarity in this digital realm is already here, even if the platforms and technologies are still evolving. We are just at the start of the expansion and adoption of this technology.
Many of the issues which the law has evolved to address in real life will need to be considered in the context of the virtual world. The Metaverse will impact almost all aspects of real life. In the most part, it is hoped that the common law can deal with this transformation. In the same vein as was needed for digital assets generally, as identified by the Law Commission (cumulating with new legislation in the form of Property (Digital Assets etc) Bill) and the extensive ongoing work of the UK Jurisdiction Taskforce, those operating, working, interacting and transacting in the virtual world need legal certainty. Real life law and judicial systems will be called upon by users who experience harm or losses in the Metaverse.
Whilst in the first place disputes in the Metaverse may seem to initially fall within the bounds of online contractual terms and conditions, there are interesting considerations over whether the use of the private law is always appropriate. Virtual worlds are currently fiefdoms, owned and operated by one of the same tech giants. There is a sea change of utilising the tech giants as gatekeepers of these tech platforms, such as with the EU’s Digital Services Act package.
Further thoughts around the concept of the rule of law in the Metaverse, and whether historical jurisprudential learnings remain relevant to the virtual world are also necessary. Issues of liability in respect of the Industrial Metaverse in particular, including for example around the allocation of liability in respect of digital twins, is likely to cumulate in extensive litigation and evolution of the common law.
Regulators in the UK are keeping a keen eye on the ongoing development of the Metaverse. The Digital Regulation Cooperation Forum (DRCF), a multi-regulatory body comprising of the Competition and Markets Authority (CMA), Information Commissioner’s Office (ICO), Office of Communications (Ofcom) and the Financial Conduct Authority (FCA) held a ‘Metaverse Symposium’ in 2022. It is likely existing regulations will be extended to cover the harms and issues arising in the Metaverse.
I do not think we will see any specific ‘Metaverse law’ in the UK anytime soon. I expect legislators and regulators to take the same approach as they have with the rise of artificial intelligence and allow existing legislation, the common law and current regulations to govern this emerging technology. The focus of many regulators is now more on outcome-based regulation, rather than prescriptive requirements, which itself enables more flexibility to regulate the harm, rather than the specific technologies. Much of the extensive work undertaken in recent years in the UK in respect of legal issues concerning digital assets and cryptocurrency will be relevant to the Metaverse. I expect the law to continue to evolve in this space. This is somewhat in contrast to the EU, who have already implemented regulation 2023/2062(INI) on civil, company, commercial and intellectual property law issues in Virtual Laws in January 2024 and on 31 March 2025, launched its Virtual World Toolbox[4] to shape expectations in respect of the protection of its values and principles.
While many fundamental legal principles (eg, contract law, intellectual property law, tort law) will still apply, the way they manifest in an immersive virtual environment poses unique challenges. Many issues like digital identity, virtual property rights and dispute resolution in decentralized autonomous organisations (DAOs) are still evolving and may not fit neatly into current legal doctrines.
The biggest challenge to enforcing law in the Metaverse is determining jurisdiction and governance. Unlike the physical world, the Metaverse is not confined by real-life territorial borders. Users exist in different countries, each with its own legal system. This creates a complex web of conflicting laws. Without clear agreements between nations, regulating behaviour, protecting rights, and prosecuting offenses becomes a patchwork effort at best.
In essence, the Metaverse challenges fundamental concepts of territorial law, requiring new forms of cross-border cooperation and innovative legal thinking to ensure effective governance. Recent 2025 announcements from Sir Geoffrey Vos, Master of the Rolls suggest that we will soon see the formation of a new UK Jurisdiction Taskforce, the International Jurisdiction Taskforce, which will be tasked with trying to combat the multi and cross-border issues caused by digitalisation. It will comprise of jurists from key private law countries to try and establish synergies between the different jurisdictions on these matters. It is pleasing that this challenge is being addressed head-on by the UK Jurisdiction Task and I am hopeful.
As people invest in digital goods, land, and identities, questions about digital property rights, contract enforcement, and intellectual property protection are becoming increasingly important. Courts and regulators are beginning to grapple with the challenges presented by digital assets, led in part by the work of Sir Geoffrey Vos, Master of the Rolls, and the UK Jurisdiction Taskforce. A lot of work has been done on how to treat digital assets and whether this should be in the same way you would treat physical property or traditional financial assets. This includes addressing disputes over ownership, theft of digital items, and the legal recognition of smart contracts. These trends have a significant impact on virtual assets and virtual currencies.
At the same time, there’s an emerging discussion about the legal status of avatars and whether actions taken by avatars in virtual spaces can have legal consequences in the real world, and how to handle issues like harassment, fraud, or even virtual assaults.The regulation of the Online Safety Act 2023 by Ofcom has already seen the development of codes to protect online users, initially focused on children and women.
As emerging technologies impact on the real world, digital economies and identities gain real world value and significance; the law is slowly adapting to protect rights and resolve conflicts in these new digital environments. The intersection of law, technology, and virtual reality is creating unprecedented legal challenges and opportunities, making this a particularly dynamic and fascinating area of legal development.
[1] https://digital-strategy.ec.europa.eu/en/policies/virtual-worlds
[2] https://www.mckinsey.com/~/media/mckinsey/business%20functions/marketing%20and%20sales/our%20insights/value%20creation%20in%20the%20metaverse/Value-creation-in-the-metaverse.pdf
[3] https://www.weforum.org/publications/navigating-the-industrial-metaverse-a-blueprint-for-future-innovations/
[4] https://digital-strategy.ec.europa.eu/en/policies/virtual-worlds-toolbox
