Regulation of the Metaverse

BY: Harrison Hayne, RBFL Editor

While speculation about the metaverse has cooled in recent months, it is doubtful that the metaverse will bow out quietly given the billions of dollars invested in its success by major technology players. A multitude of metaverse platforms are still hoping to use the metaverse to transition the human experience into a virtual world.

Regulation is often reactive, so it is unlikely that the metaverse will experience further regulation unless its popularity increases. Regulatory bodies are most likely to regulate the metaverse if potential social and economic issues arise. However, given the massive amount of investment in the metaverse, regulation is likely to be challenged if such regulations will eat into potential profits of investors.

The metaverse is capable of being utilized for a variety of purposes that allow users to mold their personal experience. Current regulations include copyright laws, but the manner of implementation of copyright law in the metaverse remains to be clarified. The Federal Trade Commission (FTC) is the main regulatory body overlooking the metaverse, as the FTC is in charge of enforcing marketing and competition law on the Internet.

So far the primary method of regulating conduct within the metaverse has been through contracts entered into between users the operators of particular metaverse platforms. These terms of service contracts have defined the bounds of acceptable conduct within the particular metaverse platform being used. Problems could arise as these terms of service contracts liable to be minimally enforced to the extent that minimal enforcement drives engagement and use of metaverse platforms.

One of the chief concerns about the metaverse is the use of user data by platform operators. Metaverse operators will be able to use the metaverse to accumulate massive amount of personal data from users, and will look to use this data into revenue. Similar to issues regarding conduct, metaverse platforms have decided to use terms of service contracts between users and operators to define the bounds of permissible uses of user data. The FTC is quite limited in what it can do to enforce mere guidelines regarding user privacy, so it is unlikely that meaningful regulation will take place unless the FTC is delegated greater power from Congress.

Commerce within the metaverse is intertwined with the use of bitcoin and other cryptocurrencies. These blockchain assets could be subject to multiple regulatory bodies, including the SEC and IRS. However, so far the IRS has provided the most clarity into potential regulations. While IRS has opted to treat blockchain assets as property, individual states have been slower to adopt to uniform tax treatment.

There is unlikely to be meaningful change in the way the metaverse is regulated until regulatory bodies see need for change based on regulatory failures. Given the rising unpopularity of the metaverse, it will probably be awhile until metaverse users and operators signal to regulatory bodies that greater regulation is needed.


See Janna Anderson & Lee Rainie, The Metaverse in 2040, Pew Rsch. Ctr., 84 (June 30, 2022),

See Luc Olinga, Mark Zuckerberg, the Metaverse and Us, THESTREET (Oct. 30, 2022),

See Tad Simons, Crypto assets and taxes: What you need to know, THOMSON REUTERS (Apr. 6, 2022),

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