Legal Implications of a Ubiquitous Metaverse and a Web3 Future

Marquette Law Review Marquette Law Review

Volume 106

Issue 1

Fall

Article 5

2022

Legal Implications of a Ubiquitous Metaverse and a Web3 Future Legal Implications of a Ubiquitous Metaverse and a Web3 Future

Jon M. Garon

Follow this and additional works at: https://scholarship.law.marquette.edu/mulr

Part of the Commercial Law Commons, Fourth Amendment Commons, and the Internet Law

Commons

Repository Citation Repository Citation

Jon M. Garon,

Legal Implications of a Ubiquitous Metaverse and a Web3 Future

, 106 Marq. L. Rev. 163

(2022).

Available at: https://scholarship.law.marquette.edu/mulr/vol106/iss1/5

This Article is brought to you for free and open access by the Journals at Marquette Law Scholarly Commons. It

has been accepted for inclusion in Marquette Law Review by an authorized editor of Marquette Law Scholarly

Commons. For more information, please contact [email protected].

GARON_21NOV22.DOCX (DO NOT DELETE)

LEGAL IMPLICATIONS OF A UBIQUITOUS

METAVERSE AND A WEB3 FUTURE

JON M. GARON*

The future influences the present just as much as the past.

—Friedrich Nietzsche

[T]he present agony of social isolation, the impersonality,

structurelessness, and sense of meaninglessness from which so

many people suffer are symptoms of the breakdown of the past

rather than intimations of the future.

—Alvin Toffler

The metaverse is understood to be an immersive virtual world serving as

the locus for all forms of work, education, and entertainment experiences.

Depicted in books, movies, and games, the metaverse has the potential not just

to supplement real-world experiences but to substantially supplant them. This

Article explores the rapid emergence and evolution of the Web3 technologies

at the heart of the metaverse movement. Web3 itself is a paradigmatic shift in

internet commerce.

This Article begins by exploring the competing economic and philosophical

approaches to the future of the internet, which is being driven on one hand by

the most successful internet advertising firms (Facebook and Google) as well

as their video game competitors (Roblox, Microsoft’s Minecraft, Epic Games,

and Valve) and on the other hand by Web3 advocates focusing on

cryptocurrencies, nonfungible tokens, decentralized finance (DeFi) and

distributed autonomous organizations (DAOs). Limiting the focus on U.S. law,

this Article reviews three core areas for the development of the metaverse: the

* Professor of Law, Nova Southeastern University Shepard Broad College of Law. The initial

version of this paper was developed and presented at the American Bar Association Business Law

Section Cyberspace Winter Working Meeting. Special thanks to Cheryl Butzl, Ed Morse, the members

of the 2022 Winter Working Meeting, and Dan Garon. Available at SSRN:

https://ssrn.com/abstract=4002551 [https://perma.cc/UYT9-VWRL].

1. See generally FRIEDRICH NIETZSCHE, HUMAN, ALL-TOO-HUMAN: A BOOK FOR FREE SPIRITS

18 (Helen Zimmern & Paul V. Cohn trans., Prometheus Books 2009) (1878) (the oft-quoted statement

is not attributable to a publisher work) (“Our destiny rules over us, even when we are not yet aware of

it; it is the future that makes laws for our to-day.”).

2. ALVIN TOFFLER, THE THIRD WAVE 395 (1980).

GARON_21NOV22.DOCX (DO NOT DELETE)

164 MARQUETTE LAW REVIEW [106:163

regulatory environment; the transactional essentials; and the limits on

governmental intrusion into the metaverse.

The review of the regulatory environment includes state and federal

gambling laws, money transfer laws, securities laws, and regulation of unfair

and deceptive trade practices used to enforce privacy and cybersecurity

obligations. The section on transactional essentials focuses on contracts

between metaverse enterprises and their customers, antitrust and competition

restraints, copyright protections, protections of biometric data and rights of

publicity, and protections of customer speech in metaverse environments.

Finally, this Article addresses the need for the continuing evolution of the

Fourth Amendment protection from search and seizures, the third-party

doctrine limitations on reasonable expectations of privacy, and the statutory

protections under the Stored Communications Act.

This Article highlights that although these doctrinal issues are not new, the

scope of the metaverse and its potential social importance will reshape these

doctrines in sometimes unpredictable ways. Technologists, practitioners, and

regulators must be open to these shifts to appropriately develop the correct mix

of user control, industry practice, and regulatory oversight.

I. INTRODUCTION .......................................................................................... 165

II. THE EMERGENCE OF WEB3 AND THE PHILOSOPHICAL BATTLE FOR THE

METAVERSE ........................................................................................ 171

III. WEB3, NFTS, AND DAOS ....................................................................... 175

IV. A GLIMPSE OF THE U.S. LEGAL ROADMAP ............................................. 185

A. State Regulation Through Gambling Laws ................................... 187

B. Federal Regulation Through Money Transfer, Securities and

Foreign Investment Laws ........................................................... 188

i. Money Transfer Regulations ................................................... 190

ii. DAOs and the Potential Disclosure Requirements of the

Corporate Transparency Act ................................................. 194

iii. Securities Regulation ............................................................. 195

iv. Foreign Investment Regulation .............................................. 198

C. Privacy, Cybersecurity, and Additional Areas of Focus for

Regulators ................................................................................... 202

V. TRANSACTING BUSINESS IN THE VIRTUAL WORLD ................................. 206

A. Terms of Service Agreements and the Law of the Metaverse ...... 207

B. Competition Harms and Consumer Protection .............................. 213

C. Copyright ....................................................................................... 218

D. Confidentiality and Privacy ........................................................... 220

E. Rights to Biometrics, Names, Images, and Likenesses ................. 223

F. Free Speech and ToS Restrictive Conditions ................................ 231

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 165

VI. LIMITATIONS ON THE GOVERNMENT: WARRANT REQUIREMENTS, THIRD

PARTY DOCTRINE, AND THE POWER OF SUBPOENAS ......................... 232

VII. CONCLUSION ......................................................................................... 241

I. INTRODUCTION

The metaverse, as highlighted by the recent corporate name change of

Facebook to Meta Platforms, Inc. (Meta), owes its literary origins to Neal

Stephenson’s Snow Crash (1992) or to prior works by Verner Vinge and

William Gibson.

The metaverse has been used in an informal manner for the

past three decades. Aspects of a metaverse are essential to world-building

games like Roblox, Minecraft, Horizon’s World, and Fortnite, to massive

multiplayer online roleplaying games like RuneScape, Final Fantasy, and

World of Warcraft, and to virtual worlds like Second Life.

These online

environments allow users to interact with each other, to engage with computer

generated characters, and to play or perform activities using elements within

the virtual environment. To foster the interaction among participants, each

participant is represented by an avatar. The avatars may be designed to resemble

the real-world user, to be highly fanciful, or to be anything in-between. As these

examples suggest, there are already metaverses available for the public, and

“the metaverse” actually reflects a multiverse composed of different

metaverses. The term metaverse is generally used to cover the multitude of

metaverses.

Although the metaverse remains in its nascent state, it will build on the

current Web 2.0 internet. Matthew Ball has offered seven attributes that

describe the metaverse as well as the current internet: persistence; synchronous

and live interactions; the capacity for as many concurrent users as the users

demand; a stable, functioning economy; the incorporation of both digital and

physical worlds as well as operating on both open and closed platforms; being

3. See Ethan Zuckerman, Hey, Facebook, I Made a Metaverse 27 Years Ago, THE ATLANTIC

(Oct. 29, 2021), https://www.theatlantic.com/technology/archive/2021/10/facebook-metaverse-was-

always-terrible/620546/ [https://perma.cc/PV5Z-9STQ] (“[Stephenson’s] vision of the metaverse

owed a debt to Vernor Vinge’s 1981 True Names and to a series of William Gibson novels from the

‘80s. Both of those authors owed a debt to Morton Heilig’s 1962 Sensorama machine, and on and on

we go, back in time to Plato’s shadows on a cave wall.”).

4. See Jon M. Garon, Playing in the Virtual Arena: Avatars, Publicity, and Identity

Reconceptualized Through Virtual Worlds and Computer Games, 11 CHAP. L. REV. 465, 468–70

(2008).

GARON_21NOV22.DOCX (DO NOT DELETE)

166 MARQUETTE LAW REVIEW [106:163

largely interoperable; and being “populated by ‘content’ and ‘experiences’

created and operated by an incredibly wide range of contributors.”

One of the most important influences on the metaverse is the generation of

users ready for it. The beginning of the 2021 drumbeat for the metaverse began

with the public offering by Roblox, signaling to a generation raised in a virtual

world rather than on a Sesame Street that their time had arrived.

As a result, a

generation of young adults have grown up using the fifteen-year-old site for

social experiences. It has hosted birthday parties,

concerts, an egg hunt, a tie-

in with Gucci to celebrate the latter’s 100th anniversary, and an agreement with

Nike.

In addition, Snapchat’s 3D Bitmoji function launched in July 2021,

allowing its 280 million daily active users to create avatars for augmented

reality.

The Bitmoji integration provides a powerful shift in user experience.

5. Matthew Ball, The Metaverse: What it is, Where to Find it, and Who Will Build it,

MATTHEWBALL.VC (Jan. 13, 2020), https://www.matthewball.vc/all/themetaverse

[https://perma.cc/6P53-44AY]; see Ben Thompson, Microsoft and the Metaverse, STRATECHERY

(Nov. 9, 2021), https://stratechery.com/2021/microsoft-and-the-metaverse/ [https://perma.cc/SQ6H-

LJ96] (quoting Ball and noting that these attributes describe the internet as well).

6. Dean Takahashi, The DeanBeat: Roblox Public Offering is a Vote about the Metaverse,

GAMESBEAT (Mar. 5, 2021), https://venturebeat.com/2021/03/05/the-deanbeat-roblox-public-

offering-is-a-vote-about-the-metaverse/ [https://perma.cc/5V2D-L3SF]. (“Roblox, the platform for

user-generated games, will go public through a direct listing of its shares on March 10. I see its pending

success or failure as a stock as a kind of referendum on the metaverse . . . .”); Patrick Seitz, Roblox

Stock Continues Meteoric Rise on Metaverse Story, INV.’S BUS. DAILY (Nov. 19, 2021),

https://www.investors.com/news/technology/roblox-stock-continues-meteoric-rise-on-metaverse-

story/ [https://perma.cc/CA5Z-SYJH] (“Roblox today provides a platform for playing video games and

socializing in 3D virtual worlds. But Roblox stock is considered a play on the metaverse, a next-

generation version of the internet.”); ERIC SHERIDAN, MICHAEL NG, LANE CZURA, ALEXANDRA

STEIGER, ALEX VEGLIANTE & KATHERINE CAMPAGNA, AMERICAS TECHNOLOGY: FRAMING THE

FUTURE OF WEB 3.0, METAVERSE EDITION 4 (Goldman Sachs Equity Rsch. ed., 2021) (“Over the past

12 months, the term Metaverse began to gain traction shortly after Roblox’s direct listing in March and

more meaningfully saw higher levels of Google Search interest during the Q3 ‘21 earnings season as

various management teams discussed elements of their business within the future Metaverse.”).

7. See Peter Allen Clark, The Metaverse Has Already Arrived. Here’s What That Actually Means,

TIME (Nov. 15, 2021), https://time.com/6116826/what-is-the-metaverse/ [https://perma.cc/WH73-

EFSZ] (“When Cathy Hackl’s son wanted to throw a party for his 9th birthday, he didn’t ask for favors

for his friends or themed decorations. Instead, he asked if they could hold the celebration on Roblox.”).

8. See Joe Dyton, Will Facebook or Roblox be the Master of the Metaverse?, CONNECTED REAL

ESTATE MAG. (Dec. 9, 2021), https://connectedremag.com/das-in-building-wireless/wireless/will-

facebook-or-roblox-be-master-of-the-metaverse/ [https://perma.cc/D759-LP7Y].

9. See Maria Lewczyk, Snapchat Commits to the Metaverse With Launch of 3D Bitmojis,

VIRTUAL HUMANS (July 28, 2021), https://www.virtualhumans.org/article/snapchat-commits-to-the-

metaverse-with-launch-of-3d-bitmojis [https://perma.cc/862Z-NERP] (“Snapchat also boasts an

impressive amount of editing capabilities and augmented reality options for users, including a variety

of filters and lenses to create content with, such as the latest viral hit allowing you to turn yourself into

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 167

“Snapchat users are three times more likely to experiment with augmented

reality (such as filters, lenses, etc.) to try on products than those who do not use

Snapchat.”

The shift by Facebook to adopt Meta as its name and embrace virtual worlds

has received even more attention.

That attention alone is likely sufficient to

spur additional companies to provide resources and innovations, making virtual

worlds more significant in the video game, social media, and e-commerce

sectors. As a result of this growth, there will be an increase in attention by all

other industry sectors.

The metaverse of tomorrow may not look like the virtual environments

described in Ready Player One, Tron, Avatar, or The Matrix, but it is likely to

look much more robust than the original Second Life. Advances in technology

and shifts in culture have the ability to create an environment that is different

rather than merely a faster and better-rendered version of what has gone before.

The expansion of 5G wireless connectivity and embedded “internet of things”

products have the potential to make many household devices, vehicles, and

machines become integrated into virtual worlds. Non-fungible tokens (NFTs)

and other Web3 tools can also help stabilize and protect the value of in-world

currencies and assets, an essential component of financial stability in a game or

society.

Meta has had a slew of corporate acquisitions suggesting where it sees at

least some of this growth, including “a deal to buy Within, the company co-

founded by VR pioneer Chris Milk, best known for its Supernatural workout

app[;] . . . Unit 2 Games, which makes a ‘collaborative game creation platform’

called Crayta; Bigbox VR, which makes a popular game for Facebook’s Oculus

VR goggles; and Downpour Interactive, another VR game-maker.”

Facebook

was extremely successful when it provided third-party application

a cartoon.”); see also Tyler Lacoma & Paula Beaton, What is Bitmoji? Everything You Need to Know,

DIGITAL TRENDS (Sept. 22, 2021), https://www.digitaltrends.com/mobile/what-is-bitmoji/

[https://perma.cc/L8YR-BPAR] (“Bitmoji is an accessory app for social media platforms that people

use to create little cartoon versions of themselves, which they then use on their various social media

accounts . . . . You create an avatar of yourself and create various comics, GIFs, expressions, and

reactions that use this avatar.”).

10. Lewczyk, supra note 9.

11. See, e.g., Introducing Meta: A Social Technology Company, META: NEWSROOM (Oct. 28,

2021), https://about.fb.com/news/2021/10/facebook-company-is-now-meta/ [https://perma.cc/DE8F-

55JB]; Kevin Roose, The Metaverse Is Mark Zuckerberg’s Escape Hatch, N.Y. TIMES (Oct. 29, 2021),

https://www.nytimes.com/2021/10/29/technology/meta-facebook-zuckerberg.html

[https://perma.cc/RY97-GSZT]; Peter Kafka, Facebook is Quietly Buying up the Metaverse, VOX

(Nov. 11, 2021), https://www.vox.com/recode/22776461/facebook-meta-metaverse-monopoly

[https://perma.cc/P2H5-Z2LV].

12. Kafka, supra note 11.

GARON_21NOV22.DOCX (DO NOT DELETE)

168 MARQUETTE LAW REVIEW [106:163

programming interfaces to developers in its social media environment

including Zynga, the publisher of Farmville and Words with Friends.

Much

like Facebook’s earlier success, the use of interactive gaming signals an

aggressive expansion into the space controlled by Valve’s Steam, Epic Games,

Microsoft, and others.

Improved goggles and the development of augmented reality glasses closer

to that of the Microsoft HoloLens rather than the Oculus Quest will improve

the user immersion.

Haptic sensors embedded in gloves, keyboards, and a

growing list of devices and wearables will increase kinetic feedback. Increased

computing power in cell phones along with chip availability may make one’s

cell phone into an always-on replacement for desktop and laptop computers.

The expanding skill set of Siri, Google, and Alexa will create a different kind

of computer assistant. Together, these technologies will make the virtual world

as different from Pong as a laptop has evolved from an IBM Selectric

typewriter.

To truly make the leap from a game or social experiment to the digital

replacement for society’s virus-infected meat space, a new generation of

audiovisual input devices are needed to enable a person to switch from

presenting as an avatar to providing a live camera view relatively seamlessly.

Without cameras, a person’s real-time nonverbal communication is lost.

It is

13. See Daniel Victor, FarmVille Shuts Down, but Practices It Instilled in Users and Developers

Live On., N.Y. TIMES (Jan. 1, 2021), https://www.nytimes.com/2020/12/31/technology/ farmville-

zynga-facebook.html [https://perma.cc/M2SH-UYYB] (“In early 2009, when Facebook was still

nascent in its efforts to swallow as much of the internet as possible, online games were not yet the

behemoth they would become. Then, that June, came FarmVille.”); Chris Morris, The Most Important

Friendship: Facebook and Zynga, CNBC (Sept. 13, 2013), https://www.cnbc.com/2012/05/15/the-

most-important-friendship-facebook-and-zynga.html [https://perma.cc/R5RZ-W4XN] (“ ‘[G]ames

from Zynga have generated the majority of our payments and other fees revenue,’ the company said.

The rest of the revenue was tied to advertising. Zynga purchases a lot of ads on Facebook to promote

its titles—and its apps generate a lot of page views . . . .”).

14. Shani Shisha, Fairness, Copyright, and Video Games: Hate the Game, Not the Player, 31

FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 694, 696 (2021) (“[V]ideo games now make up the

largest entertainment market in the world by an order of magnitude.”).

15. See Jamie Feltham, HoloLens 2 Review: Ahead of Its Time, For Better And Worse, UPLOAD

(Apr. 9, 2021), https://uploadvr.com/hololens-2-review/ [https://perma.cc/6NPD-H95T] (“Unlike VR,

which is—in its current form—mostly preoccupied with games and entertainment, HoloLens 2 shows

you why AR has such remarkable potential for productivity and education. With the headset’s new

collaborative platform, Microsoft Mesh, I’m able to host meetings with other people that have genuine,

tangible advantages over web calls, social VR platforms and physical meetings.”); Will Greenwald,

Augmented Reality (AR) vs. Virtual Reality (VR): What’s the Difference?, PCMAG (Mar. 31, 2021),

https://www.pcmag.com/news/augmented-reality-ar-vs-virtual-reality-vr-whats-the-difference

[https://perma.cc/B5RV-FHYP].

16. See JUDEE K. BURGOON, VALERIE MANUSOV & LAURA K. GUERRERO, NONVERBAL

COMMUNICATION 112 (2d ed. 2021).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 169

already greatly diminished online, but a computer-generated avatar cannot

replicate the eye movements, breathing, double takes, and tells that inform

much of human communication.

Although there is some nonverbal

communication through the proximity of avatars and manipulation of facial

gestures, these are far less robust than face-to-face communications or

communications through live video communications.

If a combination of camera and augmented reality glasses were used instead

of virtual reality (VR) goggles, however, the transition can be largely

accomplished. Wearable haptic sensors could further enhance the nonverbal

cues a person communicates to those on the other side of the conversations.

This is not the only possible solution. Cameras can also be used to map a user’s

live facial movement onto an avatar or digitally rendered image. Photorealistic

avatars could create the illusion of being on camera when in fact, the person is

wearing a VR headset that does not show inside the virtual world.

Technological improvements such as those listed above are necessary but

not sufficient for the creation of a fully realized metaverse. The other aspect of

the change must come from social readiness, demand, and predisposition for

17. See Fatik Baran Mandal, Nonverbal Communication in Humans, 24 J. HUM. BEHAV. SOC.

ENV’T, 417, 417–18 (2014) DOI: 10.1080/10911359.2013.831288 [https://perma.cc/56DQ-R4UT]

(“Nonverbal behavior includes all communicative acts except speech. . . . It also includes bodily

contact, posture, physical appearance, and direction of gaze and the paralinguistic variables of

emotional tone, timing, and accent.”); Patrick W. Miller, Nonverbal Communication, in NAT’L EDUC.

ASS’N 10 (3d ed. 1988) (“Some facial expressions are readily visible, while others are so fleeting as to

go unnoticed. Both types can positively or negatively reinforce the spoken word and convey cues

concerning emotions and attitude. Next to words the human face is the primary source of information

for determining an individual’s internal feelings.”) (citations omitted).

18. Cf. Masanori Takano & Takaaki Tsunoda, Self-Disclosure of Bullying Experiences and

Social Support in Avatar Communication: Analysis of Verbal and Nonverbal Communications, 13

PROCS. OF THE THIRTEENTH INT’L AAAI CONF. ON WEB AND SOC. MEDIA 473, 474 (2019),

https://ojs.aaai.org/index.php/ICWSM/article/download/3353/3221 [https://perma.cc/ZTK7-PPHA]

(“Nonverbal communication is also important for self-disclosure and social support. Especially, avatar

communication, where people with virtual bodies can show facial expressions and gestures in virtual

space, allows us to nonverbally interact through the Internet. . . .”) (citations omitted).

19. Earlier studies focused on the movement of avatars within virtual worlds. See Smiljana

Antonijevic, From Text to Gesture Online: A Microethnographic Analysis of Nonverbal

Communication in the Second Life Virtual Environment, 11 INFO. COMMC’N. & SOC’Y, 221, 225–27

(2008), https://doi.org/10.1080/13691180801937290 [https://perma.cc/W9GD-7K9Q].

20. See, e.g., Adi Robertson, Facebook Can Project Your Eyes Onto a VR Headset, and It’s

Exactly as Uncanny as it Sounds, VERGE (Aug. 4, 2021),

https://www.theverge.com/2021/8/4/22609564/facebook-reality-lab-reverse-passthrough-vr-

prototype-research-siggraph [https://perma.cc/EMY4-YT3Q] (“Facebook Reality Labs . . . released a

paper on ‘reverse passthrough VR,’ a recipe for making VR headsets less physically isolating . . . .

‘Passthrough VR’ refers to a feature that displays a live video feed from a headset’s cameras, letting

users see the real world while they’re still wearing the device.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

170 MARQUETTE LAW REVIEW [106:163

use. Again, there are strong indicators that those changes are coming. The

massive expansion of online gaming has led to a cultural shift among the

millions who spend time in these environments, such as “(1) competitive

integrity, (2) wealth sharing, and (3) labor.”

Despite the overwhelming

success of gaming, however, the metaverse will be built on more.

Expansion of at-home work accommodations and at-home educational

environments makes use of Zoom, Slack, Teams, Canvas, and similar

interactive environments a core part of one’s work and learning environment.

Separating work or school from play environments may no longer be

accomplished using physical spaces. At-home workers and students have

enjoyed needing to only dress the half of their bodies in view to the camera.

Privacy concerns have led many users to create virtual backgrounds. High-

quality digital imagery could easily replace our live heads with photorealistic

animated headshots that do not need makeup, clothing, or lighting to make us

look professionally present in classes and meetings. Populating our meetings

with photorealistic avatars could have a transformative effect. Standardizing

use of nonrepresentational avatars could also help organizations and

communities deal with implicit biases involving race, gender, and sexual

identity. After all, if “[o]n the Internet, nobody knows you’re a dog”

applies

to the metaverse, then perhaps there is some truth to the statement that “I don’t

see breed.” This is not to suggest that all these things will come to pass or that

they will all occur in the same virtual world. But they highlight the potential for

a change in kind rather than degree with a fully realized metaverse.

Over the course of the next months or years, most of these technological

innovations will be possible. Which of these changes will be successful will

turn on a number of factors, most of which will depend on the public’s

perception of the innovation rather than any technological merit.

Given the

continued expansion of the video gaming industry, the societal impact of social

media, and the shift to technology-mediated work and learning environments,

however, it is a reasonable expectation that some of these shifts will take place,

21. Shisha, supra note 14, at 700.

22. Glenn Fleishman, Cartoon Captures Spirit of the Internet, N.Y. TIMES (Dec. 14, 2000),

https://www.nytimes.com/2000/12/14/technology/cartoon-captures-spirit-of-the-internet.html

[https://perma.cc/ARN5-6SBV] (describing the most popular cartoon licensed by The New Yorker

magazine).

23. See, e.g., Kenneth Rapoza, Why you Absolutely Must Invest in the Metaverse, FORBES (Nov.

14, 2021), https://www.forbes.com/sites/kenrapoza/2021/11/14/why-you-absolutely-must-invest-in-

the-metaverse/?sh=5a0e4f23a9b0 [https://perma.cc/4MWP-3ELF].

24. See, e.g., Lee Smith & Darienne L. Dennis, Sony Battles Back, FORTUNE (May 19, 2013)

https://fortune.com/2013/05/19/sony-battles-back-fortune-1985/ [https://perma.cc/RAE6-BPV8]

(republication of article from 1985).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 171

creating new markets worth billions of dollars and triggering significant legal,

business, and regulatory issues.

II. THE EMERGENCE OF WEB3 AND THE PHILOSOPHICAL BATTLE FOR THE

METAVERSE

While this Article suggests a regulatory regime within an interoperable,

ever-present metaverse, it will not be the only model to emerge. There are three

primary reasons that what will emerge will be a multiverse, a loose

confederation of distinct virtual worlds and metaverse environments. The

multiverse will be an international, partially interoperable array of metaverses,

each subject to a different mix of state authority, corporate oversight, and

participatory governance.

The first reason that a single metaverse will not provide a common global

experience is the unique set of positive law and social norms in each country or

region.

The governance of the internet and operation of domestic law varies

considerably from country to country, and the metaverse will exacerbate rather

than flatten this trend.

Freedom House reports, “Authorities in at least 48

countries pursued new rules for tech companies on content, data, or competition

25. The geopolitical and military consequences of the multiverse are beyond the scope of this

Article. I have begun an exploration of this topic in a separate series of articles. See generally Jon M.

Garon, When AI Goes to War: Corporate Accountability for Virtual Mass Disinformation, Algorithmic

Atrocities, and Synthetic Propaganda, 49 N. KY. L. REV. 181 (2022); Jon M. Garon, The Empires

Strike Back: Reassertion of Territorial Regulation in Cyberspace, 3 J.L. & TECH. TEX. 1 (2019); Jon

M. Garon, Cyber-World War III: Origins, 7 J.L. & CYBER WARFARE 1 (2018).

26. See ADRIAN SHAHBAZ & ALLIE FUNK, FREEDOM ON THE NET: THE GLOBAL DRIVE TO

CONTROL BIG TECH, FREEDOM HOUSE 1–2 (2021), https://freedomhouse.org/report/freedom-

net/2021/global-drive-control-big-tech [https://perma.cc/3UAZ-M9B9]; William D. Eggers, Mike

Turley, & Pankaj Kamleshkumar Kishnani, The Future of Regulation, DELOITTE (June 19, 2018),

https://www2.deloitte.com/us/en/insights/industry/public-sector/future-of-regulation/regulating-

emerging-technology.html [https://perma.cc/ZM4E-9BEW] (“The assumption that regulations can be

crafted slowly and deliberately, and then remain in place, unchanged, for long periods of time, has

been upended. . . . [G]overnment agencies are challenged with creating or modifying regulations,

enforcing them, and communicating them to the public at a previously undreamed-of pace.”).

27. See, e.g., Mary Hui, China is Eyeing the Metaverse as the Next Internet Battleground,

QUARTZ (Nov. 17, 2021), https://qz.com/2089316/china-sees-the-metaverse-as-the-next-internet-

battleground/ [https://perma.cc/5GBE-9QFL].

[A Chinese Government book] sketches out six major trends of the metaverse.

Among them: the deep integration of the digital and real economy; data becoming

a core asset; and the globalization of digital and decentralized finance, or DeFi.

Those trends map neatly onto China’s stated strategic goals for its internet

industry and more broadly, the digital economy. The government regards data as

a factor of production, and has erected a new legal infrastructure to ensure

sweeping control over tech firms’ data.

Id.

GARON_21NOV22.DOCX (DO NOT DELETE)

172 MARQUETTE LAW REVIEW [106:163

over the past year.”

The U.S. regulatory model is very different from that of

Europe, and even more different from the governmental control exercised in

China, Russia, and by other authoritarian regimes.

Secondly, the development of the metaverse or expanded metaverses comes

as part of a larger movement towards Web3, the next phase in the development

of the digital economy.

At the heart of the Web3 movement is a philosophical

goal of decentralized and democratized control of the internet instead of control

vesting in an oligarchic set of interdependent multinational corporations or

traditional superpowers.

For some activities, the importance of Web3

communities and autonomy from corporate governance will drive adoption

decisions. In others, the requirements of legal compliance, the importance of

contractual relationships, and a risk-averse management strategy will require

participation in only those aspects of the metaverse that are backed by

established industry leaders that can assure compliance with regulatory

requirements and product safety standards.

Thirdly, as the adage notes, “The future is already here. It’s just not evenly

distributed yet.”

By 2015, the importance of digital property had become so

significant that the Uniform Law Commission, in partnership with the

American Law Institute, adopted the Revised Uniform Fiduciary Access to

28. SHAHBAZ & FUNK, supra note 26, at 1.

29. Id. (“China ranks as the worst environment for internet freedom for the seventh year in a

row. Chinese authorities imposed draconian prison terms for online dissent, independent reporting, and

mundane daily communications.”).

30. See Ephrat Livni, Welcome to “Web3.” What’s That?, N.Y. TIMES (Dec. 5, 2021),

https://www.nytimes.com/2021/12/05/business/dealbook/what-is-web3.html [https://perma.cc/Z3JJ-

U9AF].

31. See id.

32. This approach of risk-averse contractual partnerships was famously captured in the adage

“nobody gets fired for buying IBM,” a strategy that left many companies unable to pivot to the PC

revolution and emergence of the internet. See Duena Blomstrom, “Nobody Gets Fired for Buying

IBM.” But They Should., FORBES (Nov. 30, 2018), https://www.forbes.com/sites/duenablomstrom1

/2018/11/30/nobody-gets-fired-for-buying-ibm-but-they-should [https://perma.cc/7GE8-498V]; Scott

Kirsner, The Barriers Big Companies Face When They Try to Act Like Lean Startups, HARV. BUS.

REV. ONLINE (Aug. 16, 2016), https://hbr.org/2016/08/the-barriers-big-companies-face-when-they-

try-to-act-like-lean-startups [https://perma.cc/7JX8-4739].

33. Quote generally attributed to William Gibson. See Pagan Kennedy, William Gibson’s Future

Is Now, N.Y. TIMES (Jan. 13, 2012), https://www.nytimes.com/2012/01/15/books/review/distrust-that-

particular-flavor-by-william-gibson-book-review.html [https://perma.cc/DNN4-R224] (“[T]his quote

is often attributed to Gibson, though no one seems to be able to pin down when or if he actually said

it. Still, it neatly sums up his own particular flavor.”); see also The Future Has Arrived — It’s Just Not

Evenly Distributed Yet, QUOTE INVESTIGATOR (Jan. 24, 2012),

https://quoteinvestigator.com/2012/01/24/future-has-arrived/ [https://perma.cc/CH9K-ZLX4]

(providing an outline of the evolution of the quote with attribution to Gibson and a nod to Marshall

McLuhan and Alvin Toffler).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 173

Digital Assets Act (RUFADAA).

RUFADAA provides legal authority for an

executor, fiduciary, or lawyer to access the account of someone who has died

or become incapacitated to properly oversee the person’s digital assets.

The

law has since been adopted in all but four states, highlighting the growth in

importance of digital assets.

As this change demonstrates, there is already too

much invested in digital assets to expect that a new system will wholly or

painlessly supplant what has already been adopted.

The past history of virtual worlds provides another example of the highly

variable experiences to be expected. The virtual worlds of a prior decade did

not actually vanish, they merely dropped out of the headlines. “Virtual reality

never really left. It just shifted focus from entertainment to fields like medicine

and military training.”

The statistics for virtual worlds help provide a strong

reminder that even small niche uses are significant. According to market

research firm Omdia, “[I]n 2021, 12.5 million headsets will be sold, while

spend on VR content will reach $2 [billion].”

Other reports are considerably

higher, but the more moderate calculations are likely more accurate.

Beyond the public interest in various tools, technologies, investments, and

pastimes, there are also profound structural barriers that benefit some adopters

of technology over others. “The idea of the ‘digital divide’ refers to the growing

gap between the underprivileged members of society . . . .”

One simple

example highlights the problem. “As more than 55 million students moved to

online learning during the pandemic, one in five teens, ages 13 to 17, reported

being unable to do their homework ‘often’ or ‘sometimes’ because of unreliable

34. See FIDUCIARY ACCESS TO DIGITAL ASSETS ACT, REVISED (UNIF. L. COMM’N 2018)

https://www.uniformlaws.org/committees/community-home?CommunityKey=f7237fc4-74c2-4728-

81c6-b39a91ecdf22 [https://perma.cc/BDG4-U7SU].

35. Id.; see S. Dresden Brunner, Access to Digital Assets—Florida’s New Law for Fiduciaries:

What Are Digital Assets and Why Are They Relevant?, FL. BAR J., Nov. 2016, at 34, 34–35,

https://www.floridabar.org/the-florida-bar-journal/access-to-digital-assets-floridas-new-law-for-

fiduciaries-what-are-digital-assets-and-why-are-they-relevant/ [https://perma.cc/K4R3-W9DA];

Patrick Hicks, What is RUFADAA - Everything You Need to Know, TRUST & WILL,

https://trustandwill.com/learn/what-is-rufadaa [https://perma.cc/J6TC-27FH].

36. See UNIFORM LAW COMMISSION, supra note 34.

37. Ivan Stevanovic, 30 Virtual Reality Statistics for 2022, KOMMANDO TECH (May 13, 2022),

https://kommandotech.com/statistics/virtual-reality-statistics/ [https://perma.cc/J9Y3-WGEP].

38. George Jijiashvili, Omdia Research Reveals 12.5 Million Consumer VR Headsets Sold in

2021 With Content Spend Exceeding $2bn, GAME DEV. (Dec. 10, 2021),

https://www.gamedeveloper.com/blogs/omdia-research-reveals-12-5-million-consumer-vr-headsets-

sold-in-2021-with-content-spend-exceeding-2bn [https://perma.cc/527W-84TD].

39. Stevanovic, supra note 37 (reflecting 171 million active VR users in the world in 2018 with

a revenue of $16.8 billion).

40. Digital Divide, STANFORD UNIV., https://cs.stanford.edu/people/eroberts/cs181/

projects/digital-divide/start.html [https://perma.cc/RV92-9NPQ].

GARON_21NOV22.DOCX (DO NOT DELETE)

174 MARQUETTE LAW REVIEW [106:163

Internet access. Twelve million children were without internet access

altogether.”

The digital divide disadvantages the disadvantaged, exacerbating

preexisting inequities “especially [for] the poor, rural, elderly, and handicapped

portion of the population who do not have access to computers or the internet;

and the wealthy, middle-class, and young Americans living in urban and

suburban areas who have access.”

Nearly half of Americans without at-home internet were in

Black and Hispanic households. With a 14-point gap in

broadband access between white and Black households with

school-going children, and a 12-point gap between white and

Hispanic households, we find that up to 40% of disconnected

K-12 students from Black, Latino, and indigenous

communities struggle with insufficient digital literacy,

language obstacles, and other disincentives to use the internet

and find ways to gain better access.

The digital divisions are likely to keep these historic

disadvantages in place in the future. Seventy percent of Black

and 60% of Hispanic respondents report being underprepared

with digital skills, affecting their employability. While a third

of all white workers in 2018 were in jobs they could do from

home, less than 20% percent of Black workers and only 16%

percent of Hispanic workers were in jobs that could be done

remotely.

The internal divides of race, poverty, and geography mean that the future

development of society-changing technologies risk further reinforcing a

technological caste system based on wealth, race, culture, and geography both

within the U.S. and among the nations of the world. These divisions are innately

inequitable for those left without access to the opportunities made uniquely

through the metaverse, and they will be exploited by adversaries of the U.S. to

further an anti-American narrative that paints democratic ideals as mere

manipulation and propaganda.

For each of these three reasons, any future

41. Bhaskar Chakravorti, How to Close the Digital Divide in the U.S., HARV. BUS. R. ONLINE

(July 20, 2021), https://hbr.org/2021/07/how-to-close-the-digital-divide-in-the-u-s

[https://perma.cc/34KT-RC9H].

42. STANFORD UNIVERSITY, supra note 40.

43. Chakravorti, supra note 41.

44. See Peter Rudolph, The Sino-American World Conflict, in SWP RESEARCH PAPER 4,

STRATEGIC RIVALRY BETWEEN UNITED STATES AND CHINA 10 (Barbara Lippert & Volker Perthes

eds., 2020), https://www.swp-berlin.org/en/publication/strategic-rivalry-between-united-states-and-

china [https://perma.cc/V3KB-XZ5L] (“[T]he systemic conflict will loom increasingly large on the

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 175

expectations of Web3 and the metaverse must take the global competition, the

varying regulatory models, and the internal inequities into account.

III. WEB3, NFTS, AND DAOS

Within the context of these three challenges, the evolution of Web3 will be

particularly important to assess as it evolves over time. According to advocates

of a decentralized, token-centric model of internet engagement, Web3 “will

democratize everything, reshaping art, commerce and technology; displacing

intermediaries; and putting people more directly in control of their destinies.”

Web3 differs from Web 1.0 and Web 2.0, according to analysts, in the

nature of both the content and interactivity. Although the internet has been in

existence since the 1970s, the modern World Wide Web or Web 1.0 was tied

directly to the launch of the graphical user interface beginning with the Mozilla

(Netscape) web browser in 1994.

In many ways, the internet of the 1990s was

a digital publisher and library, dominated by content owners digitizing,

organizing, and pushing out content to the public in a one-to-many model.

Web 2.0 was about interactivity and user generated content. “Web 2.0 refers to

worldwide websites which highlight user-generated content, usability, and

American side, sometimes interpreted as a clash between ‘liberal democracy’ and what is occasionally

referred to as ‘digital authoritarianism’. Highlighting the ideological conflict might be employed to

mobilise sustained domestic support for a power clash with China. . . .”); EUGENE RUMER & RICHARD

SOKOLSKY, THIRTY YEARS OF U.S. POLICY TOWARD RUSSIA: CAN THE VICIOUS CIRCLE BE

BROKEN? 2 (2019), https://carnegieendowment.org/2019/06/20/thirty-years-of-u.s.-policy-toward-

russia-can-vicious-circle-be-broken-pub-79323 [https://perma.cc/C6LN-V7HV] (“Russian leaders see

their country as a great power in charge of its own destiny. . . . [T]hey reject democracy promotion as

a cover for U.S.-sponsored regime change; they . . . will resist perceived U.S. intrusions; and they rely

on anti-Americanism to legitimize their unpopular policies with domestic audiences.”).

45. Livni, supra note 30.

46. See Gilad Edelman, The Father of Web3 Wants You to Trust Less, WIRED (Nov. 29, 2021),

https://www.wired.com/story/web3-gavin-wood-interview/ [https://perma.cc/FE7V-M9KL] (“Web

1.0, the story goes, was the era of decentralized, open protocols, in which most online activity involved

navigating to individual static webpages.”). Netscape launched in October 1994 as Mozilla and set

most of the industry standards. What Was the First Web Browser?, STARRY (June 19, 2019),

https://starry.com/blog/inside-the-internet/what-was-the-first-web-browser [https://perma.cc/C7BP-

9MMH]. Tim Berners-Lee created an earlier browser in 1990. Marc Andreessen and Jamie Zawinski

developed the NCSA Mosaic web browser in 1993, which became Microsoft’s Internet Explorer in

1995. Id.

47. See Nupur Choudhury, World Wide Web and Its Journey from Web 1.0 to Web 4.0, 5 INT’L

J. COMPUT. SCI. & INFO. TECH. 8096, 8096 (2014).

GARON_21NOV22.DOCX (DO NOT DELETE)

176 MARQUETTE LAW REVIEW [106:163

interoperability for end users. Web 2.0 is also called the participative social

web.”

The generation implementing Web 1.0 started with Pong. Each node on the

internet helped realize a vision of the future fostered by Star Trek.

America

Online and the Yahoo! portal were groundbreaking in their day.

Then, with

Web 2.0, the editorial power of the portals and their media-giant parent

companies was disintermediated by Google’s search engine and the explosion

of many-to-many content that put the user’s voice at the center of the media

feed.

For advocates of Web3, Web 2.0 shifted from its participatory roots into a

centralized, algorithmically mediated new media marketplace.

The

48. Comparison Between Web 1.0, Web 2.0 and Web 3.0, GEEKSFORGEEKS (Aug. 2, 2022),

https://www.geeksforgeeks.org/web-1-0-web-2-0-and-web-3-0-with-their-difference/

[https://perma.cc/47RW-5FZZ]; see Susannah Fox & Mary Madden, Riding the Waves of “Web 2.0,”

PEW RSCH. CTR. (Oct. 5, 2006), https://www.pewresearch.org/internet/2006/10/05/riding-the-waves-

of-web-2-0/ [https://perma.cc/S9T5-2UB4] (“[Web 2.0] provided a useful, if imperfect, conceptual

umbrella under which analysts, marketers and other stakeholders in the tech field could huddle the new

generation of internet applications and businesses that were emerging to form the ‘participatory Web’

as we know it today: Think blogs, wikis, social networking, etc.”).

49. See Teena Maddox, Tech Leaders Share How Star Trek Inspired Them to Pursue a Career

in Technology, TECH REPUBLIC (Jan. 23, 2020), https://www.techrepublic.com/article/tech-leaders-

share-how-star-trek-inspired-them-to-pursue-a-career-in-technology/ [https://perma.cc/B9PX-3RTE].

50. See Edmund Lee & Lauren Hirsch, Fortunes of AOL and Yahoo Change Again in a $5 Billion

Sale, N.Y. TIMES, May 4, 2021, at B5 (“Yahoo and AOL, kings of the early internet, saw their fortunes

decline as Silicon Valley raced ahead to create new digital platforms. Google replaced Yahoo. AOL

was supplanted by cable giants.”).

51. See Paul Miller, Web 2.0: Building the New Library, ARIADNE (Oct. 30, 2005),

http://www.ariadne.ac.uk/issue/45/miller/ [https://perma.cc/MA8H-ND43]; Scott Karp, What

Magazines Still Don’t Understand About The Web, PUBLISHING 2.0 (June 9, 2008),

https://publishing2.scottkarp.ai/2008/06/09/what-magazines-still-dont-understand-about-the-web/

[https://perma.cc/GWG4-NMQS]; Choudhury, supra note 47, at 8099.

52. See, e.g., Kevin Curran, Netflix No Longer Fits in FAANG, But Here’s Who Does,

THESTREET (June 7, 2021), https://www.thestreet.com/investing/netflix-no-longer-fits-in-faang-

heres-who-does [https://perma.cc/ACY7-JETB] (“Nearly a decade ago, TheStreet’s founder Jim

Cramer coined the acronym FANG, later updated to FAANG, for companies supremely dominant in

their respective markets and their stocks’ resulting proclivity for outperformance.”); Lara O’Reilly,

The 30 Biggest Media Companies in the World, BUS. INSIDER (May 31, 2016),

https://www.businessinsider.com/the-30-biggest-media-owners-in-the-world-2016-5

[https://perma.cc/DAE5-TFKN] (“Digital giants are increasingly dominating the global advertising

market. In 2015, Google, Facebook, Baidu, Yahoo, and Microsoft accounted for 19% of all the global

ad spend flowing through all media, according to media agency ZenithOptimedia’s 2016 ‘Top Thirty

Global Media Owners’ report.”); Florian Saurwein & Charlotte Spencer‐Smith, Automated Trouble:

The Role of Algorithmic Selection in Harms on Social Media Platforms, 9 MEDIA & COMM. 222, 222

(2021) https://www.cogitatiopress.com/mediaandcommunication/article/view/4062

[https://perma.cc/2ZCU-LYWB].

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 177

dominance of the FAANG companies—Facebook, Apple, Amazon, Netflix,

and Google—largely undermine the ethos of Web 2.0 as being about individual

participation. While Facebook, YouTube, TikTok, Twitter, and others are about

user content, the role of algorithms to manage what one sees, and the dominance

of the platforms, make the internet feel very ownership centric. Naval Ravikant

tweeted, “Web 2: Users are the data, corporations own the platform, and the

code is closed. Web 3: Users own their data, contributors own the platform, and

the code is open.”

“Web 2.0, which we’re living through now, is the era of centralization, in

which a huge share of communication and commerce takes place on closed

platforms owned by a handful of super-powerful corporations—think Google,

Facebook, Amazon—subject to the nominal control of centralized government

regulators.”

Combined with powerful centralized control enforced through the

dominated by massive multinational corporations.

Even though more than

80% of the public uses YouTube and nearly 70% of the public uses Facebook,

the era is known for the corporate management of public content rather than the

Evidence of harms involving social media algorithms was collected from media

reports and academic papers within a two‐year timeframe from 2018 to 2019,

covering Facebook, YouTube, Instagram, and Twitter. Harms with similar casual

mechanisms were grouped together to inductively develop a typology of

algorithmic harm based on the mechanisms involved in their emergence: (1)

algorithmic errors, undesirable, or disturbing selections; (2) manipulation by

users to achieve algorithmic outputs to harass other users or disrupt public

discourse; (3) algorithmic reinforcement of pre‐existing harms and inequalities in

society; (4) enablement of harmful practices that are opaque and discriminatory;

and (5) strengthening of platform power over users, markets, and society.

Id.

53. Naval Ravikant (@naval), TWITTER (Oct. 12, 2021, 7:52 PM),

https://twitter.com/naval/status/1448089151677603846 [https://perma.cc/BDQ9-VN86].

54. Edelman, supra note 46.

55. See, e.g., In Song Kim & Helen v. Milner, Multinational Corporations and their Inﬂuence

Through Lobbying on Foreign Policy 8–9 (Dec. 2, 2019), https://www.brookings.edu/wp-

content/uploads/2019/12/Kim_Milner_manuscript.pdf [https://perma.cc/K3Y5-U5P6] (“[R]esearch

on business political activity is that large ﬁrms lobby the most. . . . Moreover, larger ﬁrms utilize their

resources to actually spend more. . . . The biggest ﬁrms are also able to leverage considerable

informational advantages . . . which help to reduce uncertainty for policymakers.”) (citations omitted);

Global Implications of Media and Technology, LUMEN LEARNING,

https://courses.lumenlearning.com/sociology/chapter/global-implications-of-media-and-technology/

[https://perma.cc/DT4S-YR53] (“On the surface, there is endless opportunity to find diverse media

outlets. But the numbers are misleading. . . . In 1983, a mere 50 corporations owned the bulk of mass-

media outlets. Today in the United States . . . just five companies control 90 percent of media

outlets.”) (citation omitted).

GARON_21NOV22.DOCX (DO NOT DELETE)

178 MARQUETTE LAW REVIEW [106:163

decentralized nature of media.

Despite the participation by the public, Web

2.0 revenue is driven by advertising.

Web3, its evangelists predict, will use the power of digital property to

empower the individual.

“For Web3, the internet is shifting from ad-based

business models to commerce-based business models. . . . As the internet

evolves, it becomes more participatory. People move from passive consumers

to active creators.”

Gavin Wood, founder of the Web3 Foundation, has been

quoted as explaining, “Web3 is actually much more of a larger sociopolitical

movement that is moving away from arbitrary authorities into a much more

rationally based liberal model. And this is the only way I can see of

safeguarding the liberal world . . . .”

The question remains whether this vision is different than the vision of

earlier Web 1.0 and Web 2.0 advocates regarding their model of an internet.

John Perry Barlow chided the “Governments of the Industrial World” that

“[y]ou claim there are problems among us that you need to solve. . . . Many of

these problems don’t exist.”

The earlier utopian idea failed and created a

vacuum into which U.S. corporations were able to bestride the narrow world,

each like a mighty colossus.

56. Brooke Auxier & Monica Anderson, Social Media Use in 2021, PEW RSCH. CTR. (Apr. 7,

2021), https://www.pewresearch.org/internet/2021/04/07/social-media-use-in-2021/

[https://perma.cc/65H7-5D8X] (reporting that 81% of Americans use YouTube and 69% use

Facebook).

57. Rex Woodbury, Chain Reactions: How Creators, Web3, and the Metaverse Intersect, DIGIT.

NATIVE (May 5, 2021), https://digitalnative.substack.com/p/chain-reactions-how-creators-web3

[https://perma.cc/KQU4-FQA6] (“Most big Web1 and Web2 companies make money through

advertising.”).

58. See Edelman, supra note 46 (“Gavin Wood coined the term Web3 (originally Web 3.0) in

2014. At the time, he was fresh off of helping develop Ethereum, the cryptocurrency that is second

only to Bitcoin in prominence and market size.”).

59. Woodbury, supra note 57 (emphasis in the original).

60. Edelman, supra note 46.

61. See John Perry Barlow, A Declaration of the Independence of Cyberspace, ELEC. FRONTIER

FOUND. (Feb. 8, 1996), https://www.eff.org/cyberspace-independence [https://perma.cc/KS7U-

BFGM] (“Governments of the Industrial World, you weary giants of flesh and steel, I come from

Cyberspace, the new home of Mind. On behalf of the future, I ask you of the past to leave us alone.”).

62. Id.

63. See WILLIAM SHAKESPEARE, JULIUS CAESAR act 1, sc. 2, l. 136–42.

CASSIUS

Why, man, he spans this narrow world

like the Colossus, and we puny men

Walk under his huge legs, and peep about

To find ourselves dishonorable graves.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 179

Like the earlier generation of anti-regulators, the current Web3 enthusiasts

tend to ignore both the nature of the people who actively used the technologies

and the people left without access to its benefits. But the increasingly lower

barriers to entry for creation and economic opportunity in the Web3 economy

should at least reduce these disparities.

Moreover, at the same time there is a strong diffusion of wealth and power

away from the U.S. In 2012, the National Intelligence Council published a

global trend analysis to review the likely shifts in the coming two decades.

The report provided some prescient scenarios of the world of 2030:

In the most plausible worst-case scenario, the risks of

interstate conflict increase. The U.S. draws inward and

globalization stalls.

. . . .

Inequalities explode as some countries become big winners

and others fail. Inequalities within countries increase social

tensions. Without completely disengaging, the U.S. is no

longer the “global policeman.”

Driven by new technologies, nonstate actors take the lead

in confronting global challenges.

Reading the predictions at their halfway point, the first two predictions have

come to pass, leading advocates for Web3 to embrace nonstate actors as a

solution. Evangelists for Web3 point out that these changes are already

occurring. There is over $2.3 trillion in value that has accrued in the thousands

of cryptocurrencies that have emerged in the past five years.

This

demonstrates a tremendous global demand for non-fiat currencies. That demand

may also reflect the interest by some asset holders of their need to move out of

Men at some time are masters of their fates.

The fault, dear Brutus, is not in our stars,

But in ourselves, that we are underlings.

Id.

64. See Woodbury, supra note 57 (“More broadly, it’s easier than ever to build companies.

Amazon Web Services and Stripe are Lego-like building blocks that make it fast and easy to launch a

business. Software is becoming more accessible to use, allowing anyone to be a creator entrepreneur.”).

65. NATIONAL INTELLIGENCE COUNCIL, GLOBAL TRENDS 2030: ALTERNATIVE WORLDS i

(2012), https://www.dni.gov/files/documents/GlobalTrends_2030.pdf [https://perma.cc/SP45-HK3D].

66. Id. at ii.

67. Livni, supra note 30 (“At the start of 2020, a Bitcoin was worth just over $7,000. Today, it’s

trading at about $50,000, and the value of all cryptocurrencies, of which Bitcoin is one among many,

is some $2.3 trillion.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

180 MARQUETTE LAW REVIEW [106:163

unstable economies, to avoid government regulation, or some combination of

both.

Goldman Sachs suggests that key elements of this model will emerge. It

provides a few key principles:

[1] Likely more control by the user of their data (including data

residing on-device);

[2] Likely a more micro focus - a mean reversion on scale

(either in end market being tackled or in relationship between

the platform and the user);

[3] The rise of individual as creator & creator monetizing their

content more directly with “fans”;

[4] Increasingly decentralized (with the possible breakdown of

the mobile operating system/app store distribution model over

the next 5-10 years); &

[5] Flexibility (if not innovation) on payment mechanisms

aimed at a mix of themes, including decentralized privacy and

anti-establishment.

These are not particularly bold predictions since they largely describe the

nascent Web3 economy of 2021. In the last few years, for example, blockchain

technologies have expanded into multiple areas beyond cryptocurrency. The

most popular expansion of blockchain technology has been through the

collection, sale, and trading of nonfungible tokens (NFTs). “So far in 2021,

about $27 billion worth of crypto has been spent on major NFT platforms,

according to Chainalysis. That’s up from $114 million in all of last year.”

The use of NFTs creates a mechanism for digital assets to be uniquely

identified, provided a nearly unforgeable provenance, and be available for

68. See, e.g., Werner Vermaak, Afghanistan: Can Blockchain and Crypto Prevent or Mitigate

The Fallout of Failing States?, ALEXANDRIA, https://coinmarketcap.com/alexandria/article/

afghanistan-can-blockchain-and-crypto-prevent-or-mitigate-the-fallout-of-failing-states

[https://perma.cc/PF9J-AT36] (“El Salvador’s recent decision to adopt Bitcoin as a national currency

could improve their economy by easing money transfers from El Salvadorians abroad and providing

financial services to locals who can’t otherwise afford them. The same technology would have proved

exceedingly useful during the Taliban’s recent run on the banks.”); Cady Voge, Where Could Bitcoin

Succeed as a Currency? In a Failed State, WIRED (Mar. 22, 2018),

https://www.wired.com/story/where-could-bitcoin-succeed-as-a-currency-in-a-failed-state/

[https://perma.cc/EBS8-QULW] (“[I]n Venezuela, where inflation topped 2,616 percent last year,

cryptocurrency is a way around restrictions on holding foreign currency, and in some cases, a means

of survival.”); Cynthia Dion-Schwarz, David Manheim & Patrick B. Johnston, TERRORIST USE OF

CRYPTOCURRENCIES - TECHNICAL AND ORGANIZATIONAL BARRIERS AND FUTURE THREATS 14

(2019) https://www.rand.org/pubs/research_reports/RR3026.html [https://perma.cc/7U5N-N3JE]

(“The question of whether and how terrorist organizations would use a cryptocurrency system depends

on the available technology and its properties, as well as the groups’ needs and capabilities.”).

69. SHERIDAN, supra note 6, at 3.

70. Livni, supra note 30.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 181

trading, largely without the need for large, centralized intermediaries.

The

NFT is more than just simply a digital certificate of authenticity, however,

because it typically includes code that specifies conditions of ownership and

transfer. These provisions are unfortunately and inaccurately labeled “smart

contracts,”

though they can more accurately be described as automated

provisions for digital transactions. “Smart contracts are open-sourced

blockchain protocols that directly control the transfer of digital currencies or

assets between parties under certain terms and conditions.”

For current

internet users, NFTs provide a fundamentally new way of approaching

ownership of digital assets, since those had previously been defined by the

For those involved in Web 1.0, the

use of NFTs is quite analogous to the early efforts in copyright law to provide

digital protections measures for digital assets, micropayment systems, and other

property-oriented approaches to protect artists and individuals from corporate

overreach.

Social trends and the digital native culture, however, may create a

different outcome in Web3 than that which occurred in Web 1.0.

We’re becoming a digital-first species, and at the same time

we’re rejecting institutions. Those two factors are combining

to make work more disaggregated and creative, fueling the

71. See Pratin Vallabhaneni, The Rise of NFTs – Opportunities and Legal Issues, WHITE & CASE

(Apr. 20, 2021), https://www.whitecase.com/publications/alert/rise-nfts-opportunities-and-legal-

issues [https://perma.cc/8GER-DDQA] (“[A]n NFT . . . contains a unique identification code and

metadata that distinguishes one NFT from any other, and represents items on the blockchain that cannot

be replicated. . . . Moreover, NFTs are composed of software code in the form of ‘smart contracts’ that

can be crafted to provide significant benefits to NFT creators.”).

72. Quinn Dupont & Bill Maurer, Ledgers and Law in the Blockchain, KINGS REV. (June 23,

2015), https://www.kingsreview.co.uk/essays/ledgers-and-law-in-the-blockchain [https://perma.cc/

8CN5-Z3TT] (“[S]mart contracts seem to miss the whole point of contracts: that, like promises, they

are made to be broken. . . . Contracts, by contrast, are all about managing uncertainty.”). Smart

contracts are merely short code, often containing programming errors made immutable in the

blockchain. David G.W. Birch, They’re Not Smart And They’re Not Contracts, FORBES (Sept. 4, 2021),

https://www.forbes.com/sites/davidbirch/2021/09/04/theyre-not-smart-and-theyre-not-

contacts/?sh=3b0db44a397e [https://perma.cc/7LBY-VJ34]. Companies treating the use of these

coding errors as hacking, therefore, acknowledge that the terms of the contract are likely not the same

as the code in the token. Id. “Ethereum inventor Vitalik Buterin[ ] comment[ed] that he wished that

with hindsight he had used the word ‘persistent script’ instead.” Id.

73. Vallabhaneni, supra note 71.

74. See generally JOSHUA FAIRCHILD, OWNED: PROPERTY, PRIVACY, AND THE NEW DIGITAL

SERFDOM (2017). Since the focus of this Article is on the metaverse, the discussion of Web3 will be

limited to its intersection with virtual world architectures. The broader implications of the Web3 will

be addressed separately.

75. See Jon M. Garon, What If DRM Fails?: Seeking Patronage in the iWasteland and the Virtual

O, 2008 MICH. ST. L. REV. 1, 27–30 (2008) (discussing the economic hardship on individual artists

and predicting a return to patronage systems of artistic support).

GARON_21NOV22.DOCX (DO NOT DELETE)

182 MARQUETTE LAW REVIEW [106:163

creator economy and letting everyone build with technology.

Web3 and new business models will better allow creators and

their communities to capture and exchange value, forming

robust digital economies. Ultimately, this will lead to an

immersive, decentralized metaverse.

The demographic shifts,

changes in technologies, and the central role the

internet now plays in many people’s daily lives all suggest the transformation

will take place. Despite these changes, however, that does not suggest that

governments are prepared to sit back or that established enterprises are not

going to find strategies to dominate the emerging markets.

In the context of cryptocurrency, for example, each sovereign state will

determine the degree to which it is willing to have a non-fiat currency compete

with the nation’s fiat currency, the extent to which the use of the public is in

need of consumer protection regulation, and the degree to which the

marketplace for these assets must be regulated to control fraud and abuse.

The

choices will likely vary from country to country, and they may also vary

considerably depending on the particular attributes of each cryptocurrency.

The power of the FAANG companies have led proponents of Web3 to

embrace a similar, libertarian ethos against organizational management. This

movement can best be seen in the popularity of Decentralized Autonomous

Organizations (DAOs).

DAOs . . . unlock radically new ways to organize capital and

human resources. Packy McCormick sums it up succinctly:

“DAOs are a new way to finance projects, govern communities,

and share value. Instead of a top-down hierarchical structure, they

use Web3 technology and rapidly evolving governance and

incentive systems to distribute decision-making authority and

financial rewards. Typically, they do that by issuing tokens based

on participation, contribution, and investment. Token holders then

76. Woodbury, supra note 57 (“As a 90s kid, I’ll never forget loitering in the food court with

friends . . . . The mall was the hub around which our social lives revolved. Today’s kids hang out on

Snapchat, on TikTok, in Roblox, in Fortnite. The internet is the new place to be.”).

77. See id. (“In 2010, there were 2 billion people online—about 30% of the world’s population.

Over the last decade, that’s swelled to 4.5 billion people and 60% of the world.”).

78. See Robert Litan, Regulation, LIBR. OF ECON. & LIBERTY,

https://www.econlib.org/library/Enc/Regulation.html [https://perma.cc/G7QT-4N3Y] (highlighting

disclosure requirements, antitrust and competition laws, safety, and taxes as the purposes of

regulation); Objectives of Market Regulation, ANALYSTPREP (Sept. 12, 2019),

https://analystprep.com/cfa-level-1-exam/equity/objectives-market-regulation/ [https://perma.cc/

JT49-967T] (“The objectives of market regulation are to control fraud, control agency problems,

promote fairness, set mutually beneficial standards, prevent undercapitalized financial firms from

making excessively risky investments, and to ensure that long-term liabilities are funded.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 183

have the ability to submit proposals, vote, and share in the

upside.”

DAOs can be analogized to nonprofit membership organizations which

have no professional staff, to share ownership in corporations, or to labor

unions which own their companies. The DAOs will be one potential model for

governance of the metaverse—or at least some games and virtual worlds that

connect into the metaverse. It is hard not to reflect that history has attempted

this revolution before or to ignore that “[a]ll animals are equal, but some

animals are more equal than others.”

Tokens will be meted out based on

payment, proof of work, or some other system. The attention span to provide

governance from below will not be evenly distributed. Like political

movements, some DAOs will be captured by their fringe elements. Others will

be operated by those who are most expert at gathering the resources from the

broader community. Still others are likely to be built with advantages for the

founders, much like or even stronger than the venture-capital-backed publicly

traded corporations of today. Ironically, it should not be forgotten that a stock

certificate is precisely a token of distributed ownership designed to allow

aggregation of capital, liquidity, and shared governance.

For some organizations and for particular purposes, however, the DAO may

be an appropriate operational approach.

Just as there are nonprofits, public

benefit corporations, limited liability companies, and close corporations to

serve as alternatives to the Chapter C corporation, there will be times that DAOs

are best suited to the public’s interest in a particular cause, enterprise, or

entertainment.

For the limited purpose of addressing the metaverse, however, there is a

clear battle brewing between the centralized vision of a virtual world network

organized and managed by Meta and other FAANG companies or a series of

open-source protocols utilized through the sharing of NFTs and the smart

contract rules associated with those tokens. The existing exemplars of the

metaverse are predominantly controlled by centralized corporations and

79. Yash Bagal, How Web3 Redefines Labour, Capital, and Fandom in Music, APPETITE FOR

DISTRACTION (Dec. 6, 2021), https://yashbagal.substack.com/p/web3-daos-nfts-music-creators

[https://perma.cc/G8EP-XHQK]; see Brandon Echter, Crypto and the metaverse with Packy

McCormick of Not Boring, SOLANA (Oct. 12, 2021), https://solana.com/news/packy-mccormick-of-

not-boring-on [https://perma.cc/F6XT-RLM3] (quoting Packy McCormick, writer, NOT BORING)

(“One of the things I think crypto does well is give physical-ish characteristics to digital things, and so

I think a interface that makes that clear will have a lot of value in just making a lot of the stuff that

feels a little more ethereal feel more real and tangible. . . .”).

80. GEORGE ORWELL, ANIMAL FARM 88 (Alfred A. Knopf Inc. ed. 1989).

81. See Dave Rodman, DAOs: A Legal Analysis, JD SUPRA (Apr. 1, 2021),

https://www.jdsupra.com/legalnews/daos-a-legal-analysis-6177928/ [https://perma.cc/U2R9-778B].

GARON_21NOV22.DOCX (DO NOT DELETE)

184 MARQUETTE LAW REVIEW [106:163

carefully curated. These include Roblox, Fortnite, and Microsoft’s Minecraft.

These companies also adhere to restrictions of the Children’s Online Privacy

Protection Act requiring additional protections for minors under the age of

thirteen.

In contrast, there are NFT-based metaverse projects that seek to remove

corporate ownership (or at least remove the FAANG companies from the list of

corporate owners) and replace centralized control with user-based or

community-based control. One such project is Decentraland.

It is operated by

the Decentraland Foundation operating on behalf of the community DAO.

Although a DAO, it has community committees, such as the “wearables

curation committee” to establish certain acceptable standards within the

community.

Another of the significant noncentralized metaverses is

Sandbox.

“Sandbox is a virtual world made-up of NFTs (LANDS, ASSETS,

GAMES). Meaning, users have absolute ownership of their creations and

LANDs in the Metaverse. For that reason, the Sandbox Metaverse is a

promising investment area.”

Both Sandbox and Decentraland rely on the

Ethereum platform for their NFT operating network.

Neither the centrally operated metaverses nor the NFT/DAO metaverses

will be able to eradicate the other, and in some areas, there may even be

82. See Yao Du, Thomas D. Grace, Krithika Jagannath & Katie Salen-Tekinbas, Connected Play

in Virtual Worlds: Communication and Control Mechanisms in Virtual Worlds for Children and

Adolescents, MULTIMODAL TECH. & INTERACTIONS May 2021, at 1, 15 (2021),

https://www.mdpi.com/2414-4088/5/5/27/pdf [https://perma.cc/P785-WQC5] (discussing parental

controls and moderation is a wide range of platforms).

83. Id. at 7–8.

84. See Alexandra Marquez, Welcome to Decentraland, Where NFTs Meet a Virtual World,

NBC NEWS (Apr. 3, 2021), https://www.nbcnews.com/tech/tech-news/welcome-decentraland-nfts-

meet-virtual-world-rcna553 [https://perma.cc/UFW5-WYUT] (“Most everything in Decentraland is an

NFT, from its virtual plots of land to the art on the walls in the virtual galleries. Ownership also gives

users a say in how the virtual world operates.”).

85. DECENTRALAND, Terms of Use, https://decentraland.org/terms/ [https://perma.cc/5459-

YWHT].

86. Id.

87. See Sébastien Borget, The Sandbox (SAND): Tokenized Assets for Gaming Ecosystems,

CRYPTOPEDIA (Dec. 23, 2021), https://www.gemini.com/cryptopedia/the-sandbox-sand-crypto-nft-

virtual-world [https://perma.cc/Z7EN-J8JM] (post by the Sandbox Co-Founder & COO) (“The

Sandbox is an Ethereum-based metaverse and gaming ecosystem where users can create, share, and

monetize in-world assets and gaming experiences. . . . The Sandbox is designed to disrupt the

traditional gaming market in which platforms own and control user-generated content whereby the

rights of creators and gamers are limited.”).

88. Melwyn Joseph, Sandbox Metaverse: Is The Sandbox Playable and Is The Sandbox An

NFT?, STEALTH OPTIONAL (Dec. 6, 2021), https://stealthoptional.com/metaverse/sandbox-metaverse-

is-the-sandbox-playable-and-is-the-sandbox-an-nft/ [https://perma.cc/XDT8-5MLJ].

89. Id.; DECENTRALAND, supra note 85.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 185

cooperation. Nonetheless, control of the metaphorical capital cities within the

metaverse and the key economic assets could well be worth trillions of dollars.

The competition between the Fortune 50 companies and newly formed DAOs

will shape the internet for the next generation.

IV. A GLIMPSE OF THE U.S. LEGAL ROADMAP

The expansion of virtual worlds will take place within an environment

largely defined by intellectual property rights of copyright, trademark, patent,

trade secret, and publicity rights,

as well as the digital property rights

associated with NFTs and their smart contracts. Other than for the NFTs, each

of these doctrines is well established, making it likely that the application of

these intellectual property rights will be generally predictable within the

metaverse environment. Beyond the intellectual property regime, however,

there may be some areas where the expansion of virtual worlds to large-scale

adoption of a metaverse will have unanticipated implications and

complications.

Unlike the “real” world, the interactions within the metaverse are framed

by contractual relations between the site owner and the participants in which

the contractual agreements and terms of service take on an extremely important

role. There have been numerous examples of users on platforms challenging

the enforceability of end user license agreements or terms of service

agreements.

When the host is a gaming company, such questions are generally

treated as simple contract issues.

But if the use of virtual worlds develops into

“The Metaverse,” a single, ubiquitous platform or an interconnected series of

commercially owned platforms, then the market power of the host will raise

additional questions regarding the unconscionability of any terms imposed by

the all-powerful system owner, the potential to treat the platform as a common

90. See, e.g., E.S.S. Ent. 2000, Inc. v. Rock Star Videos, Inc., 547 F.3d 1095, 1097–98, 1101

(9th Cir. 2008) (trademarks); Hart v. Elec. Arts, Inc., 717 F.3d 141, 145, 170 (3d Cir. 2013) (publicity

rights); Brown v. Entm’t Merchs. Ass’n, 564 U.S. 786, 788–91, 856 (2011) (free speech rights);

Pellegrino v. Epic Games, Inc., 451 F. Supp. 3d 373, 383, 385 (E.D. Pa. 2020) (false endorsement);

Sega Enters. Ltd. v. Accolade, Inc., 977 F.2d 1510, 1514, 1527–28 (9th Cir. 1992) (copyright);

National Basketball Ass’n v. Motorola, Inc., 105 F.3d 841, 844–46 (2d Cir. 1997) (copyright); see also

Sophie Goossens, Christine Morgan, Cem Kuru, Fred Ji & DJ Cespedes, Protecting Intellectual

Property In The Metaverse, 33 INTELL. PROP. & TECH. L.J. 11, 11–12, 14–16 (2021); Barlow, supra

note 61; Jessica Litman, Imaginary Bottles, 18 DUKE L. & TECH. REV. 127, 128–29 (2019); Mark A.

Lemley, Place and Cyberspace, 91 CALIF. L. REV. 521, 534–37 (2003).

91. E.g., MDY Indus., LLC v. Blizzard Ent, Inc., 629 F.3d 928, 935, 938–39 (9th Cir. 2010);

Bragg v. Linden Rsch., Inc., 487 F. Supp. 2d 593, 606–07 (E.D. Pa. 2007); see also Kevin Carr, Digital

Assets & License Protections in an Age That Denies Class Actions and Mandates Arbitration, 2021 J.

DISP. RESOL. 335, 336 (2021).

92. E.g., Blizzard Ent, Inc., 629 F.3d at 939, 941; Linden Rsch., Inc., 487 F. Supp. 2d at 605.

GARON_21NOV22.DOCX (DO NOT DELETE)

186 MARQUETTE LAW REVIEW [106:163

carrier, or to redefine and regulate the environment to avoid unfair and

deceptive trade practices.

To the extent the metaverse is used by governmental agencies, then the

spaces operated and managed by the government might be considered to

become designated public fora within the proprietary metaverse.

Further

distinctions may be needed when a government official is acting in a private,

nongovernmental capacity from the person’s actions in an official capacity.

93. See Biden v. Knight First Amend. Inst. at Columbia Univ., 141 S. Ct. 1220, 1220 (2021)

(granting cert. and vacating lower court decision as moot). In his concurrence to the dismissal of the

certiorari petition, Justice Thomas made this point:

The analogy to common carriers is even clearer for digital platforms that have

dominant market share. Similar to utilities, today’s dominant digital platforms

derive much of their value from network size. The Internet, of course, is a

network. But these digital platforms are networks within that network. . . .

. . . .

Much like with a communications utility, this concentration gives some digital

platforms enormous control over speech. When a user does not already know

exactly where to find something on the Internet—and users rarely do—Google is

the gatekeeper between that user and the speech of others 90% of the time. It can

suppress content by deindexing or downlisting a search result or by steering users

away from certain content by manually altering autocomplete

results. . . . Facebook and Twitter can greatly narrow a person’s information flow

through similar means. And, as the distributor of the clear majority of e-books

and about half of all physical books, Amazon can impose cataclysmic

consequences on authors by, among other things, blocking a listing.

. . . .

If the analogy between common carriers and digital platforms is correct, then

an answer may arise for dissatisfied platform users who would appreciate not

being blocked: laws that restrict the platform’s right to exclude.

. . . .

None of this analysis means, however, that the First Amendment is irrelevant

until a legislature imposes common carrier or public accommodation

restrictions—only that the principal means for regulating digital platforms is

through those methods.

Id. at 1224–26 (Thomas, J., concurring) (citations omitted).

94. See, e.g., Knight First Amend. Inst. at Columbia Univ. v. Trump, 928 F.3d 226, 237 (2d Cir.

2019), dismissed as moot, Biden v. Knight First Amend. Inst. at Columbia Univ., 141 S. Ct. 1220, 1220

(2021); Davison v. Randall, 912 F.3d 666, 685 (4th Cir. 2019); see also Adam Candeub, Bargaining

for Free Speech: Common Carriage, Network Neutrality, and Section 230, 22 YALE J. L. & TECH. 391,

399 (2020) (“[C]ommunications regulation, particularly common carriage, has always encompassed

more than antitrust because communications networks offer essential public goods.”).

95. See Lindke v. Freed, 563 F. Supp. 3d 704, 710 (E.D. Mich. 2021) (“Courts have approached

this argument by examining whether the public official acted under color of state law in maintaining

the social media account, thereby triggering First Amendment concerns.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 187

A. State Regulation Through Gambling Laws

As the metaverse grows more robust in user experience and the Web3

expectations of participatory creative ownership, it must serve as a marketplace

for commercial transactions. Transactions involving only in-world digital

assets will be predominantly regulated with reference to the terms of service

required of all metaverse participants.

If the world uses in-game currency,

then transactions are unlikely to trigger significant regulatory scrutiny. Even

here, however, there are variations among different state laws. In Kater v.

Churchill Downs, Inc.,

the Ninth Circuit recently interpreted Washington

State’s Recovery of Money Lost at Gambling Act (RMLGA)

very broadly.

The court explained:

[Virtual chips] permit a user to play the casino games inside the

virtual Big Fish Casino. . . . Without virtual chips, a user is unable

to play Big Fish Casino’s various games. Thus, if a user runs out

of virtual chips and wants to continue playing Big Fish Casino,

she must buy more chips to have “the privilege of playing the

game.”

As a result, the plaintiff—and the 50,000 others who later joined the class

action—had the right to recover their losses in the game.

100

96. See infra Section V.A. (discussing terms of service requirements). But see João Marinotti,

Tangibility as Technology, 37 GA. ST. U. L. REV. 671, 713–14 (2021) (noting that real property,

bailment and similar legal doctrines are not subject to contractual waivers and will take precedence

over attempts to limit liability by contract).

97. Kater v. Churchill Downs Inc., 886 F.3d 784, 786 (9th Cir. 2018).

“Gambling” is defined as the “[1] staking or risking something of value [2] upon

the outcome of a contest of chance or a future contingent event not under the

person’s control or influence, [3] upon an agreement or understanding that the

person or someone else will receive something of value in the event of a certain

outcome.”

Id. (quoting Wash. Rev. Code § 9.46.0237 (2005)).

98. Wash. Rev. Code § 4.24.070 (1957).

All persons losing money or anything of value at or on any illegal gambling

games shall have a cause of action to recover from the dealer or player winning,

or from the proprietor for whose benefit such game was played or dealt, or such

money or things of value won, the amount of the money or the value of the thing

so lost.

Id.

99. Kater, 886 F.3d at 787; see James Gatto & Mark Patrick, How the Evolution of Games Has

Led to a Rise in Gambling Concerns: All Bets are On! Gambling and Video Games, NAT. L. REV.

(Sept. 16, 2018), https://www.natlawreview.com/article/how-evolution-games-has-led-to-rise-

gambling-concerns-all-bets-are-gambling-and [https://perma.cc/R4MX-SW2R].

100. Peter Hayes, Churchill Downs, Others Settle Gaming App Suit for $155 Million,

BLOOMBERG L. (Feb. 12, 2021), https://news.bloomberglaw.com/class-action/churchill-downs-others-

settle-gaming-app-suit-for-155-million [https://perma.cc/K7VN-JMFK].

GARON_21NOV22.DOCX (DO NOT DELETE)

188 MARQUETTE LAW REVIEW [106:163

When game assets can be converted to cash, in-world wagering typically

meets the three-pronged test of (1) payment of some form of consideration, (2)

a result determined by chance rather than skill, (3) resulting in the award of a

prize.

101

“While these three elements seem to be fairly simple terms, their

interpretation is not. Their meaning varies from state to state.”

102

As the

metaverse expands, the potential for in-world assets to become exchangeable

for other things of value increases, meaning the prize becomes far more

important when a game is tied to the interoperability of the metaverse or two

exchangeable assets.

While most states may not treat in-game assets as illegal gambling when

used only for in-game play, if the in-game currency can be converted to money

or items of value, then game publishers and metaverse operators must address

the unintended additional legal implications.

103

The lesson of Kater should not

be lost on Web3 architects. A relatively minor definitional construction in a

state gambling statute was enough to undermine a longstanding, robust online

business model. If states become frustrated with a loss of tax revenue,

regulatory control, or impotent consumer protection laws, they can easily

amend domestic laws to turn NFTs and in-game assets into regulated casino

chips, thereby imposing costly state liabilities on transactions previously

thought to be immune.

104

B. Federal Regulation Through Money Transfer, Securities and Foreign

Investment Laws

Transferring funds or fungible assets within the game or world will be

subject to money transfer laws if the funds can be converted to currency, assets,

101. Gatto & Patrick, supra note 99 (“In general, if all three of these elements are present, that

offering may be an illegal lottery and may also constitute illegal gambling. If at least one of these

elements is removed, the offering will generally fall outside the anti-lottery/gambling laws.”).

102. Id.

103. See, e.g., Paul C. Nylen, Imposing a Deadline on the IRS: Artificial Intelligence Tries to

Beat “Starcraft” While the IRS Tries to Regulate Virtual Currency, 52 AKRON L. REV. 945, 953–54

(2019) (addressing tax obligation and foreign bank reporting obligations); Nika Antonikova, Real

Taxes on Virtual Currencies: What Does the I.R.S. Say?, 34 VA. TAX REV. 433, 441–42 (2015) (“A

taxpayer who receives virtual currency must include the fair market value of the virtual currency in

computing gross income both if currency was received in exchange for goods and services, and if it

was ‘mined’ by a taxpayer.”); Sean F. Kane, Virtual Worlds, Digital Economies, and Synthetic Crimes,

PRAC. LAW., Apr. 2008, at 35, 44 (“With such freedom of unregulated and unreported access and

transfer, as being offered first by Entropia Universe’s accounts, the Money Laundering Control Act

will be difficult to fully enforce.”).

104. See Kater, 886 F.3d at 787.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 189

or crypto.

105

To the extent that virtual worlds are in the money-services business

as a function of the platform’s ability to exchange in-world digital assets for

fiat currency or cryptocurrency, then the platform will need to register as a

money-services business.

106

Second Life has taken that step for its own

operations and more recently for its users.

107

In-game banking and investment

services will likely be subject to the regulations governing real-world

activities.

108

Depending on the financial transactions that can occur within the

105. See Currency and Foreign Transactions Reporting Act, Pub. L. No. 91-508, 84 Stat. 1118

(1970), 18 U.S.C § 1956 (2018) (Bank Secrecy Act); see also Stan Sater, Do We Need KYC/AML: The

Bank Secrecy Act and Virtual Currency Exchanges, 73 ARK. L. REV. 397, 417, 422 (2020); Anton

Moiseienko & Kayla Izenman, Gaming the System: Money Laundering Through Online Games, RUSI

NEWSBRIEF, Oct. 2019, at 1, 3 https://rusi.org/explore-our-research/publications/rusi-

newsbrief/gaming-system-money-laundering-through-online-games [https://perma.cc/VJW9-GRCL]

(“If a computer game allows players to transfer in-game items to each other, and these in-game items

can be exchanged into fiat currency, the gaming company’s position is similar to that of a virtual

currency exchange. But unlike gaming companies, virtual currency exchanges should be subject to

[anti-money laundering regulations].”).

106. See 18 U.S.C. § 1960(a)(2) (“[T]he term ‘money transmitting’ includes transferring funds

on behalf of the public by any and all means including but not limited to transfers within this country

or to locations abroad by wire, check, draft, facsimile, or courier. . . .”); Sater, supra note 105, at 398–

99.

In 2013, FinCEN published guidance titled Application of FinCEN’s Regulations

to Persons Administering, Exchanging, or Using Virtual Currencies (2013

Guidance). The 2013 Guidance interpreted the BSA Regulations and

contextualized them to the virtual currency ecosystem while also inventing new

terms such as “user,” “exchanger,” “administrator,” “virtual currency,” and

“convertible virtual currency.” In subsequent guidance and administrative

rulings, FinCEN regularly uses these terms as well as defining new terms to

continually apply the BSA Regulations to different business models that are of

note in the virtual currency ecosystem.

Id. (quoting U.S. DEP’T OF THE TREASURY FIN. CRIMES ENF’T NETWORK, FIN-2013-G001,

APPLICATION OF FINCEN’S REGULATIONS TO PERSONS ADMINISTERING, EXCHANGING, OR USING

VIRTUAL CURRENCIES 1 (2013)).

107. Moiseienko & Izenman, supra note 105, at 3.

On 1 July 2019, Linden Lab, the developer of the online game Second Life,

announced that all Second Life users would henceforth need to register with its

fully owned subsidiary Tilia Inc., a money service business (MSB) licensed in 46

US states. As an MSB, Tilia is required to comply with AML/CTF obligations

under the Bank Secrecy Act and its implementing regulations, including in

relation to customer verification and suspicious transaction reporting.

Id.

108. See James P. Brennan, Joshua McDougall, Eric Hornung, Seth Litwack & Madiha Zuberi,

The Curious Case of Crypto, BANKING & FIN. SERVS. POL’Y REP., Apr. 2018, at 8, 12 (discussing state

money transfer registration requirements in Washington and New York).

GARON_21NOV22.DOCX (DO NOT DELETE)

190 MARQUETTE LAW REVIEW [106:163

game or virtual world, potentially every financial regulatory body could claim

jurisdiction over some aspect of these financial transactions.

109

i. Money Transfer Regulations

There is a strong appetite for cryptocurrencies, but the need case may not

fully match the interest. “Despite the much-touted economic, political, and

ideological motivations behind the creation of cryptocurrencies, they have

emerged to address market frictions.”

110

Prior to the emergence of

cryptocurrency, “Commerce on the Internet [had] come to rely almost

exclusively on financial institutions serving as trusted third parties to process

electronic payments. While the system works well enough for most

transactions, it still suffers from the inherent weaknesses of the trust based

model.”

111

The profitability of the trust model, after all, is built on “the absence

of complete trust between parties . . . [which] imposes costs on both institutions

and consumers, including contracting, search, and verification costs.”

112

Decentralized finance (DeFi) offers a solution to improve trust and therefore

reduce transaction costs.

In many ways, the trusted third-party model continues to work well.

113

a result, there are some cryptocurrencies that actually trade ownership off the

chain, relying on the intermediary to legitimize the transaction.

114

109. See generally U.S. DEP’T OF JUST., CRYPTOCURRENCY ENFORCEMENT FRAMEWORK

(2020), https://www.justice.gov/cryptoreport [https://perma.cc/74A4-RM46].

110. Hossein Nabilou & André Prüm, Central Banks and Regulation of Cryptocurrencies, 39

REV. BANKING & FIN. L. 1003, 1005 (2020).

111. SATOSHI NAKAMOTO, BITCOIN: A PEER-TO-PEER ELECTRONIC CASH SYSTEM 1 (2008).

112. Erik Feyen, Jon Frost, Leonardo Gambacorta, Harish Natarajan & Matthew Saal, Fintech

and the Digital Transformation of Financial Services: Implications for Market Structure and Public

Policy, BANK FOR INT’L SETTLEMENTS PAPERS, July 2021, at 2

https://www.bis.org/publ/bppdf/bispap117.pdf [https://perma.cc/2ACX-998A] (“A fundamental

feature of payment markets is the need to keep track of payment obligations, and to verify the identity

of account holders or the veracity of payment tokens.”) (citation omitted).

113. See Dirk A. Zetzsche, Douglas W. Arner & Ross P. Buckley, Decentralized Finance, 6 J.

FIN. REG. 172, 191 (2020), https://doi.org/10.1093/jfr/fjaa010 [https://perma.cc/7HG4-NZKX]

(highlighting that the current financial system is built to address compliance obligations).

114. See Sarah Jane Hughes & Stephen T. Middlebrook, Advancing A Framework for Regulating

Cryptocurrency Payments Intermediaries, 32 YALE J. ON REG. 495, 497–98 (2015).

A growing percentage of transactions, however, take place through one or more

intermediaries. Intermediaries act as custodians of cryptocurrency or

cryptocurrency credentials originally belonging to their clients and may facilitate

and clear transactions for clients without updating the public ledger. Such

transactions are referred to as taking place “off the block chain.” Off the block

chain transactions may not appear in the public ledger at all, or, if they do, they

appear as transactions involving not the sender and receiver, but the

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 191

Understanding the regulatory model for cryptocurrency transactions and

transactions of nonfungible digital assets, therefore, will depend on the nature

of the particular transaction. Some transactions will be for fungible

cryptocurrency tokens, such as Bitcoin or Ether (Eth), that are written directly

to the distributed ledger.

115

Other transactions for fungible tokens will be noted

by the trusted third-party intermediary in the intermediary’s own ledgers to

reduce the transaction costs associated with changes to the distributed ledger.

116

And other transactions will be for nonfungible tokens, some of which will be

on chain and others will be noted by trusted intermediaries and recorded off

chain.

117

Blockchain technology provides a great solution to the potential for double-

spending, or having two parties make simultaneous claims to the funds while

they are in transit.

118

Placing the record of the transaction into the distributed

ledger assures that the same token cannot be used more than once.

119

But this is

just one of many issues for financial transactions. Additional risks include

“concerns about fraud, market manipulation, financial crime, consumer

protection, liability issues in distributed ledgers, the development of large,

intermediaries.

Id.

115. See Ryan Haar, Ethereum: What You Should Know Before You Invest, NEXTADVISOR (May

3, 2022), https://time.com/nextadvisor/investing/cryptocurrency/what-is-ethereum/ [https://perma.cc/

HJZ2-QNG5] (“Ethereum is a software platform that runs on a blockchain. Users can interact with the

platform using ether, the cryptocurrency associated with Ethereum—or buy and hold it as a store of

value. Ethereum is commonly used by developers, but there are people who also invest in the crypto

for its potential to be worth more over time.”).

116. Nathan Reiff, Blockchain Won't Cut Out Intermediaries After All, INVESTOPEDIA (Oct. 27,

2021), https://www.investopedia.com/tech/blockchain-wont-cut-out-intermediaries-after-all/

[https://perma.cc/XQG2-SMMB].

117. On-chain NFTs and Why They’re Better, ART HAUS, https://art.haus/on-chain-nfts-and

whytheyrebetter/#:~:text=One%20crucial%20difference%20between%20on,location%20of%20the%

20digital%20art [https://perma.cc/NBS3-ERLZ].

118. Nabilou & Prüm, supra note 110, at 1005–06; see also What Is Double-Spending?,

CRYPTOPEDIA (June 24, 2021), https://www.gemini.com/cryptopedia/double-spending-problem-

crypto [https://perma.cc/GW7D-ARQD].

Double-spending is simply the process of making two payments with the same

currency or funds in order to deceive the recipient of those funds. With physical

currency, this really isn’t possible. You can’t give two people the same $20 bill

or silver coin. With most online payments, you trust a third party to make sure

funds are sent and received properly. Banks, credit card companies, and payment

processors validate the transactions themselves and minimize the risk of double-

spending. With cryptocurrency, however, there’s no third-party intermediary—

just the sender and the recipient. How can crypto holders protect themselves

against double-spending? The answer is on the blockchain.

Id.

119. CRYPTOPEDIA, supra note 118.

GARON_21NOV22.DOCX (DO NOT DELETE)

192 MARQUETTE LAW REVIEW [106:163

closed networks that can potentially create barriers to entry, data protection,

taxation policy for cryptocurrencies, monetary policy, and financial

stability.”

120

Given this long list of potential issues, it is not surprising that each of the

U.S. financial regulatory bodies is seeking to be part of the regulatory

solution.

121

There are four key regulatory regimes:

[1] Financial Crimes Enforcement Network (FinCEN):

Regulates all crypto assets for [anti-money laundering (AML)

and combating the financing of terrorism (CFT)] purposes.

122

[2] US Securities and Exchange Commission (SEC):

Regulates crypto assets considered securities by applying the

Howey test.

123

[3] Commodity Futures Trading Commission (CFTC):

Regulates virtual currencies which are considered

commodities (Bitcoin and Ethereum).

124

[4] Officer of the Comptroller of Currency (OCC): For banks

participating in the crypto ecosystem.

125

In 2021, the Financial Action Task Force (FATF) updated guidance

provided by the various regulatory agencies with an effort to emphasize the

120. Nabilou & Prüm, supra note 110, at 1007–08 (internal citations omitted).

121. Brennan, McDougall, Hornung, Litwack & Zuberi, supra note 108.

State regulators apply state money transfers laws. The IRS considers

cryptocurrency property and subject to capital gains tax. The CFTC considers

cryptocurrency to be a commodity and subject to trading regulations. The SEC

suggests that cryptocurrencies are securities. The U.S. Treasury, via the Financial

Crimes Enforcement Network (FinCEN), considers it a currency subject to Office

of Foreign Asset Control (OFAC) sanctions.

Id.

122. See Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT), INT’L

MONETARY FUND, https://www.imf.org/external/np/leg/amlcft/eng/ (last visited Nov. 18, 2022)

(“Money laundering and the financing of terrorism are financial crimes with economic effects. Money

laundering requires an underlying, primary, profit-making crime (such as corruption, drug trafficking,

market manipulation, fraud, tax evasion), along with the intent to conceal the proceeds of the crime or

to further the criminal enterprise.”).

123. Paul Kim, The Howey Test: A Set of Rules That Determine if an Investment is a Security,

Bus. INSIDER (May 31, 2022), https://www.businessinsider.com/personal-finance/howey-

test#:~:text=The%20Howey%20test%20determines%20if,from%20the%20efforts%20of%20others

[https://perma.cc/R8UJ-23BJ].

124. Customer Advisory: Understand the Risks of Virtual Currency Trading, CFTC,

https://www.cftc.gov/LearnAndProtect/AdvisoriesAndArticles/understand_risks_of_virtual_currency

.html [https://perma.cc/3YGM-WQ2V].

125. Crypto Travel Rule in United States by FinCEN, NOTABENE , https://notabene.id/world/usa

[https://perma.cc/LN22-79WT] (“[W]here [the Financial Action Task Force (FATF)] uses ‘virtual

assets’ and ‘VASPs,’ FinCEN’s guidance uses money services businesses (MSBs.) and convertible

virtual currencies (CVCs).”).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 193

risk-based approach to cryptocurrency transactions, the emergence of NFTs,

and the expanded threats of ransomware.

126

In 2021, for FinCEN raised

concerns that the most pressing concern has been the growth of cryptocurrency-

fueled ransomware attacks.

127

As a result of these concerns, FinCEN continues to require anti-money

laundering protocols and know your customer (KYC) banking regulations for

most cryptocurrency transactions, which will likely include all forms of tokens,

unless the asset is not merely nonfungible but also truly non-tradable.

128

After

all, just because each digital object has a unique serial number, that does not

transform the object from a commodity into a unique asset. Automobiles have

vehicle identification numbers making each automobile unique, but in the

aggregate, there is a robust market for largely interchangeable vehicles

available for sale, lease, and trade. Each bill of paper currency has a unique

serial number, but the currencies remain wholly fungible.

Commodities can be tokenized using NFTs, but that does not mean there

are not markets for those items subject to financial disclosure regulations. “In

2011, FinCEN issued a final rule that, among other things, defined ‘money

transmission services’ to include accepting and transmitting ‘currency, funds,

or other value that substitutes for currency by any means.’ ”

129

The use of the

phrase “other value that substitutes for currency” provided a broad,

126. U.S. DEP’T OF THE TREASURY FIN. ACTION TASK FORCE, DRAFT UPDATED GUIDANCE FOR

A RISK-BASED APPROACH TO VIRTUAL ASSETS AND VASPS 4 (2021), https://www.fatf-

gafi.org/media/fatf/documents/recommendations/March%202021%20-

%20VA%20Guidance%20update%20-%20Sixth%20draft%20-%20Public%20consultation.pdf

[https://perma.cc/F8Q2-MKAH].

127. See U.S. DEP’T OF THE TREASURY FIN. CRIMES ENF’T NETWORK, FINCEN ADVISORY

FIN-2021-A004, ADVISORY ON RANSOMWARE AND THE USE OF THE FINANCIAL SYSTEM TO

FACILITATE RANSOM PAYMENTS 4, 7 (2021), https://www.fincen.gov [https://perma.cc/P6LB-DKA5]

(“The severity and sophistication of ransomware attacks continue to rise across various sectors,

particularly across governmental entities, and financial, educational, and healthcare

institutions. . . . FinCEN’s review of BSA data has identified DarkSide and Sodinokibi/REvil as among

the most costly ransomware variants in the first six months of 2021. During this timeframe, 458

ransomware related transactions were reported with a total value of $590 million.”).

128. See U.S. DEP’T OF JUST., supra note 109, at 22, 39, 41 (“In the United States, individuals

and entities that offer money transmitting services involving virtual assets, such as cryptocurrency

exchanges and kiosks, as well as certain issuers, exchangers, and brokers of virtual assets, are

considered [money services businesses (MSBs)].”).

129. Id. at 24; see also Bank Secrecy Act Regulations; Definitions and Other Regulations

Relating to Money Services Businesses, 76 Fed. Reg. 43585, 43596 (July 21, 2011) (to be codified at

31 C.F.R. pts. 1010, 1021, 1022); 31 C.F.R. § 1010.100(ff)(5)(i)(A) (2021).

GARON_21NOV22.DOCX (DO NOT DELETE)

194 MARQUETTE LAW REVIEW [106:163

transactional approach to value storage and various substitutes for traditional

fungible assets.

130

For virtual worlds involving cryptocurrencies and tradable NFTs,

131

FinCEN has consistently demanded that anyone who trades in these tokens will

be required to register, to file Suspicious Activity Reports (SARs), and to

comply with anti-money laundering requirements.

132

As a result, the numerous

KYC and other banking requirements suggest that most tokens might be better

characterized and regulated as securities, which may actually prove more

flexible to the enterprises trading the assets.

The DAO organizational structure is particularly inimical to the KYC and

AML obligations. “These reporting requirements are incredibly expensive and

are difficult for ‘traditional’ companies to comply with. Considering the fact

that most DAO members are basically anonymous, the AML/KYC

requirements alone would be prohibitive.”

133

A DAO of any scale would require

some form of centralized reporting obligations that would undermine the

anonymity, flexibility, and shared governance of the DAO ethos. But both

DAOs and more traditional entities may actually find benefits within the

umbrella of traditional securities law rather than banking regulations.

ii. DAOs and the Potential Disclosure Requirements of the Corporate

Transparency Act

In 2021, Congress created another law designed to protect markets and

investments from opaque financial services. The Corporate Transparency Act

(CTA) was adopted as an amendment to the Anti-Money Laundering Act of

130. See Financial Crimes Enforcement Network; Amendment to the Bank Secrecy Act

Regulations-Definitions and Other Regulations Relating to Money Services Businesses, 74 Fed. Reg.

22129, 22137 (May 12, 2009) (to be codified at 31 C.F.R. pt. 103); U.S. DEP’T OF JUST., supra note

109, at 24.

131. See U.S. DEP’T OF JUST., supra note 109 at 56 (“A non-convertible virtual currency may

effectively become a convertible virtual currency where a robust unofficial secondary market for the

currency develops and provides the opportunity to exchange the ‘non-convertible’ currency for fiat or

other virtual currency.”); FINANCIAL ACTION TASK FORCE, VIRTUAL CURRENCIES: KEY DEFINITIONS

AND POTENTIAL AML/CFT RISKS 4 (2014), http://www.fatf-

gafi.org/media/fatf/documents/reports/Virtual-currency-key-definitions-and-potential-aml-cft-

risks.pdf [https://perma.cc/3QWU-D7DU].

132. See U.S. DEP’T OF THE TREASURY FIN. CRIMES ENF’T NETWORK, , FINCEN GUIDANCE

FIN-2013-G001, APPLICATION OF FINCEN’S REGULATIONS TO PERSONS ADMINISTERING,

EXCHANGING, OR USING VIRTUAL CURRENCIES (2013), https://www.fincen.gov/

sites/default/files/shared/FIN-2013-G001.pdf [https://perma.cc/F4YD-AKXQ].

133. Rodman, supra note 81.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 195

2020.

134

The law was developed to help combat money laundering, and is

primarily focused on the use of shell companies.

135

“The CTA, part of the Anti-

Money Laundering Act of 2020, established beneficial ownership information

reporting requirements for certain types of corporations, limited liability

companies, and other similar entities created in or registered to do business in

the United States.”

136

Proposed regulations focus on entities filed through a state’s secretary of

state office, including corporations, LLCs, and limited liability partnerships.

“Under the proposed rules, a domestic reporting company is any entity that is a

corporation, a limited liability company, or other entity that is created by the

filing of a document with a secretary of state or similar office of a U.S.

jurisdiction.”

137

While broad in scope, the CTA and the initial regulation’s focus

on formation through a document filed with the secretary of state may create at

least a short-term opportunity for DAO proponents to promote the use of DAOs

as an opportunity to avoid CTA reporting obligations.

138

Invariably, however,

this distinction will eventually be addressed by regulation or statute.

iii. Securities Regulation

Although the operations of FinCEN are based on highly specific statutes,

the Securities and Exchange Commission (SEC) has very broad statutory

authority, and it will continue to expand its role in the metaverse and Web3

financing.

The SEC will continue to play a significant role in regulating the

unregistered sale of tokens and digital assets that have the attributes of

134. Corporate Transparency Act (CTA), Pub. L. No. 116-283, 134 Stat. 4547 (codified in

scattered sections of 31 U.S.C.); see Brian K. Prosek, John R. Chadd & Kalynn G. Walls, The

Corporate Transparency Act, NAT. L. REV. (Dec. 1, 2021),

https://www.natlawreview.com/article/corporate-transparency-act [https://perma.cc/6RWT-PH9C].

135. See Brooke Tansill, The Corporate Transparency Act: What Practitioners Need To Know,

VA. LAW., June 2021, at 14–15 https://virginialawyer.vsb.org/publication/?i=708504&article_id=

4039086&view=articleBrowser&ver=html5 [https://perma.cc/3837-LD9R].

136. Press Release, Fin. Crimes Enf’t Network, FinCEN Issues Proposed Rule for Beneficial

Ownership Reporting to Counter Illicit Finance and Increase Transparency (Dec. 7, 2021),

https://www.fincen.gov/news/news-releases/fincen-issues-proposed-rule-beneficial-ownership-

reporting-counter-illicit [https://perma.cc/7RCP-HSBA].

137. Thomas G. Appleman, Vera S. Hansen, & Arthur L. Griem, FinCEN Publishes Notice of

Proposed Rulemaking on the Corporate Transparency Act, NAT. L. REV. (Dec. 21, 2021),

https://www.natlawreview.com/article/fincen-publishes-notice-proposed-rulemaking-corporate-

transparency-act [https://perma.cc/V7Z4-9T64].

138. Nick Oberheiden, 5 Things to Consider When Creating a DAO, JD SUPRA (Feb. 8, 2022),

https://www.jdsupra.com/legalnews/5-things-to-consider-when-creating-a-dao-5888423/

[https://perma.cc/8ZTK-SLTQ] (“As unincorporated entities, [DAOs] do not need to follow the legal

formalities of incorporation such as registration. . . .”).

GARON_21NOV22.DOCX (DO NOT DELETE)

196 MARQUETTE LAW REVIEW [106:163

securities. Any collaboration by participants within the virtual world to

monetize the digital assets created within the platform will trigger securities

regulation when the activities are collaborative, but the value is not created by

the effort of the individual users.

139

State blue sky laws may play a role in

protecting the public from unscrupulous in-world get rich quick schemes, but

only to the extent there is state jurisdiction over the activity.

140

For DAOs, the

theoretical argument is that the collective ownership and shared community

responsibility suggests that value is created by the actions of each individual.

141

But this may not be the reality for all DAOs, particularly if tokens derived from

payment carry less per-unit value than tokens derived from effort. The SEC and

state regulators could potentially treat many of the DAO structures as securities

notwithstanding the lack of a central manager directing the enterprise while

theDAO token owner sits back to make profit on the investment in a DAO

token.

142

The Supreme Court has explained that a security includes many different

certificates denominating ownership. “Congress’ purpose in enacting the

securities laws was to regulate investments, in whatever form they are made and

139. SEC v. W.J. Howey Co., 328 U.S. 293, 298–99 (1946) (“[A]n investment contract for

purposes of the Securities Act means a contract, transaction or scheme whereby a person invests his

money in a common enterprise and is led to expect profits solely from the efforts of the promoter or a

third party . . . .”).

140. Mark Astarita, Blue Sky Law, SEC L. (Dec. 5, 2019),

https://www.seclaw.com/glossary/blue-sky-law/ [https://perma.cc/Y8KR-KRR8] (“A blue sky law is

a state law regulating the offer and sale of securities, as well as the regulation of broker dealers and

stock brokers.”).

141. The SEC has rejected this position. See Report of Investigation Pursuant to Section 21(a)

of the Securities Exchange Act of 1934: The DAO, Exchange Act Release No. 81207 4 (July 25, 2017),

http://www.sec.gov/litigation/investreport/34-81207.pdf [https://perma.cc/7NAN-DYHQ]

(hereinafter SEC DAO REPORT).

142. See 15 U.S.C.A. § 77b(a)(1).

The term “security” means any note, stock, treasury stock, security future,

security-based swap, bond, debenture, evidence of indebtedness, certificate of

interest or participation in any profit-sharing agreement, collateral-trust

certificate, preorganization certificate or subscription, transferable share,

investment contract, voting-trust certificate, certificate of deposit for a security,

fractional undivided interest in oil, gas, or other mineral rights, any put, call,

straddle, option, or privilege on any security, certificate of deposit, or group or

index of securities (including any interest therein or based on the value thereof),

or any put, call, straddle, option, or privilege entered into on a national securities

exchange relating to foreign currency, or, in general, any interest or instrument

commonly known as a “security”, or any certificate of interest or participation in,

temporary or interim certificate for, receipt for, guarantee of, or warrant or right

to subscribe to or purchase, any of the foregoing.

Id. A particular DAO NFT may fall into the definition of many of these certificates separate from any

attributes that make it an investment contract.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 197

by whatever name they are called.”

143

In SEC v. W.J. Howey Co.,

144

the Court

offered the definition of an investment contract as “whether the scheme

involves an investment of money in a common enterprise with profits to come

solely from the efforts of others.”

145

In SEC v. Edwards,

146

the Court further

explained that “when we held that ‘profits’ must ‘come solely from the efforts

of others,’ we were speaking of the profits that investors seek on their

investment, not the profits of the scheme in which they invest.”

147

A DAO that

will grow in value primarily through its popularity and size may well have

increased value of investment or dividends potentially making the token

regulable as an investment contract, notwithstanding the direct management

provided in the DAO to every token holder.

148

A suggestion has been floated that a DAO operated as a general partnership

should be immune from securities laws because, essentially, the risk one

assumes as a general partner should make one an active participant in the

investment.

149

The caselaw, however, is more nuanced, suggesting that in

practice most general partners are active participants.

150

To the extent that the

general partnership is comprised of limited partnerships or other passive, pass-

through entities, the factual assertion of active management would disappear

and the “efforts of others” analysis would likely result in these entities also

operating as investment contracts.

The SEC has taken a similar approach. Reviewing the first DAO initial coin

offering (ICO), the SEC largely looked past the formalities of DAO shared

governance to find that the overall structure forced the investors to rely on the

organizers’ unique positions of knowledge, skill, and control to create value in

the tokens.

151

As such, the tokens were securities. “The voting rights afforded

DAO Token holders did not provide them with meaningful control over the

enterprise, because (1) DAO Token holders’ ability to vote for contracts was a

143. Reves v. Ernst & Young, 494 U.S. 56, 61 (1990); see also 15 U.S.C.A. § 77b(a)(1).

144. 328 U.S. 293 (1946).

145. Id. at 301.

146. 540 U.S. 389 (2004).

147. Id. at 393–94.

148. SEC DAO REPORT, supra note 141, at 4, 12–14.

149. See Rodman, supra note 81.

150. See SEC v. Merchant Capital, LLC, 483 F.3d 747, 755 (11th Cir. 2007) (“A general

partnership interest is presumed not to be an investment contract because a general partner typically

takes an active part in managing the business and therefore does not rely solely on the efforts of

others.”); SEC v. Schooler, 902 F. Supp. 2d 1341, 1346 (S.D. Cal. 2012).

151. SEC DAO REPORT, supra note 141, at 12–14 (“Even if an investor’s efforts help to make

an enterprise profitable, those efforts do not necessarily equate with a promoter’s significant

managerial efforts or control over the enterprise.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

198 MARQUETTE LAW REVIEW [106:163

largely perfunctory one; and (2) DAO Token holders were widely dispersed

and limited in their ability to communicate with one another.”

152

The characteristics that will determine these outcomes will be based in the

intersection between the DAO’s governance documents, its end user license

agreement, and the smart contract provisions embedded into the NFTs. As a

result, the programming choices that define the smart contract provisions may

define whether or not the NFT adopted by a particular DAO will be regulated

as an investment contract.

iv. Foreign Investment Regulation

If the predictions of the metaverse prove to be even partially correct, then

the metaverse will have the potential to disrupt the institutions and relations that

govern both domestic and international politics. No country is more concerned

about that disruption than China, which tightly controls all means of dissent and

is increasingly focused on all forms of international commerce.

153

Russia and

152. Id. at 14.

153. See Drake Bennett, The Metaverse Gives China a New Digital Playground to Censor,

BLOOMBERG (Dec. 10, 2021), https://www.bloomberg.com/news/newsletters/2021-12-10/china-

metaverse-offers-new-digital-playground-for-censorship [https://perma.cc/FLV2-KXDY].

China’s reticent approach to gaming, accompanied by encouragement for

young people to go out and partake in real-world sports, is perhaps a preview of

its view of the metaverse. . . .

In one corner would be the authoritarians eager to limit the metaverse, or

perhaps even to use it as a pretext for expanding existing prohibitions. The

always-on nature of the imagined virtual world, its blurred boundary with so-

called meatspace, could represent possible new frontiers of surveillance and

restrictions. Robert Williams, a China policy researcher at Yale Law School,

points out in an email that the definition of what now constitutes problematic

online gaming could end up broadening “in a social context where the lines

between physical and digital reality are somewhat blurred.”

Id.; see also China Targets Online Platforms in Quest to ‘Clean Up’ Internet, YAHOO! NEWS (Dec.

23, 2021), https://news.yahoo.com/china-targets-online-platforms-quest-113410595.html

[https://perma.cc/Y3K2-3JZZ] (“China will scrutinise online platforms . . . as part of its drive to ‘clean

up’ the internet . . . . The investigation comes against the backdrop of a wide-ranging crackdown by

regulators on several sectors, with officials tightening oversight of companies in technology, real

estate, gaming, education, cryptocurrencies and finance.”); Alex Chan, Hong Kong Pro-Democracy

News Site Closes After Raid, Arrests, NPR (Dec. 29, 2021),

https://www.npr.org/2021/12/29/1068696336/hong-kong-police-raid-pro-democracy-news-outlet-

arrest-6 [https://perma.cc/E3DS-26HV]; OFF. OF THE U.S. SEC’Y OF STATE, THE ELEMENTS OF THE

CHINA CHALLENGE 28, 30 (2020) https://www.state.gov/wp-content/uploads/2020/11/20-02832-

Elements-of-China-Challenge-508.pdf [https://perma.cc/5KXR-L7W3] (“China’s pursuit of global

preeminence and drive to remake world order flow from the CCP’s overarching sensibility. That

sensibility is authoritarian, collectivist, and imperial. . . . [I]t promulgates among the people a rigid

ideology from which it tolerates no dissent.”); THE LONGER TELEGRAM: TOWARD A NEW AMERICAN

CHINA STRATEGY 48–49 (2021) https://www.atlanticcouncil.org/wp-content/uploads/2021/01/The-

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 199

other foreign governments have their own agendas regarding U.S. technology,

and those programs may extend into the work in artificial intelligence,

communications technology, 5G, synthetic media, NFTs, cryptocurrencies and

blockchain services, and other innovations that will fuel Web3 growth and the

proliferation of the metaverse.

154

The U.S. government, in contrast, is very

concerned that foreign control of these technologies would have the potential

to give foreign adversaries an advantage over the U.S. and its strategic agenda,

and could be used to harm either the U.S. domestic agenda or be used to

compete unfairly on an economic basis with U.S. companies.

155

To address these concerns, in 2018, Congress passed the Foreign

Investment Risk Review Modernization Act of 2018 (FIRRMA).

156

The

purpose of the law was to expand the jurisdiction of the Committee on Foreign

Investment in the United States (CFIUS).

157

CFIUS has operated since 1975,

granting the President authority “to block or suspend proposed or pending

foreign ‘mergers, acquisitions, or takeovers’ of U.S. entities, including through

joint ventures, that threaten to impair the national security.”

158

Implementing

Longer-Telegram-Toward-A-New-American-China-Strategy.pdf [https://perma.cc/2TDY-

JMR2] (“China will reject all forms of international human rights pressure concerning Xinjiang, Tibet,

Hong Kong, as well as other forms of domestic political and religious dissent within China proper, as

the regime doubles down through its repressive control systems in defense of the Leninist state.”).

154. See, e.g., Anna Baydakova, Russian Government Introduces Crypto Bill to Parliament Over

Central Bank Objections, COINDESK (Feb. 21, 2022), https://www.coindesk.com/policy/2022/02/21/

russian-government-introduces-crypto-bill-to-parliament-over-central-bank-objections/

[https://perma.cc/5S3A-EVAJ]; see also Alun John, Samuel Shen & Tom Wilson, China's Top

Regulators Ban Crypto Trading and Mining, Sending Bitcoin Tumbling, REUTERS (Sep. 24, 2021),

https://www.reuters.com/world/china/china-central-bank-vows-crackdown-cryptocurrency-trading-

2021-09-24/ [https://perma.cc/TD7C-YBTB].

155. Ryan Browne, Biden Just Put Out an Executive Order on Cryptocurrencies—Here’s

Everything That’s in it, CNBC (Mar. 9, 2022), https://www.cnbc.com/2022/03/09/heres-whats-in-

bidens-executive-order-on-crypto.html [https://perma.cc/UU8Q-KM2W]; Tami Stark & Ben Elron,

US Regulators Seek to Prevent Use of Crypto to Circumvent Russia Sanctions, WHITE & CASE (Apr.

6, 2022), https://www.whitecase.com/insight-alert/us-regulators-seek-prevent-use-crypto-circumvent-

russia-sanctions [https://perma.cc/3MUD-RT3U].

156. Foreign Investment Risk Review Modernization Act of 2018, Pub. L. No. 115-232, 132

Stat. 2173 (2018).

157. See Provisions Pertaining to Certain Investments in the United States by Foreign Persons,

85 Fed. Reg. 3112, 3112 (Jan. 17, 2020) (to be codified at 31 C.F.R. pts. 800, 801) (“FIRRMA amended

and updated section 721 (section 721) of the Defense Production Act of 1950 (DPA), which delineates

the authorities and jurisdiction of the Committee on Foreign Investment in the United States (CFIUS

or the Committee).”).

158. JAMES K. JACKSON & CATHLEEN D. CIMINO-ISAACS, CONG. RSCH. SERV., IF10952,

CFIUS Reform Under FIRRMA 1 (2020), https://sgp.fas.org/crs/natsec/IF10952.pdf

[https://perma.cc/W639-WSYD] (“CFIUS is an interagency body comprised of nine Cabinet members,

two ex officio members, and others as appointed that assists the President in overseeing the national

security risks of FDI in the U.S. economy.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

200 MARQUETTE LAW REVIEW [106:163

regulations promulgated by the U.S. Department of Treasury (which serves as

chair of CFIUS) took effect in February 2020 which expanded the scope of

CFIUS review, making the process potentially relevant to many of the global

transactions that could fund or shape the metaverse. The regulations address the

expansion of CFIUS review of “TID U.S. businesses,” a new acronym for

critical technologies, critical infrastructure, and personal data.

159

This includes

transactions that provide foreign investors access to material nonpublic

technical information, sensitive personal data, and “substantive involvement in

the U.S. business’s decision-making with respect to the technology,

infrastructure, or data.”

160

Specifically, the final regulations include, among other reasons for review,

transactions involving:

(3) Any involvement, other than through voting of shares, in

substantive decisionmaking of the TID U.S. business

regarding:

(i) The use, development, acquisition, safekeeping, or release

of sensitive personal data of U.S. citizens maintained or

collected by the TID U.S. business;

(ii) The use, development, acquisition, or release of critical

technologies; or

(iii) The management, operation, manufacture, or supply of

covered investment critical infrastructure.

161

The regulations also provide a lengthy definition of sensitive personal data

that covers U.S. government and military personnel or contractors, financial

data, health care and health status data, geolocation data, biometric and genetic

data, stored communications, and more.

162

The scope of the sensitive personal

data is sufficiently broad to include essentially all metaverse platform operators

as well as most social media services. The only limitation is that the regulation

excludes entities that have collected data on one million or fewer individuals,

though this limitation will not apply if the entity has the capability to exceed

the one-million individual threshold.

163

159. See Antonia I. Tzinova, New CFIUS Regulations Finally Take Effect, HOLLAND & KNIGHT

(Feb. 13, 2020), https://www.hklaw.com/en/insights/publications/2020/02/new-cfius-regulations-

finally-take-effect [https://perma.cc/AR6E-SWYC]; Nicholas J. Spiliotes, Charles L. Capito & Joseph

A. Benkert, Foreign Investment 2020 (Part 3): CFIUS Spotlight on “TID” U.S. Businesses, MORRISON

& FOERSTER (Oct. 15, 2019), https://www.mofo.com/resources/insights/191015-foreign-investment-

2020.html [https://perma.cc/U6MA-MGF8].

160. Tzinova, supra note 159.

161. Provisions Pertaining to Certain Investments in the United States by Foreign Persons, 85

Fed. Reg. at 3127 (to be codified at 31 C.F.R. § 800.211(b)(3)).

162. See id. at 3132 (to be codified at 31 C.F.R. § 800.241(a)(1)(ii)).

163. Id. (to be codified at 31 C.F.R. § 800.241(a)(1)(i)(B)).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 201

In addition to the inclusion of sensitive personal data, Congress extended

FIRRMA’s definition of “ ‘critical technologies’ to include ‘emerging and

foundational technologies’ controlled by the 2018 Export Control Reform Act

(ECRA).”

164

This further extends the regulatory protection of Web3 under

CFIUS.

The role of CFIUS in the metaverse is not hypothetical. In 2019, the Trump

administration began a very public review of TikTok, threatening to ban the

company because of its Chinese ownership.

165

Some of those actions were

eventually reversed by the Biden administration, but additional reviews of

Chinese investments were put in place, including many that will still impact

Web3 and metaverse technologies.

166

The ownership of TikTok, in particular,

was complicated because the Trump administration ordered both a CFIUS

review and a separate executive order under “the International Emergency

Economic Powers Act (IEEPA) to outright ban ‘transactions’ with entire

companies.”

167

The executive order was reversed by the subsequent Biden

executive order,

168

while the CFIUS review of ByteDance’s ownership of

TikTok remains ongoing but in seeming abeyance.

169

The role of CFIUS in TikTok is even more confounding since ByteDance

did not acquire a U.S. company to obtain the sensitive personal data potentially

164. Adam Chan, CFIUS, Team Telecom and China, LAWFARE (Sept. 28, 2021),

https://www.lawfareblog.com/cfius-team-telecom-and-china [https://perma.cc/T72A-U3DC]; see also

Provisions Pertaining to Certain Investments in the United States by Foreign Persons, 85 Fed. Reg. at

3128 (to be codified at 31 C.F.R. § 800.215).

165. See Christopher M. Caparelli, Taking on TikTok: CFIUS on the Front Page (and in the Fine

Print), TORYS (Sept. 20, 2020), https://www.torys.com/our-latest-thinking/publications/2020/09/

taking-on-tiktok [https://perma.cc/FX9X-VEVH] (“Shortly before the Trump administration’s bans

against TikTok and WeChat were set to take effect on September 20, two U.S. federal judges issued

preliminary injunctions . . . . In the TikTok case, the court enjoined the government’s ban on

downloads and software updates of the popular application.”); Emily Birnbaum, “This Has Been

Botched”: This is What Makes Trump’s TikTok Tirade so Unusual, PROTOCOL (Aug. 6, 2020),

https://www.protocol.com/cfius-tiktok-not-how-this-works [https://perma.cc/6Y6S-BHXU].

166. See Nova J. Daly, Nazak Nikakhtar, Daniel P. Brooks, John Allen Riggins & Adam M.

Teslik, Biden Administration Revokes Trump EOs Targeting TikTok, WeChat, and Other Chinese

Software Apps; Initiates Broader Investigations into Software Apps by Foreign Adversaries, WILEY

(June 11, 2021), https://www.wiley.law/alert-Biden-Administration-Revokes-Trump-EOs-Targeting-

TikTok-WeChat-and-Other-Chinese-Software-Apps-Initiates-Broader-Investigations-into-Software-

Apps-by-Foreign-Adversaries [https://perma.cc/R8FP-3CNW].

167. See Chan, supra note 164.

168. See Daly, Nikakhtar, Brooks, Riggins & Teslik, supra note 166.

169. Rick Sofield, John Satira & Olivia Hinerfield, TikTok and Oracle Ink Data-Storage

Agreement in Apparent Effort to Avoid Further CFIUS Scrutiny, VINSON & ELKINS (June 24, 2022),

https://www.velaw.com/insights/tiktok-and-oracle-ink-data-storage-agreement-in-apparent-effort-to-

avoid-further-cfius-scrutiny/ [https://perma.cc/2UYJ-GJTK].

GARON_21NOV22.DOCX (DO NOT DELETE)

202 MARQUETTE LAW REVIEW [106:163

held by TikTok.

170

Instead, it simply made its own application available in the

U.S. using the Google Play Store and Apple App Store.

171

Nonetheless, the lesson from TikTok and the expanded authority under

FIRRMA will have a profound impact on the growth of Web3 and the

metaverse. Foreign investments are being discouraged and regulatory scrutiny

is expanding.

C. Privacy, Cybersecurity, and Additional Areas of Focus for Regulators

The metaverse will likely become home to many online pastimes beyond

role-playing games and fantasy sports leagues. Among them will be those

associated with public vice. These will include gambling, sales of drugs and

illicit items, and pornographic adult entertainment. Some of these unsavory

activities are more heavily regulated than others, and it is likely that the state

and federal regulators of such activities will seek to regulate these activities.

Financial services companies will not provide financial services for illegal

activities and tend to avoid those companies which may trigger such regulatory

scrutiny. Uses such as these could make collaborations by the financial services

sector more difficult. However, it is also possible that the lure of the metaverse

payday will encourage the financial sector to look beyond the sector of illegal

activity in order to be part of the broader transition. Concerns over illegal

activities might also drive corporations to segment and separate their

operations, creating an internet of virtual worlds rather than a unified

metaverse. Interoperable virtual worlds would help more risk-averse

enterprises participate without taking on all the challenges of an unregulated,

virtual wild west.

At the other end of the use case, to the extent the metaverse becomes a

platform for online business meetings, trainings, and classroom settings, the

platforms and the business operating on those platforms will also be required

to comply with various Americans with Disabilities Act accommodation

obligations for those consumers who have a medical impairment or health

issue.

172

The structure of the metaverse must take into account the needs of

those users who are hearing impaired, visually impaired, have motor-skill

limitations, or have other special needs.

173

To the extent the metaverse is

170. See Daly, Nikakhtar, Brooks, Riggins & Teslik, supra note 166.

171. Elizabeth Atkin, A Complete History of TikTok—From Launch and Banning Controversy,

to Best Viral Trends, METRO (Feb. 13, 2021), https://metro.co.uk/2021/01/01/a-complete-history-of-

tiktok-launch-us-ban-and-best-viral-dances-13823263/ [https://perma.cc/3VZT-PVMD].

172. Squire Patton Boggs, Employment Law In The Metaverse—Part 2, FAMILY WEALTH REP.

(Aug. 18, 2022), https://www.familywealthreport.com/article.php?id=195325#.YwuTj3bMKM8

[https://perma.cc/9NRA-LFPT].

173. Id.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 203

offering an alternative to a public accommodation, the provider of that service

must take reasonable steps to assure that all customers are able to take

advantage of that service.

174

This last set of obligations, in turn, requires the providers of the metaverse

platform to address the social responsibility, as well as legal responsibility, it

will have in managing the character and tone of the metaverse environment.

Through enforcement of the terms of service, congressional adjustments to the

Communications Decency Act § 230 safe harbor,

175

and updated privacy

laws,

176

the success or failure of the metaverse may well depend on the extent

to which privacy rights are protected and harmful, trolling behavior is curtailed.

Like enterprises on the current internet, each service provider will have ongoing

obligations to protect the privacy and security of the information and data of its

customers as well, making compliance with applicable privacy and security

laws an essential component of each company’s metaverse strategy.

177

Another of the significant risks lurking in a ubiquitous metaverse is the

threat of cybersecurity breaches. Corporate espionage, ransomware attacks,

international cyberwarfare incursions, and old-fashioned hacking will all move

174. Id.

175. See 47 U.S.C § 230; George Fishback, How the Wolf of Wall Street Shaped the Internet: A

Review of Section 230 of the Communications Decency Act, 28 TEX. INTELL. PROP. L.J. 275, 283–90

(2020); Jon M. Garon, Constitutional Limits on Administrative Agencies in Cyberspace, 8 BELMONT

L. REV 499, 536 (2021).

176. See Rick Buck, Introduction to Data Privacy in 2021, WIREWHEEL (Oct. 28, 2021),

https://wirewheel.io/data-privacy-laws-guide/ [https://perma.cc/Z7V9-6UNY] (“Over the past few

years, the proliferation of data privacy laws has accelerated around the world. And this trend is not

about to stop. According to Gartner, ‘by 2023, 65% of the world’s population will have its personal

data covered under modern privacy regulations.’ ”); Cynthia J. Larose & Christopher J. Buontempo,

US State Privacy Law Update, NAT. L. REV. (June 11, 2021), https://www.natlawreview.com/

article/us-state-privacy-law-update-june-11-2021 [https://perma.cc/956L-AZWQ].

177. See Wayne Unger, Reclaiming Our Right to Privacy by Holding Tech. Companies

Accountable, 27 RICH. J.L. & TECH. 1, 16–17 (2020) (“Privacy trade groups frame compliance with

privacy and security laws as a means of reducing corporate risk—not a means of actually protecting

individuals’ PI by improving a business’s privacy and security practices.”); Stanley A. Marciniak III,

Comment, Too Big to Protect: A Dodd-Frank Framework for Protecting 21st Century American

Consumer Privacy Rights, 59 DUQ. L. REV. 329, 348–49 (2021) (“If Americans cannot stop ‘pervasive’

data collection, use, and sale, the question becomes: ‘[w]hat do we do?’. . . . In short, the answer lies

in the law. Imposing accountability-based legal structures on corporations that define ‘fair and unfair

uses of information’ can catalyze a solution.” (quoting FRANK PASQUALE, THE BLACK BOX SOCIETY:

THE SECRET ALGORITHMS THAT CONTROL MONEY AND INFORMATION 52 (2015)); Anita L. Allen,

An Ethical Duty to Protect One’s Own Information Privacy?, 64 ALA. L. REV. 845, 852 (2013) (“In

addition to ‘first-order’ duties to protect one’s own privacy, there may also be ‘second-order,’

derivative duties to protect one’s own privacy for the sake of specific others or the community.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

204 MARQUETTE LAW REVIEW [106:163

to the metaverse because that’s where the money is.

178

The FBI has identified

theft in the cryptocurrency marketplace as one of the key concerns for the

cryptocurrency industry.

179

Among the myriad of fears and threats, the FBI

report notes that “criminals routinely infect victims’ computers and servers with

ransomware,”

180

others “demand payment after threatening to distribute

confidential or embarrassing information (such as nude photos in cases of

‘sextortion’),”

181

organize and fund terrorism,

182

traffic in child pornography,

183

counterfeit goods and services,

184

and commit tax fraud.

185

In a 2016 survey of corporate boards at publicly traded corporations, 70%

stated that cybersecurity was the top concern for their company.

186

“The

organizations that rely on data have increasingly come to fear ‘data breaches,’

‘security incidents,’ ‘malicious actors,’ ‘ransomware’ and a host of emerging

threats that take up growing amounts of time in server rooms, boardrooms and,

if recent trends continue, courtrooms.”

187

The responsibility for oversight to forestall these breaches, hacks,

incursions, and exfiltrations will fall on the entities that comprise the metaverse,

and the responsibility for acting responsibly will fall on the officers and

directors of those enterprises. Corporations operate through their centralized

178. See Willie Sutton, FBI: HISTORY, https://www.fbi.gov/history/famous-cases/willie-sutton

[https://perma.cc/R5XR-NPBY] (highlighting the gentlemen bank robber, known for his polite

demeanor and dapper dress, who famously answered the question “why he robbed banks” by saying,

“because that’s where the money is.”).

179. U.S. DEP’T OF JUST., supra note 109, at viii. (“[I]llicit uses of cryptocurrency typically fall

into three categories: (1) financial transactions associated with the commission of crimes; (2) money

laundering and the shielding of legitimate activity from tax, reporting, or other legal requirements; or

(3) crimes, such as theft, directly implicating the cryptocurrency marketplace itself.”).

180. Id. at 7.

181. Id.

182. Id. at 7, 11.

183. Id. at 10.

184. Id. at 12.

185. Id. at 14. In the first six months of 2019, data breaches compromised an estimated 4.1 billion

records, 3.2 billion of which came from just eight isolated breaches. Davey Winder, Data Breaches

Expose 4.1 Billion Records in First Six Months of 2019, FORBES (Aug. 20, 2019)

https://www.forbes.com/sites/daveywinder/2019/08/20/data-breaches-expose-41-billion-records-in-

first-six-months-of-2019/?sh=46f17810bd54 [https://perma.cc/3MK6-5XAB].

186. Charles Weinstein, Concerns About Risks Confronting Boards – 2015 Survey,

EISNERAMPER (Mar. 2016), http://www.eisneramper.com/Risk-Management-Cybersecurity-Social-

Media-0116.aspx [https://perma.cc/5LG6-RCRE].

187. Gerard M. Stegmaier & Courtney E. Fisher, Caveat Director Analyzing Cybersecurity

Challenges in Corporate Governance, 38 DEL. LAW. 14, 14 (2020).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 205

management, while DAOs operate through the community will.

188

The business

judgment rule provides corporate directors a strong presumption against

liability.

The business judgment rule is an acknowledgment of the

managerial prerogatives of Delaware directors . . . . It is a

presumption that in making a business decision the directors of

a corporation acted on an informed basis, in good faith and in

the honest belief that the action taken was in the best interests

of the company.

189

Under the business judgment rule, decisions made by corporate directors

are generally not subject to shareholder liability or other second-guessing

provided they are made in good faith.

190

To achieve these protections,

enterprises and the directors of enterprises need to undertake meaningful

corporate compliance programs for each area in which there are affirmative

regulations as well as in areas where there may be significant risk of loss or

harm.

191

If, as many believe, cybersecurity incidents are inevitable,

officers and directors will face an increasingly difficult

challenge to respond systematically to these enterprise risks in

ways that are demonstrable. Although the business judgment

rule provides formidable protection, how business judgment is

exercised and the defense of its exercise in the area of

cybersecurity and its oversight is growing rapidly. The

situation is more complicated because security is but one

among many demands on the enterprise. . . . [W]hile

companies could take a series of security precautions, directors

must help ensure and provide guidance regarding all corporate

interests among many potential stakeholders and with

188. Cathy Hackl, What Are DAOs And Why You Should Pay Attention, FORBES (June 1, 2021),

http://forbes.com/sites/cathyhackl/2021/06/01/what-are-daos-and-why-you-should-pay-attention

[https://perma.cc/2VZA-83EG] (“The governance of DAOs is based on community, while traditional

companies’ governance is mostly based on executives, Board of Directors, activist investors. etc.

DAOs’ operations are fully transparent and global, meanwhile, traditional companies’ operations are

private, only the organization know what is happening, and they are not always global.”).

189. Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984) (first citing Zapata Corp. v. Maldonado,

430 A.2d 779, 782 (Del. 1981); then citing Kaplan v. Centex Corp., 284 A.2d 119, 124 (Del. Ch. 1971);

and then citing Robinson v. Pittsburgh Oil Refin. Corp. 126 A. 46 (Del. Ch. 1924)), overruled on other

grounds by Brehm v. Eisner, 746 A.2d 244, 264 (Del. 2000); see Steven A. Lauer & Joseph E. Murphy,

Compliance and Ethics Programs: What Lawyers Need to Know to Understand the Development of

This Field, 75 BUS. LAW. 2541, 2560 (2020).

190. Lauer & Murphy, supra note 189, at 2560.

191. See id. at 2561; see also Stegmaier & Fisher, supra note 187, at 23.

GARON_21NOV22.DOCX (DO NOT DELETE)

206 MARQUETTE LAW REVIEW [106:163

substantial personal risk.

192

For DAOs, these protections may not be available. The lack of structured

decision-making, the ability to inform oneself, and the other attributes of

management will not be present. Suddenly, those features may become legal

liabilities—bugs in the corporate code of conduct. Even for traditional

corporations, the need to create robust privacy, cybersecurity, and legal

compliance systems will be a time consuming and expensive task.

The challenges for operating in the fully realized metaverse are daunting,

and it will likely emerge in fits and starts over many years. But as well the

internet’s transformation of media, gaming, commerce, and financial services,

the potential for an immersive next stage in communications is anticipated too

heavily for it to remain fiction. Someone will soon be willing this reality into

existence. As such, the legal community must be ready to face what that reality

will bring and help foster the best version of this next future.

V. TRANSACTING BUSINESS IN THE VIRTUAL WORLD

To focus the myriad of potential issues for the multiverse of evolving virtual

worlds, this Article will use the fictional “Ginormaverse,” a theoretical U.S.-

based virtual world featuring many of the important aspects of a successful,

commercially-focused, next-generation virtual world.

193

Ginormaverse

provides services for work, education, entertainment, commerce, and news

from its common platform. This Article is not using Ginormaverse because it

discounts the potential of DAOs to help fuel a more disaggregated multiverse,

but merely because it is reasonable to predict that the attributes of the metaverse

will take on a homogenous state whether the ownership is highly distributed or

highly concentrated.

194

The legal issues will be the same in both the ubiquitous

metaverse and the fragmented multiverse; the difference will be a greater

variety of contractual terms and compliance modalities.

These are some of the critical features of Ginormaverse:

• Each user has a verified identity, protected by an

encryption technology, with multi-factor

192. Stegmaier & Fisher, supra note 187, at 23.

193. The name Ginormaverse was selected after a brief Internet search identified significant use

for metaverse, ultraverse, megaverse, superverse, giantverse, gigantiaverse, universe, magaverse,

whopperverse, and other names in the “verse” family. Whopperverse was not used but closely

associated with both Burger King and Hershey’s Whoppers Malted Milk Balls.

194. See generally Salvatore Ferraro, What Limits Shareholder Activism is the Free-Rider

Problem, THE CONVERSATION (Dec. 11, 2019), https://theconversation.com/what-limits-shareholder-

activism-is-the-free-rider-problem-127232 [https://perma.cc/R6GN-7KPD] (“Economists call it the

free-rider problem. In essence it’s the problem of individuals having little incentive to contribute to a

collective resource when they can enjoy its benefits even if they don’t.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 207

authentication. A user can operate within many of the

worlds pseudonymously, but for non-entertainment

purposes, most operations require a true identity.

195

• Technology will allow users to shift from virtual

reality to camera-based live images using augmented

reality glasses or other means, so that a person’s live

image can be present within the virtual world when

appropriate rather than just an avatar.

• Each user’s avatars are portable, meaning that the

avatars can be used with all their features, attributes,

and digital property, across all other compatible

platforms. There may be other universes that are not

interoperable, but those become irrelevant outside the

platform.

• Each category of commercial enterprise has a place in

Ginormaverse. There are banks, retailers with home

delivery, bookstores and libraries, offices, engineering

labs, schools, social clubs, churches and similar houses

of worship, conference centers, game rooms, and

every other aspect of social interaction available in the

United States. Existing major enterprises, including

Microsoft, Amazon, and Google, will operate within

the Ginormaverse environment as if the user were

engaging with these providers directly through a

computer or mobile device.

A. Terms of Service Agreements and the Law of the Metaverse

These policies, and many more, will be largely established by the Terms of

Service Agreement (ToS) or End User License Agreement (EULA) provided

by the platform and required as a condition of use by any person or enterprise

wishing to interact within the virtual world.

196

Law365 explains that every

software vendor requires an agreement to “limit [its] liability for damages”;

“maintain control over distribution and use of . . . software”; “protect . . . rights

to terminate licenses”; and “restrict abuses of software.”

197

Other commentors

195. See generally Przemyslaw Palka, The World of Fifty (Interoperable) Facebooks, 51 SETON

HALL L. REV. 1193, 1229–30 (2021) (“Put simply, products are interoperable if they can work

together. . . . ‘[T]he ability to transfer and render useful data and other information across systems,

applications, or components.’ [John Palfrey & Urs Gasser] nuance the definition by distinguishing four

layers of interoperability: technological, data, human, and institutional.”) (quoting JOHN PALFREY &

URS GASSER, INTEROP: THE PROMISE AND PERILS OF HIGHLY INTERCONNECTED SYSTEMS 5 (2012)).

196. See, e.g., Why Do You Need an End User License Agreement?, LAW365 (Jan. 8, 2020),

https://www.law365.co/blog/end-user-license-agreement [https://perma.cc/CS8D-LWE7].

197. Id.

GARON_21NOV22.DOCX (DO NOT DELETE)

208 MARQUETTE LAW REVIEW [106:163

highlight the importance of specifying intellectual property rights, establishing

(as well as limiting or disclaiming) warranties, restricting activities and uses,

and defining the scope and limitations of the user’s license to use the software

or participate on the platform.

198

EULA or ToS agreements have become standard and ubiquitous in the age

of smartphones.

199

The expectation that Ginormaverse or any virtual world will

require such an agreement is hardly surprising. The implications, however, take

on additional significance if the metaverse itself becomes ubiquitous and

universal. The ToS for a universal platform has the potential to become the

equivalent of positive national law. “The vast majority of Americans—97%—

now own a cellphone of some kind.”

200

If use of the platform is required by the nation’s leading vendors such as

Google and Apple, social media giant Facebook, and Microsoft—which

remains relevant, if not dominant, in almost every digital sector—along with

large retailers including Amazon, Target, and Walmart, it will cover nearly

100% of Americans. The single ToS could end up being required for anyone

using a computer operating system (except for those few Linux holdouts that

do not also use either Microsoft or Apple), anyone who owns a smart phone,

anyone who shops online or uses digital coupons in stores, and so on.

201

The social pressure on the parties drafting the Ginormaverse ToS may keep

the company from overreaching too extensively. At least theoretically, the

social backlash from excessive terms and the goal of maintaining customer

goodwill has discouraged some of the potentially harmful provisions from

becoming standardized in ToS contracts. Back in 2005, the Electric Frontier

198. Abanti Bose, Advantages and Disadvantages of End-User License Agreements, IPLEADERS

(July 25, 2021), https://blog.ipleaders.in/advantages-disadvantages-end-user-license-agreements/

[https://perma.cc/5EQC-XLYJ]; Jacqueline Gibson, Q&A What is an EULA?, LEGALVISION,

https://legalvision.com.au/q-and-a/what-is-an-eula/ [https://perma.cc/PD95-Z5UA] (“If you are using

an EULA as an addition to an overarching licen[s]e between you and a business, then the EULA will

ensure you have recourse to address any issues directly with the individual employees who use the

software, rather than only having a legal relationship with the business.”); Mike Young, EULA: 7 Key

Parts Of A Software End User License Agreement, MIKE YOUNG L. FIRM (Nov. 18, 2015),

https://mikeyounglaw.com/software-end-user-license-agreement-eula [https://perma.cc/8M7T-

CGAA].

199. Cf. Annalee Newitz, Dangerous Terms: A User’s Guide to EULAs, ELEC. FRONTIER

FOUND. (Feb. 17, 2005), https://www.eff.org/wp/dangerous-terms-users-guide-eulas

[https://perma.cc/Y2WK-4UBL] (perhaps policy makers should have heeded this warning from 2005).

200. Mobile Fact Sheet, PEW RSCH. CTR. (June 27, 2021),

https://www.pewresearch.org/internet/fact-sheet/mobile/ [https://perma.cc/W96C-X8XX] (“The share

of Americans that own a smartphone is now 85%, up from just 35% in Pew Research Center’s first

survey of smartphone ownership conducted in 2011.”).

201. See Auxier & Anderson, supra note 56.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 209

Foundation warned about EULAs by identifying hidden provisions aimed at

stifling consumer criticism, increasing customer monitoring, prohibiting

reverse engineering, and modifying both the licensed software and the EULA

itself.

202

Although provisions prohibiting reverse engineering and allowing for

the modification of software and terms are common, contractual restrictions on

consumer feedback have been prohibited by Congress.

203

Nonetheless, the

concern remains that provisions in the ToS to compel arbitration and to prohibit

class action lawsuits will remove the vast majority of conflicts out of the court

system.

204

Whatever efficiency benefits this might provide, it also curtails the

development of the common law. If these provisions govern business-to-

business transactions as well as business-to-consumer transactions that occur

within the virtual world, commercial law could essentially leave the jurisdiction

of the courts.

As discussed below, the ToS will be central to identify the scope and

ownership of each virtual world user’s intellectual property rights, privacy

interests, and potential for criminal liability under the Computer Fraud and

Abuse Act (CFAA).

205

The ToS will not be able to contractually waive positive

law requirements such as those data breach notification statutes or financial

regulations, but in many other areas, the ToS can be drafted to supplement or

eventually to undermine state and federal law governing the interactions among

the members of the public who agree to its terms of service. In addition, as

discussed below, the metaphor of a virtual activity may give rise to a very

different digital crime than the in-world understanding. For example, digital

items can be copied and perhaps criminally or tortiously erased. But despite the

virtual world metaphor, an in-world item cannot be stolen because it was never

202. Newitz, supra note 199.

203. Consumer Review Fairness Act of 2016, 15 U.S.C. §§ 41, 45, 57a (2016) (making void a

contract that prohibits consumer reviews, with exceptions for certain types of confidential

information); see Bill Moak, Online Reviews: Companies can’t bar Consumers from Posting Negative

Comments, CLARION LEDGER (May 24, 2019),

https://www.clarionledger.com/story/news/2019/05/24/online-negative-reviews-what-businesses-

can-and-cant-do-law-crfa-ftc/3770680002/ [https://perma.cc/AS3L-DA9T].

204. See, e.g., Kater v. Churchill Downs Inc., No. 15-CV-00612-RSL, 2021 WL 511203, at *2

(W.D. Wash. Feb. 11, 2021) (an initial complaint about losing $1,000 in funds on a casino video game

ultimately resulted in a class action lawsuit resulting in a $155 million fund, $38,750 in attorneys’ fees,

and more than 50,000 class members); Kater v. Churchill Downs, No. 3:15-cv-006120RBL, 2018 WL

5734656, at *3 (W.D.Wash. Nov. 02, 2018) (defendant could not both pursue litigation and enforce

arbitration provision).

205. See 18 U.S.C. § 1030; see also Thomas E. Kadri, Digital Gatekeepers, 99 TEX. L. REV.

951, 1003 (2021); Orin S. Kerr, Criminal Law in Virtual Worlds, 2008 U. CHI. LEGAL F. 423–24

(2008); Orin S. Kerr, Cybercrime’s Scope: Interpreting “Access” and “Authorization” in Computer

Misuse Statutes, 78 N.Y.U. L. REV. 1596, 1597 (2003).

GARON_21NOV22.DOCX (DO NOT DELETE)

210 MARQUETTE LAW REVIEW [106:163

a physical object, and the change in access from one user to another may result

in a violation of the CFAA or other laws rather than theft.

206

The ToS will be central to the protection, potential expansion, and

rebalancing of intellectual property rights. In this example, Ginormaverse will

be the copyright owner of the software and visual images created to own and

operate the platform.

207

To permit the interoperability to work, the companies

sharing the common platform will need to cross-license the copyrights in their

respective audiovisual works as well as in the software code which runs those

works.

208

The other vendors will require that the ToS provides that each vendor

retains its own copyright, granting a limited, non-exclusive license to

Ginormaverse in order to facilitate the interoperability and to standardize the

end-user’s interactions as each person moves from node to node within the

multiverse.

Ginormaverse and the other vendors could choose to make the core code

available even more publicly using a Creative Commons license, but history

suggests that the code will be protected vigorously from non-partner vendors

who do not cross-license their own code.

209

If licensed in this manner, the

metaverse will begin to control and exclude which other vendors gain access to

the platform. In this way, the interoperable software will work much like the

controls used by Google and Apple over their respective app stores.

210

If history remains any guide, the network effects strongly suggest that while

there may be a time of significant experimentation, the benefits of

interoperability and access to particularly popular resources along with

frictional barriers such as the learning curve for different platforms will result

in a very limited number of competitors. There may be a single multiverse, or

206. See Kerr, Criminal Law in Virtual Worlds, supra note 205, at 419, 422–23 (distinguishing

violations of rules of play within the virtual world from misuse of credentials to steal funds from

attached accounts).

207. See 17 U.S.C. § 102 (literary works and audiovisual works); GREG LASTOWKA, VIRTUAL

JUSTICE: THE NEW LAWS OF ONLINE WORLDS 170 (2010).

208. Some of the software will not be entirely functional and outside the scope of copyright.

Much of the code will be copyright protected, however, requiring cross-licenses.

209. PETE PERLEGOS, CROSS-LICENSING 17 (2005), http://perlegos.com/lawschool/

crosslicensing.pdf#page=17 [https://perma.cc/YR5V-G38P] (quoting RICHARD E. CAVES, HAROLD

CROOKELL & PETER J. KILLING, THE IMPERFECT MARKET FOR TECHNOLOGY LICENSES, OXFORD

BULLETIN OF ECONOMICS AND STATISTICS (1983)).

210. See, e.g., Nikolas Guggenberger, Essential Platforms, 24 STAN. TECH. L. REV. 237, 263

(2021) (“Third-party app developers lack practical and reasonable alternatives to the two leading

platforms. . . . Moreover, developers remain tied to the app stores beyond the initial

download. . . . Google and Apple also compete in the secondary market for apps themselves. Google’s

apps reach 186 million users, Apple’s 105 million.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 211

like computer operating systems

211

and smartphones,

212

there may be a duopoly,

or it may broaden further. In gaming, for example, there are two dominant app

stores, but also Steam and the Epic Games Store,

213

and the three major console

makers.

214

Netflix and Amazon are also seeking to be competitive in games.

215

Whether there is one metaverse, a few competing metaverses, or a Web3-

inspired multitude of providers, the virtual world will use its ToS to standardize

many of the users’ expectations within the platform.

216

Areas within the virtual

world may have additional restrictions such as specially walled gardens for

content screened from young children and areas for only adolescents. Other

areas will be screened for the customers of a particular vendor. But these rules

will continue to operate within the constraints of the ToS that governs the

broader metaverse.

From a contractual standard, this allows the owner of the metaverse to

control the virtual space in much the same manner that a mall owner controls

the retail space at a mall or the owner of a platform often prioritizes its own

211. See United States v. Microsoft Corp., 253 F.3d 34, 52 (D.C. Cir. 2001) (“[C]onsumers

would not switch from Windows to Mac OS in response to a substantial price increase because of the

costs . . . as well as because of the effort involved in learning the new system and transferring files to

its format.”).

212. See Guggenberger, supra note 210, at 262 (“Aside from third-party Android stores in China,

Google and Apple all but divide up the market for smart phone application platforms with the Google

Play Store and the Apple App Store. In 2019, users downloaded 85 billion apps from the Google play

store, and 31 billion from the Apple App Store.”).

213. See generally Andrew Beattie, How the Video Game Industry Is Changing, INVESTOPEDIA

(Oct. 31, 2021), https://www.investopedia.com/articles/investing/053115/how-video-game-industry-

changing.asp [https://perma.cc/JF69-M6P3] (“Tech giants such as Google, Meta [formally Facebook],

and Apple, have all made plans to enter the video game industry. . . . Microsoft (MSFT[has already

been in the gaming industry through its popular Xbox console.”); GRAND VIEW RSCH., GAMING

MARKET SIZE, SHARE & TRENDS ANALYSIS REPORT BY DEVICE (CONSOLE, MOBILE, COMPUTER),

BY TYPE (ONLINE, OFFLINE), BY REGION (NORTH AMERICA, EUROPE, APAC, LATAM, MEA), AND

SEGMENT FORECASTS, 2022 – 2030, https://www.grandviewresearch.com/industry-analysis/gaming-

industry?utm_source=prnewswire&utm_medium=referral&utm_campaign=ICT_08-Aug-

22&utm_term=gaming_industry&utm_content=rd1 [https://perma.cc/G2YJ-9RXC] (“The global

gaming market size was worth 202.64 billion in 2021 and is expected to expand at a compound annual

growth rate (CAGR) of 10.2% from 2022 to 2030” or 504.29 billion USD by 2030.).

214. US Video Gaming Industry in 2022: Gaming Devices & Video Game Content Viewership

Trends, INSIDER INTELLIGENCE (July 21, 2021), https://www.insiderintelligence.com/insights/us-

gaming-industry-ecosystem/ [https://perma.cc/7E24-8VSL] (“Gamers turned to their Nintendo,

Playstation, and Xbox devices as time spent at home increased in 2020—monthly digital console

gamers saw a larger increase than any other gaming device, growing by 6.3% from 2019.”).

215. See Mike Snider, Video Games Playing on the Minds of Amazon, Netflix, Peloton and Zoom,

USA TODAY (July 24, 2021), https://www.usatoday.com/story/tech/2021/07/24/amazon-netflix-

peloton-zoom-video-games/8070256002/.

216. See, e.g., DECENTRALAND, supra note 85.

GARON_21NOV22.DOCX (DO NOT DELETE)

212 MARQUETTE LAW REVIEW [106:163

products and services above those of the third-party vendors for which it

conducts business.

217

This creates a competitive risk to those companies who

rely on the metaverse as a platform from which to conduct business and a

tremendous opportunity for the owner of the platform to leverage its own

products or services into a prominent position within the virtual world.

Ultimately, the success of the metaverse may determine the extent to which

antitrust and unfair competition laws are updated to address the practices of the

multiverse operators.

For some advocates of NFTs and DAOs, there is an effort to do away with

ToS and instead rely on smart contracts. Certainly, no one will miss the need to

click through pages of contractual provisions nearly impossible to read as a

condition of opening an app or logging into a website. At the same time,

however, ToS provide important legal protections for the companies and

important warranties for the consumers in e-commerce transactions. DAO

owners and the committees or assigned leadership will want contractual waiver

to reduce legal risk associated with the metaverse operation.

218

Smart contracts,

since they are merely pre-programmed software interactions, do not provide the

risk management or contingency planning of true contracts. Perhaps the best

example can be seen in the crypto project ICON, which lost 14,000,000 ICX

tokens, worth $8 million at the time of the loss, because a programmer noted a

software error that permitted the user to mint 25,000 tokens for free on each

visit.

219

Had ICON employed a ToS, it could have contractually required users

to meet investment criteria. It also could have reserved the power to legally

recall and reissue tokens in the event of catastrophic breaches (provided it did

so in a way that avoids simply forking the blockchain and causing losses to

217. Amazon.com Inc has been repeatedly accused of knocking off products it sells on its

website and of exploiting its vast trove of internal data to promote its own

merchandise at the expense of other sellers. The company has denied the accusations.

But thousands of pages of internal Amazon documents examined by Reuters—

including emails, strategy papers and business plans—show the company ran a

systematic campaign of creating knockoffs and manipulating search results to boost

its own product lines in India, one of the company’s largest growth markets.

Aditya Kalra & Steve Stecklow, The Imitation Game, REUTERS (Oct. 13, 2021),

https://www.reuters.com/investigates/special-report/amazon-india-rigging/ [https://perma.cc/2TJT-

LAHU]. See also Epic Games, Inc. v. Apple Inc., 493 F. Supp. 3d 817, 828 (N.D. Cal. 2020) (“Epic

Games Store was created to compete against the leading multi-publisher digital video game

marketplace on computer platforms, Steam, which is operated by Valve Corporation. The Epic Games

Store provides access to more than 250 games from more than 200 developers.”).

218. See, e.g., DECENTRALAND, supra note 85.

219. Crypto ‘Hacker’ who Exploited Bug to Mint $17M Could Still Keep It, PROTOS (Aug. 11,

2021), https://protos.com/crypto-hacker-icon-icx-minted-bug-blockchain-property-right/

[https://perma.cc/K4AK-SVL9]; Birch, supra note 72.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 213

other owners’ assets).

220

Smart contracting code cannot grant a DAO the legal

right to fix software errors, but since software errors are inevitable, metaverse

operators will inevitably recognize that legal contracts are more powerful than

smart contracts.

In addition, if contractual rights to correct catastrophic software issues are

not enough, there are also the myriad of regulatory compliance obligations that

the owner of a service must include to ensure that the customers of the service

are in compliance with the law and the contractual obligations of the metaverse.

Community standards, anti-obscenity and child pornography provisions,

accredited or otherwise qualified investors, and many other affirmative

obligations must be included in the contracts. As a result, metaverse

transactions will likely continue to be governed by contract law in each

jurisdiction.

B. Competition Harms and Consumer Protection

A particular concern of the metaverse that may be better addressed through

the competition spawned by DAOs and the multiverse is the tendency of

enterprises to promote their own activities over those of competitors. In the

abstract, this form of self-promotion is entirely reasonable. Nike, for example,

will be expected to stock only Nike shoes at its retail stores.

221

There is no

consumer or regulatory expectation that it will provide Adidas or Converse

sneakers.

222

McDonalds is not obligated to sell Burger King hamburgers, and it

can choose to contract with either Pepsi or Coca-Cola for its soft drinks. The

right to monopolize one’s own stores with one’s own goods or services does

not seem problematic, and any regulatory intervention would seem absurd.

220. See Birch, supra note 72 (“Poly Network had reported that a person or persons unknown

used yet more bugs in smart contracts to redistribute some $600m worth of Ether, Binance Coin and

USDC to cryptographically more deserving wallets . . . . Poly Network responded by abandoning code

is law and threatening both legal action and direct action . . . .”).

221. See Stephanie Stoughton & Leslie Walker, Manufacturers’ Online Stores Upset Their

Retailers, WASH. POST (Feb. 8, 1999), https://www.washingtonpost.com/archive/politics/1999/02/08/

manufacturers-online-stores-upset-their-retailers/9407a520-6097-4923-9364-1be9aa91ad86/

[https://perma.cc/H3DU-J8Q5] (“Sporting goods retailers were hardly pleased the day Nike Inc.

opened its own factory outlets, offering the swoosh-branded athletic shoes at discount

prices. . . . Nike’s bid to bypass retailers online underscores how the Internet is complicating long-

standing business relationships. It is sending tremors through the retailing and manufacturing

industries . . . .”).

222. See Refusal to Deal, FTC, https://www.ftc.gov/tips-advice/competition-guidance/guide-

antitrust-laws/single-firm-conduct/refusal-deal [https://perma.cc/89YN-SGF8] (“In general, a firm has

no duty to deal with its competitors.”).

GARON_21NOV22.DOCX (DO NOT DELETE)

214 MARQUETTE LAW REVIEW [106:163

But the relationship changes when the store both sells goods and competes

with the vendors that sell on its platform. Again, it is not a problem new to the

internet. Discount stores and department stores have long sold store brands that

compete directly with the retailers who market through those chains.

223

It is

common practice in the retail industry and has been the subject of FTC scrutiny.

The FTC has outlined situations where the leadership by a retailer’s

supplier—known as a category captain—might create antitrust concerns.

“[T]he category captain might: (1) learn confidential information about rivals’

plans; (2) hinder the expansion of rivals; (3) promote collusion among retailers;

or (4) facilitate collusion among manufacturers.”

224

The first concern regarding

confidential information has increased in scope as the economy has shifted to

data-driven wholesale and retail strategies.

225

The FTC has been concerned

about the ability of category captains to capitalize on their superior market

power to dominate the retail space, set preferential pricing arrangement, and

artificially heighten barriers to entry for competitors.

226

The problem becomes significantly worse when the retailer is selling

competitors’ goods and services, competing with the competitors’ goods and

services with its own goods, and also serving as the research and promotional

platform for those goods and services. In essence, the platform serves as the

category captain and the chief rival to the competitors, competitors that are

deeply reliant on the platform to provide the marketing and distribution. For

example, in terms of smartphone, tablet, and computer apps, Google Play hosts

approximately 3.5 million apps, Apple App Store houses 2.23 million apps,

Windows Store hosts 669,000, and Amazon Appstore has 476,000.

227

223. See Gregory Gundlach & Alex Loff, Competitive Exclusion In Category Captain

Arrangements 7 (Aug. 18, 2018) (Antitrust Inst., Working Monograph),

https://www.antitrustinstitute.org/wp-content/uploads/2018/10/Gundlach-and-Loff_Comp-Exc.-in-

Cat-Cap_8.31.18-FINAL.pdf [https://perma.cc/EL2D-GSAQ] (“The most popular approach to

category management involves ‘outsourcing’ decisions to a single manufacturer in the category (a.k.a.,

the ‘category captain’). . . . The extent of involvement and the level of influence and control held by a

category captain can be extensive.”); see also Bradley J. Lorden, Category Management: The Antitrust

Implications in the United States and Europe, 23 LOY. CONSUMER L. REV. 541, 541–42 (2011).

224. Lorden, supra note 223, at 545 (quoting FED. TRADE COMM’N, REPORT ON THE FEDERAL

TRADE COMMISSION WORKSHOP ON SLOTTING ALLOWANCES AND OTHER MARKETING PRACTICES

IN THE GROCERY INDUSTRY 50 (2001)).

225. See Guggenberger, supra note 210, at 265, 266.

226. See generally Stéphane Caprice & Vanessa von Schlippenbach, Consumer Shopping Costs

as a Cause of Slotting Fees: A Rent-Shifting Mechanism (Deutsches Institut für Wirtschaftsforschung,

Working Paper No. 1020, 2010), https://econpapers.repec.org/RePEc:diw:diwwpp:dp1012

[https://perma.cc/B9RQ-3R9U].

227. Number of Apps Available in Leading App Stores as of Q2 2022, STATISTICA (Aug. 11,

2022), https://www.statista.com/statistics/276623/number-of-apps-available-in-leading-app-stores/

[https://perma.cc/6PCS-4TN5].

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 215

With millions of apps being hosted, the search algorithms and

recommendations are essential for companies to connect with customers. “But

as Apple has become one of the largest competitors on a platform that it

controls, suspicions that the company has been tipping the scales in its own

favor are at the heart of antitrust complaints . . . .”

228

If competitors wish to

improve their placement, they have the option of paying Apple for that

priority.

229

Apple is not alone in prioritizing its own products, charging its competitors,

and potentially using customer data for competitive advantage. Amazon, the

nation’s leading retailer, has claimed this title as well.

230

“[I]nternal documents

also show that Amazon employees studied proprietary data about other brands

on Amazon.in, including detailed information about customer returns. The aim:

to identify and target goods—described as ‘reference’ or ‘benchmark’

products—and ‘replicate’ them.”

231

For wholesalers and retailers, the

transactions with Amazon are a devil’s bargain. “53% of vendors see

themselves in direct competition with Amazon’s products.”

232

Meta has been the subject of similar accusations. In August 2021, the FTC

updated its complaint against Meta (then Facebook) over its innovation

strategies.

233

When Facebook was unable to develop its own apps to compete

in the mobile marketplace, “Facebook instead resorted to an illegal buy-or-bury

scheme to maintain its dominance. . . . And to further moat its monopoly,

228. Jack Nicas & Keith Collins, How Apple’s Apps Topped Rivals in the App Store It Controls,

N.Y. TIMES (Sept. 19, 2019), https://www.nytimes.com/interactive/2019/09/09/technology/apple-app-

store-competition.html [https://perma.cc/89KT-AVXY].

229. Id. See Guggenberger, supra note 210, at 266.

230. See Aditya Kalra & Steve Stecklow, supra note 217; Karen Weise, Prime Power: How

Amazon Squeezes the Businesses Behind Its Store, N. Y. TIMES (Dec. 19, 2019),

https://www.nytimes.com/2019/12/19/technology/amazon-sellers.html [https://perma.cc/B9DK-

V6MN] (“Last year, Americans bought more books, T-shirts and other products on Amazon than eBay,

Walmart and its next seven largest online competitors combined, according to eMarketer, a research

company.”).

231. Kalra & Stecklow, supra note 217, at 3.

232. Guggenberger, supra note 210, at 259 (citing JUNGLE SCOUT, THE STATE OF THE AMAZON

SELLER 2020 24 (2020), https://www.junglescout.com/wp-content/uploads/2020/02/State-of-the-

Seller-Survey.pdf [https://perma.cc/SL55-XDU4]).

233. See Plaintiff’s First Amended Complaint for Injunctive and Other Equitable Relief at 1,

FTC v. Facebook, Inc., No. 1:20-cv-03590-JEB (D.D.C. Aug. 19, 2021) [hereinafter FTC Amended

Complaint] (“Facebook has maintained its monopoly position in significant part by pursuing Chief

Executive Officer (“CEO”) Mark Zuckerberg’s strategy, expressed in 2008: ‘it is better to buy than

compete.’ ”).

GARON_21NOV22.DOCX (DO NOT DELETE)

216 MARQUETTE LAW REVIEW [106:163

Facebook lured app developers to the platform, surveilled them for signs of

success, and then buried them when they became competitive threats.”

234

Nor should Google be left off the list of self-dealing platforms, at least

according to allegations at the heart of recent litigation involving Epic Games

over the placement of Fortnite in the Google Play Store. According to the

complaint, Google had been willing to arrange a side-deal with Epic over the

percentage of fees charged, had arranged for payments to rival game company

Blizzard, increased restrictions on side-loading apps to stop circumvention of

the Play Store monopoly, and undertaken additional anticompetitive

strategies.

235

These efforts, and many like them, have been the result of the

anticompetitive behavior of platforms because, much like scorpions, it is simply

in their nature. “[P]latform providers work to define both collected data and

algorithmic logics as zones of exclusivity. In particular, platforms use contracts

systematically to facilitate and protect their own legibility function, extracting

transparency from users but shielding basic operational knowledge from third-

party vendors, users, and advertisers alike.”

236

The future is already here.

Over the last two decades, digital platforms have become

crucial marketplaces that bring together demand and supply of

goods and services online. . . . They have gained systemic

relevance and shape the global economy. . . . As of August

2020, they represent an aggregate market valuation of $8.2

trillion.

237

234. Press Release, FTC Alleges Facebook Resorted to Illegal Buy-or-Bury Scheme to Crush

Competition After String of Failed Attempts to Innovate, FTC (Aug. 19, 2021),

https://www.ftc.gov/news-events/press-releases/2021/08/ftc-alleges-facebook-resorted-illegal-buy-

or-bury-scheme-crush [https://perma.cc/QAE4-EJN9].

235. Plaintiff’s First Amended Complaint for Injunctive Relief, 32, Epic Games, Inc. v. Google,

LLC, No. 3:20-CV-05671-JD (No. 165-10) (N.D. Cal. Aug. 20, 2021) [hereinafter Epic Amended

Complaint]; see Sean Hollister, The Epic v. Google Lawsuit Finally Makes Sense, THE VERGE (Aug.

19, 2021), https://www.theverge.com/2021/8/19/22632804/epic-google-lawsuit-unredacted-

complaint-antitrust [https://perma.cc/5BAY-EVDD].

236. Julie E. Cohen, Law for the Platform Economy, 51 U. C. DAVIS L. REV. 133, 154

(2017).

[Epic] alleges the company was so worried about Epic setting a precedent by

abandoning the Play Store that it [Google] unleashed a broad effort to keep

developers from following the company’s lead. That included straight-up paying

top game developers, including Activision Blizzard to stick around, and sharing

additional chunks of its revenue with phone makers if they agreed not to preinstall

any other app stores.

Hollister, supra note 235.

237. Guggenberger, supra note 210, at 253–54.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 217

For platforms, the markets are driven by scale and fueled by network

effects.

238

“Strong network effects can insulate a dominant personal social

networking provider from competitive threats until a disruptive or innovative

technology emerges to open up new ways for users to connect.”

239

Of course,

while network effects are necessary to build a use case for a network, network

effects are not themselves sufficient, which is why companies resort to

anticompetitive practices to add additional competitive barriers, discourage

participants from leaving the networks, and forestall effective competition from

emerging.

240

These digital platforms are striving to control Ginormaverse, and they are

likely to use competitive barriers, customer retention strategies, and buyouts to

maintain their advantage. Unsurprisingly, Web3 advocates are hoping to keep

this power out of their hands. The future of the metaverse will not turn on any

one competitive advantage, however, for as the Epic Games litigation

highlights, Android’s open-sourced operating system and the open architecture

of Android smartphones has been as successful as Apple and Amazon at

controlling the operating environment, exploiting the transactional data, and

crafting barriers to competition that empower the operational leadership to

dominate.

241

As a result, any planning for the metaverse must take the potential consumer

harms for anticompetitive behavior into account, ex ante, before the model has

become too big to fail. Whether the enforcement is developed through smart

contracts, terms of service, or updated antitrust guidance, the bright-line

prohibition should be clear that a company which provides another company’s

238. See D’Arcy Coolican & Li Jin, The Dynamics of Network Effects, ANDREESSEN HOROWITZ

(Dec. 13, 2018), https://a16z.com/2018/12/13/network-effects-dynamics-in-practice/

[https://perma.cc/LNX9-2QLJ] (“The most successful companies and products of the internet era have

all been predicated on the concept of network effects, where the network becomes more valuable to

users as more people use it.”).

239. FTC Amended Complaint at 3, supra note 233. But see Coolican & Jin, supra note 238

(going beyond the assumption that each member of a network contributes equally to that network,

increasing the network’s value and competitive advantage to explore differences and limitations within

the network).

240. See Catherine Tucker, Network Effects and Market Power: What Have We Learned in the

Last Decade, TECH. & RSCH. POL’Y INITIATIVE, Spring 2018, at 72, 73–74 (2018)

https://sites.bu.edu/tpri/files/2018/07/tucker-network-effects-antitrust2018.pdf

[https://perma.cc/UCM2-D9HA] (discussing how the absence of “sunk costs” enables network users

to move rapidly from network to network). Earlier models of network effects presumed hardware costs,

user interface learning curves, and time establishing accounts as investments or sunk costs that would

likely retain customers. Id. In social media competition, these are largely absent. Id.; Coolican & Jin

supra note 238.

241. Epic Amended Complaint, supra note 235, at 8.

GARON_21NOV22.DOCX (DO NOT DELETE)

218 MARQUETTE LAW REVIEW [106:163

goods or services should be precluded from competing with that company. Any

company can provide the platform and any company can compete on the

platform, but it is intrinsically anticompetitive to do both, and over time, the

network benefits of such competitive advantage will squeeze most competition

out of the marketplace.

The limitation on self-preference is essential for the metaverse to meet its

potential. In many ways, the metaphor of the virtual world is little more than a

visualized search function. Information, entertainment, contacts, products, and

services are all found for the user based on the search criteria and prior behavior

of that user. Ginormaverse will be the gateway to the information a person

needs each day. In that way, it will be much like Google is today. As of 2020,

for example, “across all platforms, including mobile and tablet, the Google’s

share hovers . . . at 88%.”

242

It helped that Google bought the exclusive right to

be the default search engine on Apple operating systems and tied its search

engine to its own operating system, Android. Whether Google maintains that

dominance into the metaverse or a competitor replaces it, the potential to

prioritize and define the user experience will be tremendous. Only through

contractual and legal restrictions can this power be diffused.

C. Copyright

Because Ginormaverse is an interoperable platform, the ToS would likely

allow users to own the intellectual property rights in their avatar.

243

Like most

games and virtual worlds, there would be free and low-cost stock avatars

available as well, but the users will likely wish to customize one or more

avatars, meaning that they would want the ability to use these in any

interoperable space.

244

The right to retain copyright and other intellectual

property rights will be even more important to other assets beyond the avatars.

Although Ginormaverse will likely allow users to keep the copyright in

their works, the users will also need to warrant that they have the rights to the

242. Guggenberger, supra note 210, at 269 (citing Search Engine Market Share United States of

America, STATCOUNTER GLOB. STATS, https://gs.statcounter.com/search-engine-market-

share/all/united-states-of-america [https://perma.cc/YFQ6-TCBE]).

243. See Kevin Dong, Developing A Digital Property Law Regime, 105 CORNELL L. REV. 1745,

1750–51 (2020) (“[V]irtual items are instead governed by the laws of intellectual property and

contracts.”); Kenneth W. Eng, Content Creators, Virtual Goods: Who Owns Virtual Property?, 34

CARDOZO ARTS & ENT. L.J. 249, 252 (2016) (“[T]he law should first identify virtual goods that

warrant ownership rights and then extend copyright law to grant ownership protection to the end-

user.”).

244. See Heather Mueller, What is Software Interoperability and How Can It Boost Profits and

Productivity?, FORMSTACK (June 24, 2021), https://www.formstack.com/resources/blog-software-

interoperability [https://perma.cc/5ATM-QGCW].

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 219

copyrighted materials used in the avatars and other content utilized within the

virtual world. The ToS will likely include specific representations and

warranties indemnifying Ginormaverse from any infringements by the users.

To the extent that Ginormaverse represents multiple copies of the content

needed to provision each user interaction on primary and secondary computer

servers, back-up systems, and cached systems used to reduce loading times, a

particular copyrighted work might be replicated numerous times within

Ginormaverse’s computer system. The ToS should take these reproductions,

archival copies, and public performances into account in the license from each

consumer and business activity utilizing the system.

For example, the Virtual Reality Church has been in operation since

2016.

245

According to its pastor, D.J. Soto, “the spiritual connection people

experience in person in church, is equally accessible in virtual reality. ‘We

believe God is everywhere, he’s in physical dimensions, spiritual dimensions,

and virtual reality.’ ”

246

Unlike a Zoom-based congregation, the participants

wearing VR goggles will be unable to read a print copy of their prayer book to

use during the service. To accommodate the need for prayer books within the

VR experience, the church should have a license from the publisher to provide

those works to parishioners within the VR environment. In a similar manner,

the sermons and homilies written by clergy for their online congregations will

be protected by copyright as soon as they are created, and the ToS should not

transfer that copyright from the author to the owners of Ginormaverse or other

platforms.

This will be equally true for all corporate documents, presentations,

educational materials, and other types of content created by individuals or

enterprises for presentation, discussion, or distribution within the virtual world.

Some of these works will also embody trade secrets, and potentially some of

these works could include attorney-client privileged content or attorney work

245. Chace Beech, Virtual Reality Church Brings Worship to New Dimensions, SPECTRUM

NEWS 1 (Mar. 15, 2021), https://spectrumnews1.com/ca/la-west/technology/2021/03/14/virtual-

reality-church-brings-worship-to-new-dimensions [https://perma.cc/4X7K-NQ9A] (“VR Church is

designed, built, and run entirely online. It was founded in 2016 by D.J. Soto, an ordained Bishop. He

was experimenting with virtual reality and realized he could marry this new technology with his

religious work.”).

246. Id. (quoting Bishop Soto).

GARON_21NOV22.DOCX (DO NOT DELETE)

220 MARQUETTE LAW REVIEW [106:163

product.

247

Virtual doctor visits might use cameras rather than avatars, but could

still include medical records subject to HIPAA privacy and security rules.

248

D. Confidentiality and Privacy

The importance of confidentiality and data security are more explicit when

the documents are governed by federal privacy laws such as the HIPAA privacy

rule

249

or the Gramm-Leach-Bliley financial privacy rules,

250

but these concerns

are nearly as significant for any business operating within Ginormaverse that is

concerned about its trade secrets and confidential data.

251

247. On August 10, 2008, the Section presented a panel program entitled “Real Concerns

When Practicing in Virtual Worlds” at the ABA Annual meeting in New York

City. . . . Benjamin Duranske talked about some of the ethical concerns of lawyer

participation in virtual worlds. Because a virtual worlds provider may have the ability

to review logs of attorney conversations, and other avatars may have the ability to

intercept communications, attorney-client communications in virtual worlds may not

have the protection of the attorney-client privilege. Also, issues of unauthorized

practice of law arise with the question of “where are you practicing” when a lawyer

in one jurisdiction speaks in a virtual world with a client from another jurisdiction.

Given these issues, he advises lawyers not to give advice in today’s virtual worlds.

He cautioned that if a lawyer would not say something in an email, he or she should

not say the same thing in a virtual world.

Stephen S. Wu, Real Concerns When Practicing in Virtual Worlds, ABA SCITECH LAW, Winter 2009

at 19, 24–25.

248. See Stephanie Murtagh & Jasmine M. Fisher, Compliance Considerations: Access to

Telehealth Services for Patients with Disabilities, J. HEALTH CARE COMPLIANCE, July–Aug. 2021 at

5, 6–7 (2021) (discussing HIPAA waivers for telemedicine during the COVID-19 pandemic); see also

Joshua A.T. Fairfield, Avatar Experimentation: Human Subjects Research in Virtual Worlds, 2 U.C.

IRVINE L. REV. 695, 735 (2012) (“If a game god were to alter its EULA or TOS to include the kind of

general standardized consent to human subjects research that the ANPRM contemplates, the user

would not have a meaningful opportunity to decline. The user would have to either agree to the changed

EULA or give up all of his or her online community, property, and account progress.”); Rebecca

Crootof & BJ Ard, Structuring Techlaw, 34 HARV. J.L. & TECH. 347, 357 (2021) (exploring range of

legal protections).

249. Health Insurance Portability and Accountability Act (HIPAA), 45 C.F.R. §§ 160.103,

164.514 (2018). See generally, Charlotte A. Tschider, Regulating the Internet of Things:

Discrimination, Privacy, and Cybersecurity in the Artificial Intelligence Age, 96 DENV. L. REV. 87, 95

(2018) (“Large data volumes also enable data aggregation for purposes of sale, transfer, and

exchange.”). Although this Article was looking at the data implications outside of virtual worlds, many

of the concerns are fully applicable to these systems.

250. Gramm-Leach-Bliley Act (GLBA), 15 U.S.C. § 6802.

251. Certain corporate assets, such as databases of customer information and preferences,

are valuable only because of their confidentiality. One data breach could greatly

diminish the value of such an intangible asset. For example, the damage that a

corporate insider can generate in one episode of information theft has been, in at least

one instance, approximated to be between $50 million to $100 million. Similarly,

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 221

Federal law provides that trade secret “means all forms and types of

financial, business, scientific, technical, economic, or engineering information,

including patterns, plans, compilations, program devices, formulas, designs,

prototypes, methods, techniques, processes, procedures, programs, or codes,

whether tangible or intangible . . . .”

252

A trade secret requires two additional

criteria to be protected. First, “the owner thereof has taken reasonable measures

to keep such information secret;” and second, “the information derives

independent economic value, actual or potential, from not being generally

known to, and not being readily ascertainable through proper means by, another

person who can obtain economic value from the disclosure or use of the

information.”

253

“Commentators universally agree that the [Uniform Trade

Secret Act’s] independent economic value requirement was intended to codify

the common law’s requirement that a trade secret give its owner a ‘competitive

advantage’ over others who do not know or use it.”

254

The basic requirements of trade secret protection, therefore, require that the

virtual platform and the users of the virtual platform agree to respect the trade

secrets of their respective owners.

255

Incorporating the duty to protect trade

secrets into the ToS will solve one aspect of trade secret practice focused on the

explicit duty of all parties subject to the agreement to respect bona fide trade

secrets. At the same time, however, it does raise some additional concerns.

Trade secrets, confidential information, HIPAA protected health care

records, and similar data all have the need for both legal protection from

corporate proprietary information protected solely by trade secret law could, in effect,

lose all its value in an information crime incident . . . .

See Andrea M. Matwyshyn, Material Vulnerabilities: Data Privacy, Corporate Information

Security, and Securities Regulation, 3 BERKELEY BUS. L.J. 129, 139–40 (2005).

252. 18 U.S.C. § 1839(3) (defining trade secret); see Eric R. Claeys, The Use Requirement at

Common Law and Under the Uniform Trade Secrets Act, 33 HAMLINE L. REV. 583, 583–84 (2010);

see also Unif. Trade Secrets Act § 1(4) (Unif. L. Comm’n 1985) (same).

253. 18 U.S.C. § 1839(3)(A)–(B).

254. Camilla A. Hrdy & Mark A. Lemley, Abandoning Trade Secrets, 73 STAN. L. REV. 1, 26

(2021).

255. See Sharon K. Sandeen, The Evolution of Trade Secret Law and Why Courts Commit Error

When They Do Not Follow the Uniform Trade Secrets Act, 33 HAMLINE L. REV. 493, 499 (2010).

The existence of secret information coupled with an express or implied

agreement of confidentiality made it easy for common law courts to impose

liability on individuals or companies who were parties to the agreement because

breach of contract and breach of trust were well-recognized wrongs. The more

difficult issue for some courts was to determine if secret information actually

existed. This led to the development of principles for differentiating between

protectable information and unprotectable information, including the concept of

reasonable efforts to maintain secrecy.

Id.

GARON_21NOV22.DOCX (DO NOT DELETE)

222 MARQUETTE LAW REVIEW [106:163

unauthorized access and a pragmatic prohibition against unauthorized use.

While these concerns overlap, they are not necessarily the same. HIPAA rules,

for example, allow third parties to access protected records for payment,

treatment, and health care operations.

256

Attorneys share client records with

paralegals, staff, printers, and others to the extent necessary to provide the

needed legal services.

257

Ginormaverse, as the platform, will have access to any

and all information that parties share across the system. To minimize the

usability of the data by the platform, its employees, and any third parties

supporting the hardware and technology, encryption tools will be required to

restrict access and readability of the data while stored and to limit the

readability of the data to only the parties when it is being used. To the extent

technologically feasible, only the authorized users should be able to access,

decipher, read, or transfer confidential documents within Ginormaverse.

Confidential discussions and videos should not be retained after the session

unless specifically requested.

258

And when any audio or video engagements are

recorded, they should only be accessible by the parties themselves. In no case

should the content be available to Ginormaverse for training or quality

assurance purposes.

The robust privacy and security requirements are one of the many reasons

that each user must be individually identified. While true anonymity may be

appropriate for select gaming, media, and perhaps adult-entertainment

activities, those activities that require credentialed access to content and

engagements will need to have a mechanism of verifying the identity for each

participant. This is relatively straight-forward to accomplish in a closed system

where the information is held in confidence by the vendor. In an interoperable

and permeable network, the use of blockchain technologies or other forms of

distributed ledger may be part of the solution.

256. 45 C.F.R. § 164.506 (2017) (stating the regulations further limit the extent of disclosures to

the minimum necessary to carry out the requirements).

257. See, e.g., ABA MODEL RULES OF PRO. CONDUCT r. 1.6 (AM. BAR ASS’N 2020)

Paragraph (c) requires a lawyer to act competently to safeguard information

relating to the representation of a client against unauthorized access by third

parties and against inadvertent or unauthorized disclosure by the lawyer or other

persons who are participating in the representation of the client or who are subject

to the lawyer’s supervision.

ABA MODEL RULES OF PRO. CONDUCT r. 1.6 cmt. 18 (AM. BAR ASS’N 2020),

https://www.americanbar.org/groups/professional_responsibility/publications/model_rules_of_profes

sional_conduct/rule_1_6_confidentiality_of_information/comment_on_rule_1_6/

[https://perma.cc/KN5E-P78V].

258. Digital media are generally fixed upon creation and stored, at least temporarily, while being

transmitted in a close approximation of real time.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 223

E. Rights to Biometrics, Names, Images, and Likenesses

To identify a person in the real world, other people use their visual looks,

the sound of their voice, and other physical attributes. Ginormaverse will need

to acquire a limited license to use the name, image, and likeness of each user of

the system. Absent such a license, there is the potential for the virtual world to

be violating the legal protections for the customer’s biometric data

259

and for

their rights of publicity.

260

Capturing the biometric data regarding a person’s visual looks, voice,

fingerprints, eye-prints, or other unique identifiers is governed in some states

under biometric notification and use laws.

261

By December 2021, there were

more than ten states with biometric privacy laws of various types, with

provisions that vary considerably.

262

At the end of 2021, nearly two dozen states

had additional laws under consideration.

263

Although the biometric data protection laws vary considerably from state

to state, they all require some level of notice to the individual before the

person’s biometric information is collected and stored.

264

The Illinois Biometric

259. Molly DiRago & Troutman Pepper, The Litigation Landscape of Illinois’ Biometric

Information Privacy Act, AM. BAR ASS’N (Aug. 20, 2021),

https://www.americanbar.org/groups/tort_trial_insurance_practice/committees/cyber-data-

privacy/the-litigation-landscape/ [https://perma.cc/FL4W-YJSE]

Illinois was the first state to regulate the collection and storage of biometric data.

Generally, BIPA requires any private entity in possession of biometric

information to: (i) develop a written policy, (ii) inform the owner of the biometric

information in writing about the purpose for collecting the information and the

length of time it will be stored, (iii) obtain written consent for the collection and

storage of the data, and (iv) refrain from selling, leasing, trading, or otherwise

profiting from that biometric information.

Id.

260. See No Doubt v. Activision Publ’g, Inc., 122 Cal. Rptr. 3d 397, 411 (Cal. Ct. App. 2011)

(“[T]hat the avatars appear in the context of a video game that contains many other creative elements,

does not transform the avatars into anything other than exact depictions of No Doubt’s members doing

exactly what they do as celebrities.”); In re NCAA Student-Athlete Name & Likeness Licensing Litig.,

724 F.3d 1268, 1276 (9th Cir. 2013) (quoting No Doubt, 122 Cal. Rptr. 3d at 411 for the same

proposition).

261. See Lauren Caisman, Amy de la Lama, Melissa Ruth Whigham & Bryan Cave Leighton

Paisner, U.S. Biometric Laws & Pending Legislation Tracker, JD SUPRA (May 13, 2021),

https://www.jdsupra.com/legalnews/u-s-biometric-laws-pending-legislation-5729436/

[https://perma.cc/5EVJ-Q6DF] (“Biometric privacy laws and regulations generally require businesses

to track, inform employees or consumers of, and provide methods for employees or consumers to

consent to, the collection of biometric information or biometric identifiers.”).

262. Id.

263. Id.

264. See DiRago & Pepper, supra note 259.

GARON_21NOV22.DOCX (DO NOT DELETE)

224 MARQUETTE LAW REVIEW [106:163

Information Privacy Act (BIPA)

265

became the most significant of these laws,

in part because liability could arise from violations of the law without the need

to show additional damages.

266

The laws generally require some explanation of

the use to which the biometric information will be put by the enterprise

collecting the information, and the laws may include limitations on the use of

the data.

267

In addition to biometric data, there are also legal restrictions on the

commercial use of a person’s name, image, and likeness.

268

In a virtual world,

these may overlap with the person’s biometric data, but in other situations, these

rights will be complementary. The right to protect against the unauthorized

commercial exploitation of one’s name or likeness evolved under different

names during the nineteenth century and distilled into the law of privacy as a

result of the seminal law review article by Samuel Warren and Louis

Brandeis.

269

Although the precise contours of the law have never been

uniformly agreed upon by the states, rights of publicity have been recognized

by the Supreme Court.

270

271

and Torts

expert Dean William Prosser

272

each further developed the conceptual

265. 740 ILL. COMP. STAT. 14/1 (2008).

266. Rosenbach v. Six Flags Ent. Corp., 129 N.E.3d 1197, 1206 (Ill. 2019) (“The duties imposed

on private entities by section 15 of the Act (740 ILL. COMP. STAT. ANN. 14/15 (West 2016)) regarding

the collection, retention, disclosure, and destruction of a person’s or customer’s biometric identifiers

or biometric information define the contours of that statutory right.”).

267. See DiRago & Pepper, supra note 259.

268. See e.g., CAL. CIV. CODE § 3344 (West 2022); N.Y. CIV. RIGHTS LAW §§ 50–51

(McKinney 2021).

269. See Samuel D. Warren & Louis D. Brandeis, The Right to Privacy, 4 HARV. L. REV. 193,

193 (1890); see also Pavesich v. New England Life Ins. Co., 50 S.E. 68, 80–81 (Ga. 1905) (the first

case to recognize the common law right of publicity in the United States); Roberson v. Rochester

Folding Box Co., 64 N.E. 442, 447 (N.Y. 1902) (rejecting the intermediate court’s recognition of

commercial privacy and leading to the legislative adoption of N.Y. CIV. RIGHTS LAW §§ 50-51

(McKinney 1905)).

270. Zacchini v. Scripps-Howard Broad. Co., 433 U.S. 562, 580 (1977) (upholding right of

publicity claim over news station claim of First Amendment right to air an entire performance as a

human cannonball). Most recently, the Supreme Court obliquely supported rights of publicity, as

exploited by student athletes. See Nat’l. Collegiate Athletic Ass’n. v. Alston, 141 S. Ct. 2141, 2166

(2021) (“By permitting colleges and universities to offer enhanced education-related benefits, its

decision may encourage scholastic achievement and allow student-athletes a measure of compensation

more consistent with the value they bring to their schools.”).

271. Melville B. Nimmer, The Right of Publicity, 19 LAW & CONTEMP. PROBS. 203 (1954).

272. William Prosser, Privacy, 48 CALIF. L. REV. 383, 389 (1960); see Christine DiGregorio,

Finding A Fair Balance for the Right of Publicity and First Amendment Protections, 33 TOURO L.

REV. 995, 1000 (2017).

Prosser . . . categorized it into four distinct torts: intrusion to solitude, public

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 225

framework even as courts were struggling to both recognize the fundamental

right and balance it against federal law’s expanding free speech jurisprudence

and copyright law.

Publicity rights grew in scope along with the power of media, increasingly

as a common law development. In Haelan Laboratories v. Topps Chewing

Gum,

273

the courts clarified the scope of the increasingly important common

law right.

We think that, in addition to and independent of that right of privacy

(which in New York derives from statute), a man has a right in the

publicity value of his photograph, i.e., the right to grant the

exclusive privilege of publishing his picture . . . .

. . . .

This right might be called a “right of publicity.” For it is

common knowledge that many prominent persons (especially

actors and ball-players), far from having their feelings bruised

through public exposure of their likeness, would feel sorely

deprived if they no longer received money for authorizing

advertisements, popularizing their countenances, displayed in

newspapers, magazines, buses, trains and subways.

274

As corporations have monetized the rights of their customers and social

media has created a massive new marketplace for exploitation of these rights,

each member of the public has the potential to gain economic value—or at least

to recognize an injustice when someone else exploits their name, image, or

likeness—for commercial advantage.

275

The tension among rights of publicity and the associated biometric data

protections, the rights of copyright, and the rights of free speech have been

addressed in a variety of balancing tests. These include the Second Circuit’s

disclosure of embarrassing private facts, false light in the public eye, and

appropriation of one’s name and likeness for the defendant’s advantage. Prosser

defined his fourth category as a “defendant making use of the name to pirate the

plaintiff’s identity for some advantage of his own;” this later became known as

the right of publicity.

Id.

273. 202 F.2d 866 (2d Cir. 1953).

274. Id. at 868 (emphasis added).

275. See Jennifer E. Rothman, The Inalienable Right of Publicity, 101 GEO. L.J. 185, 227 (2012)

(“The right of publicity encompasses rights far beyond the mere collection of income and entitlement

to the economic value that flows from uses of a person’s identity. The right of publicity provides control

over the use of a person’s identity and, therefore, ultimately over the person herself.”); Jon M. Garon,

Commercializing the Digital Canvas: Renewing Rights of Attribution for Artists, Authors, and

Performers, 1 TEX. A&M L. REV. 837, 838–39 (2014). In contrast, other scholars are strong critics of

these rights. See, e.g., Michael Madow, Private Ownership of Public Image: Popular Cultural and

Publicity Rights, 81 CALIF. L. REV. 125, 178–79 (1993).

GARON_21NOV22.DOCX (DO NOT DELETE)

226 MARQUETTE LAW REVIEW [106:163

Rogers Test,

276

the California and Ninth Circuit’s Transformative Use Test,

277

the Missouri Supreme Court Predominant Use Test,

278

279

news reporting exceptions,

280

and similar limitations.

281

California provides representative formulations of both the common law

and statutory rights of publicity.

The elements of a right-of-publicity claim under California

common law are: “(1) the defendant’s use of the plaintiff’s

identity; (2) the appropriation of plaintiff’s name or likeness to

defendant’s advantage, commercially or otherwise; (3) lack of

consent; and (4) resulting injury.” The same claim under

California Civil Code § 3344 requires a plaintiff to prove “all

the elements of the common law cause of action” plus “a

knowing use by the defendant as well as a direct connection

between the alleged use and the commercial purpose.”

282

The Restatement (Second) of Torts provides simply that “[o]ne who

appropriates to his own use or benefit the name or likeness of another is subject

to liability to the other for invasion of his privacy.”

283

Rather than focusing on the commercial exploitation of one’s name or

likeness, comment b to the Restatement suggests an even more expansive

reading:

The common form of invasion of privacy under the rule here

stated is the appropriation and use of the plaintiff’s name or

likeness to advertise the defendant’s business or product, or for

some similar commercial purpose. Apart from statute,

however, the rule stated is not limited to commercial

appropriation. It applies also when the defendant makes use of

276. Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989).

277. Comedy III Prod., Inc. v. Gary Saderup, Inc., 21 P.3d 797 (Cal. 2001).

278. Doe v. TCI Cablevision, 110 S.W.3d 363, 374 (Mo. 2003).

279. In re Jackson, 972 F.3d 25, 33 (2d Cir. 2020) (Rapper Curtis James Jackson III’s “use of

his voice on Roberts’ mixtape is preempted by the express terms of § 301 of the Copyright

Act. . . . [I]mplied preemption precludes the application of state laws to the extent that those laws

interfere with or frustrate the functioning of . . . the Copyright Act.”).

280. Time, Inc. v. Hill, 385 U.S. 374, 397 (1967) (“That books, newspapers, and magazines are

published and sold for profit does not prevent them from being a form of expression whose liberty is

safeguarded by the First Amendment.”) (internal quotation marks omitted) (quoting Joseph Burstyn,

Inc. v. Wilson, 343 U.S. 495, 501–02 (1952).

281. See, e.g., Martin H. Redish & Kelsey B. Shust, The Right of Publicity and the First

Amendment in the Modern Age of Commercial Speech, 56 WM. & MARY L. REV. 1443 (2015).

282. In re NCAA Student-Athlete Name & Likeness Licensing Litig., 724 F.3d 1268, 1273 n.4

(9th Cir. 2013) (internal quotation marks omitted) (quoting Stewart v. Rolling Stone LLC, 105 Cal.

Rptr. 3d 98, 111 (2010)).

283. RESTATEMENT (SECOND) OF TORTS § 652C (AM. L. INST. 1977).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 227

the plaintiff’s name or likeness for his own purposes and

benefit, even though the use is not a commercial one, and even

though the benefit sought to be obtained is not a pecuniary one.

Statutes in some states have, however, limited the liability to

commercial uses of the name or likeness.

284

Despite the California language that the rights of publicity can be exploited

“commercially or otherwise” and Restatement section 652C’s suggestion that

only state statutes limit rights of publicity to commercial activity, these are

usually (but not always) a strong demarcation. Two cases highlight what has

been commonly understood to demark the claims.

The leading case involved the nephew of matinee idol Rudolph Valentino.

Since the common law rights of publicity evolved out of privacy rights, they do

not generally survive the death of the individual.

285

Nonetheless, a concurrence

by a majority of the California Supreme Court tried to make clear that rights of

publicity do not extend into communicative works.

While few courts have addressed the question of the

parameters of the right of publicity in the context of expressive

activities, their response has been consistent. Whether the

publication involved was factual and biographical or fictional,

the right of publicity has not been held to outweigh the value

of free expression. Any other conclusion would allow reports

and commentaries on the thoughts and conduct of public and

prominent persons to be subject to censorship under the guise

of preventing the dissipation of the publicity value of a

person’s identity. Moreover, the creation of historical novels

and other works inspired by actual events and people would be

off limits to the fictional author. An important avenue of self-

expression would be blocked and the marketplace of ideas

would be diminished.

286

The California Supreme Court made very clear in 1979 that the First

Amendment concerns at the heart of limitations to common law defamation and

privacy applied with equal vigor to claims for the rights of publicity. The

concurrence also rejected an attempt to interject the inapplicable “actual

malice” standard,

287

instead recognizing the need for adaptation and story-

telling using fictionalized accounts would make the use of the actual malice

284. Id. at cmt. b.

285. Guglielmi v. Spelling-Goldberg Prod., 603 P.2d 454, 455 (Cal. 1979); Lugosi v. Universal

Pictures, 603 P.2d 425, 431 (1979).

286. Guglielmi, 603 P.2d at 461–62 (Bird, C.J., concurring).

287. See N.Y. Times Co. v. Sullivan, 376 U.S. 254, 267 (1964) (holding the speech of public

figures is subject to actual malice standard).

GARON_21NOV22.DOCX (DO NOT DELETE)

228 MARQUETTE LAW REVIEW [106:163

standard more confounding than helpful.

288

Although the concurrence was

largely dicta, it demonstrated a clear distinction between communicative works

of fact and fiction for which there were no publicity rights and the commercial

products, ads, and endorsements for which there would continue to be

protection from commercial appropriation.

The Guglielmi v. Spelling-Goldberg Prod. Court also distinguished the

rather unique theft involved in Zacchini v. Scripps-Howard Broad. The

Supreme Court relied on state law protection for “the ‘right to the publicity

value of his performance,’ the right to control its commercial display and

exploitation.”

289

Unlike a name or likeness misappropriation, the value of a

person’s performance may well be protected by statute or common law. It may

even be an implicit extension of the right of publicity, but it is also an economic

right about taking the value of another’s work without authorization. At the

heart of Zacchini is the same economic theft that is central to the core of rights

of publicity actions, and which is distinct from free speech uses where a

person’s true or fictionalized story is incorporated into a story being told by a

third party.

These themes have been repeated in later California case law. In Sarver v.

Chartier,

290

the Ninth Circuit rejected a former army sergeant’s claim that he

had been falsely portrayed in the movie The Hurt Locker.

291

He had not

consented or licensed his publicity rights to the producers.

292

Dismissing all his

claims under the California anti-SLAPP statute,

293

the court noted “The Hurt

Locker is not speech proposing a commercial transaction.”

294

Following

Guglielmi, the court rejected all claims. Nearly a decade later, Olivia De

Havilland brought a similar set of complaints for a portrayal she considered

288. See Time, Inc. v. Hill, 385 U.S. 374, 397 (1967) (holding privacy claims, though non-

defamatory, remain subject to actual malice standard); Hustler Magazine, Inc. v. Falwell, 485 U.S. 46,

56 (1988) (holding actual malice standard is used for intentional parody).

289. Guglielmi, 603 P.2d at 464 (quoting Zacchini v. Scripps-Howard Broad, 433 U.S. 562, 565

(1977)). In Zacchini, the live performance of the Human Cannon Ball was filmed and aired in its

entirety on a segment of the local news, having the potential to reduce greatly the public's interested in

attending the event as live spectators. See generally Zacchini, 433 U.S. 562 (1977). This was a

commercial harm, according to the Supreme Court, notwithstanding that it was committed in the form

of a media broadcast. Id. at 580.

290. 813 F.3d 891 (9th Cir. 2016).

291. Id. at 896, 907.

292. Id. at 896.

293. Under California law, plaintiffs attempting to assert claims that might be barred by First

Amendment protections must first prove the lawsuit is not intended to deter speech under the anti-

SLAPP (strategic lawsuit against public participation) laws. CAL. CIV. PROC. CODE § 425.16(b)(1)

(West 2022).

294. Sarver, 813 F.3d at 905.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 229

unflattering.

295

“The 101-year-old actress sued . . . claiming the series Feud:

Bette and Joan makes her seem like a vulgar hypocrite and gossip.”

296

The court

again rejected such claims.

Books, films, and television shows are “things” but are they

“merchandise” or “products”?

. . . .

Feud is as constitutionally protected as was the film in Sarver,

The Hurt Locker. As with that expressive work, Feud “is

speech that is fully protected by the First Amendment, which

safeguards the storytellers and artists who take the raw

materials of life—including the stories of real individuals,

ordinary or extraordinary—and transform them into art, be it

articles, books, movies, or plays.

297

These cases suggest a clear line between communicative works such as

articles, books, movies, or plays entitled to First Amendment protection on one

hand, and the advertisements, tchotchkes, and endorsements on the other.

298

The problem for Ginormaverse and video games more generally is that despite

an unequivocal statement by the Supreme Court that video games are entitled

to full First Amendment protection,

299

courts have been reluctant to see video

games with the same level of free speech interests as books, movies, and

plays.

300

Rather than simply finding these works to be categorically

communicative, the courts have applied a balancing test.

In recent cases involving student athletes, courts found that the accurate

reproduction of a virtual sports environment resulted in an unauthorized use of

295. De Havilland v. FX Networks, LLC, 230 Cal. Rptr. 3d 625 (Cal. Ct. App. 2018).

296. Ashley Cullins, FX Wins Appellate Court “Feud” With Olivia de Havilland, HOLLYWOOD

REP. (Mar. 26, 2018), https://www.hollywoodreporter.com/business/business-news/fx-wins-appellate-

court-feud-olivia-de-havilland-1097518/ [https://perma.cc/Z9CY-2X63].

297. De Havilland, 230 Cal. Rptr. 3d at 636, 638.

298. Id. at 636.

Many of the cases in this area involve products and merchandise such as T-shirts

and lithographs [Prod. v. Gary Saderup, Inc., 21 P.3d 797 (Cal. 2001)], greeting

cards [Hilton v. Hallmark Cards 599 F.3d 894 (9th Cir. 2010)], and video games

[Davis v. Elec. Arts, Inc. 775 F.3d 1172 (9th Cir. 2015]; [In re NCAA Student-

Athlete Name & Likeness 724 F.3d 1268 (9th Cir. 2013)]; [Kirby v. Sega of Am.,

Inc. 144 Cal.App.4th 47, (2006)], or advertisements for products and

merchandise. [See, e.g., Newcombe v. Adolf Coors Co. 157 F.3d 686, 691-694

(9th Cir. 1998) [beer advertisement]; [Waits v. Frito-Lay, Inc. 978 F.2d 1093

(9th Cir. 1992)] [advertisement for SalsaRio Doritos]; Midler v. Ford Motor Co.

849 F.2d 460 (9th Cir. 1988) [advertisement for Ford Lincoln Mercury] . . . .

Id.

299. Brown v. Ent. Merch. Ass’n, 564 U.S. 786, 791 (2011).

300. See Hart v. Elec. Arts, Inc., 717 F.3d 141, 144–49 (3d Cir. 2013); In re NCAA Student-

Athlete Name & Likeness Licensing Litig., 724 F.3d 1268, 1271 (9th Cir. 2013).

GARON_21NOV22.DOCX (DO NOT DELETE)

230 MARQUETTE LAW REVIEW [106:163

the athlete’s name or likeness.

301

These courts struggled with the use of a

transformative test, but neither court asked why a video game author would

require greater rights than a broadcaster, newspaper, or filmmaker.

302

The distinction will become critical to the way in which Ginormaverse

looks to draft its ToS. The metaverse platform will undoubtedly require express

permission of anyone seeking to create an avatar within the system. But this

will not be enough. There will be events held within the system importing

content from other news and media resources. Even if courts are eventually

going to recognize that a press conference played in Ginormaverse should

require no publicity rights, just as no television, radio, or print service requires

these rights, the difference in treatment could lead to costly litigation and

confusion.

In addition, if the law requires Ginormaverse to have expansive authority

for use of publicity rights, then the contractual grant will be much broader.

From a consumer protection standard, the goal would be to have the platform

obtain only minimal rights, with the individual retaining all rights for

exploitation of one’s name, image, and likeness when used to actually endorse

products or services, to sell goods, or to otherwise commercialize one’s

publicity rights. An actor or athlete will need to give the platform permission

to recreate their image in order for that person to have an accurate avatar within

the metaverse. But that initial grant should not include the right to sublicense it

to other entities for purposes of commercialization. The ToS should be

appropriately limited in scope.

The better understanding is that the use of one’s name, image, or likeness

within the metaverse is not an exploitation of publicity rights. Avatars

presenting the news can use the names of individuals in their stories in precisely

the same manner as can other news presenters. Storytellers can name-check

celebrities in in-world content to the extent they can do so in current media.

In contrast, when a person or enterprise uses a person’s name, image, or

likeness to endorse a product or service, to create an advertisement, or to

otherwise attempt to sell any goods or services, in that instance, the individual

rights of publicity must be obtained as a condition of the usage. For example,

assume a famous actor can be seen in a virtual world having coffee while sitting

in an open plaza. That should not require any rights of publicity. If the public

can walk up to that actor and ask her for store recommendations, then those

endorsements should only be permitted if the actor has given permission in

advance. If the public can link from the purse, shoes, or clothing on the avatar

301. See, e.g., Hart, 717 F.3d at 170; In re NCAA, 724 F.3d at 1284.

302. E.g., Hart, 717 F.3d at 169; In re NCAA, 724 F.3d at 1284.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 231

to a store selling those items, then again, the vendors should be required to

obtain express permission. The recommendations and endorsements transform

the avatar’s use into a commercial exploitation of the avatar owner’s likeness.

These uses of a person’s name, image, and likeness are commercial in nature.

In addition to the rights of publicity, the FTC creates affirmative duties for

product endorsements.

303

In 2021, the FTC significantly stepped up its

enforcement against false endorsements, fake reviews, and similar consumer

deceptions.

304

There is a commensurate harm to anyone who can provide

endorsements for goods or services but finds that fake reports undermine the

public value in those endorsements. As such, rights of publicity must be

carefully protected in all instances where an actual endorsement is taking place,

while providing traditional First Amendment protections when these

commercial interests are not present.

F. Free Speech and ToS Restrictive Conditions

A related area has also received considerable attention. The commercial

marketplace is strongly benefitted from truthful disclosure of information

regarding products and services.

305

The Supreme Court has often recognized

“the consumers’ interest in the receipt of accurate information in the

commercial market by prohibiting fraudulent and misleading advertising.”

306

Given this fundamental public interest in accurate consumer information, it is

unsurprising that there are ongoing concerns about efforts to include restrictions

303. See Federal Trade Commission Act, 15 U.S.C. § 45; Guides Concerning the Use of

Endorsements and Testimonials in Advertising, 16 C.F.R. § 255 (2021).

304. See Press Release, FTC, FTC Puts Hundreds of Businesses on Notice about Fake Reviews

and Other Misleading Endorsements (Oct. 13, 2021), https://www.ftc.gov/news-events/press-

releases/2021/10/ftc-puts-hundreds-businesses-notice-about-fake-reviews-other

[https://perma.cc/HG3L-XGVG]

The rise of social media has blurred the line between authentic content and

advertising, leading to an explosion in deceptive endorsements across the

marketplace. Fake online reviews and other deceptive endorsements often tout

products throughout the online world. Consequently, the FTC is now using its

Penalty Offense Authority to remind advertisers of the law and deter them from

breaking it. By sending a Notice of Penalty Offenses to more than 700 companies,

the agency is placing them on notice they could incur significant civil penalties—

up to $43,792 per violation—if they use endorsements in ways that run counter

to prior FTC administrative cases.

Id.

305. See Va. Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 769–70

(1976); Cent. Hudson Gas & Elec. Corp. v. Pub. Serv. Comm’n, 447 U.S. 557, 562 (1980); 44

Liquormart, Inc. v. Rhode Island, 517 U.S. 484, 503 (1996); Sorrell v. IMS Health Inc., 564 U.S. 552,

577–78 (2011).

306. 44 Liquormart, Inc., 517 U.S. at 496.

GARON_21NOV22.DOCX (DO NOT DELETE)

232 MARQUETTE LAW REVIEW [106:163

on truthful product and service reviews in licensing agreements.

307

In 2021, a

new association, Transparency in Cybersecurity, was formed to address

contractual restrictions addressing general product assessments as well as

identifying cybersecurity threats.

308

Transparency in Cybersecurity launched

with a review of 200 EULAs. “Of this sampling, 42% of companies had clauses

that in some fashion prohibit users from publicly disclosing assessments of their

products. Public companies tended to be less transparent, with 53% featuring

restrictions in their EULAs, compared to just 39% of private companies.”

309

The concern about contractual limits on truthful product information has

been a concern since the shift to licensed software and goods expanded in the

modern internet age.

[Restrictive] clickwrap agreements, if upheld, violate the

consumer’s fundamental, rather than economic, rights. For

example, a number of such agreements require users to waive

their free speech rights by prohibiting them from engaging in

public criticism of the developing company or its products,

publishing benchmark results (an objective measure of a

program’s performance across differing hardware

configuration), or even reviews.

310

Although the concern over the public’s right to truthful product information

is not new, the potential for a monopolistic or oligopolistic ToS used to cover a

person’s entire professional and social life has far more sweeping effects than

a similar provision in just a computer operating system or commercial website.

To the extent Ginormaverse’s ToS becomes universal, it serves to supplant

positive law under an increasingly misplaced freedom to contract principle.

VI. LIMITATIONS ON THE GOVERNMENT: WARRANT REQUIREMENTS, THIRD

PARTY DOCTRINE, AND THE POWER OF SUBPOENAS

Another area that may be significantly impacted by a universal metaverse

is the extent to which personal privacy services are protected against

307. See Bradley Barth, Silenced? Transparency Effort Looks to Squash Vendor Restrictions on

Product Reviews by Users, SC MEDIA (Aug. 11, 2021), https://www.scmagazine.com/feature/policy/

silenced-transparency-effort-looks-to-squash-vendor-restrictions-on-product-reviews-by-users

[https://perma.cc/L22Y-6MJQ].

308. Id.

309. Id.; see also Lydia Pallas Loren, Slaying the Leather-Winged Demons in the Night:

Reforming Copyright Owner Contracting with Clickwrap Misuse, 30 OHIO N.U. L. REV. 495, 497

(2004); David R. Collins, Shrinkwrap, Clickwrap, and Other Software License Agreements: Litigating

a Digital Pig in a Poke in West Virginia, 111 W. VA. L. REV. 531, 550 (2009).

310. Collins, supra note 309, at 550.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 233

unwarranted government intrusions.

311

The government has always sought

private information regarding suspected criminals as part of its law enforcement

strategies, but with the “terrorist attacks of September 11, 2001, the impetus for

the government to gather personal information has greatly increased.”

312

Data

has become an essential element in the war on terror.

313

As society has learned

with the recent pandemic, data is also an essential element in the delivery of

public health.

314

Some view this issue as an important civil rights and social

justice issue

315

while others frame it in the civil liberties context.

316

The

continuing publicity surrounding government officials’ use of contact tracing

and health outcomes highlights the significance of personal information and

behavioral data. These data go well beyond one’s personally identifiable

information to include all aspects of an individual’s activities, interactions,

attitudes, and preferences.

The government is not necessarily just Big Brother. Although there are

concerns about overwhelming access to personal information fueling a

totalitarian state,

317

there are a myriad of smaller concerns about local law

enforcement, municipal services, and voter manipulation that could all create

social concerns if the government has unbridled access to individual and

collective private information.

In the context of cell phones and vehicle tracking, the Supreme Court has

adopted a series of significant decisions in favor of individual privacy.

318

These

311. See Daniel J. Solove, Digital Dossiers and the Dissipation of Fourth Amendment Privacy,

75 S. CAL. L. REV. 1083 (2002).

312. Id. at 1084.

313. Id.

314. See Public Health, Surveillance, and Human Rights Network. Surveillance and the “New

Normal” of Covid-19: Public Health, Data, and Justice. New York, SOC. SCI. RSCH. COUNS. (2021)

https://covid19research.ssrc.org/public-health-surveillance-and-human-rights-network/report/

[https://perma.cc/N5PM-C2NJ].

315. See Angela P. Harris & Aysha Pamukcu, The Civil Rights of Health: A New Approach to

Challenging Structural Inequality, 67 UCLA L. REV. 758, 804–05 (2020).

316. See Ronald Bayer, The Continuing Tensions Between Individual Rights and Public Health:

Talking Point on Public Health Versus Civil Liberties, 8 EUR. MOLECULAR BIOLOGY ORG. REPS., no.

12, 2007, at 1099 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2267241/ [https://perma.cc/ZW57-

NH37].

317. Solove, supra note 311, at 1804–85 (“Inadequately constrained government information-

gathering can lead to at least three types of harms. First, it can result in the slow creep toward a

totalitarian state. Second, it can chill democratic activities and interfere with individual self-

determination. Third, it can lead to the danger of harms arising in bureaucratic settings.”).

318. See United States v. Jones, 565 U.S. 400, 404 (2012) (warrant was required when police

placed tracking device on suspect’s car); Riley v. California, 573 U.S. 373, 387 (2014) (the “immense

storage capacity” of cell phones require that police obtain a warrant before conducting a general search

GARON_21NOV22.DOCX (DO NOT DELETE)

234 MARQUETTE LAW REVIEW [106:163

changes, however, have been incremental in nature and may not keep pace with

the public’s shift away from personal records to data stored by third parties and

managed outside the control by most citizens. As the metaverse further

accelerates the use of cloud-based data storage and increases the location of

proprietary information outside the home, statutory and constitutional

protections against government collection and misuse of data become

increasingly important.

The Fourth Amendment applies to protect an individual from an

unauthorized search and seizure of “persons, houses, papers, and effects.”

319

“The Fourth Amendment strikes a balance between liberty and social order—

two concepts which stand on opposite sides of an ideological teeter-totter.”

320

The Supreme Court has had to reconcile this balance as technology has evolved.

Nearly a century ago, in Olmstead v. United States,

321

the Court faced the

intrusion of the modern age of telephones, radios, and wired communications.

The Court refused to extend to telegraph and telephone messages the

protections afforded to the mail because the mail service was a government

monopoly.

322

Under this logic, outside the home, the Fourth Amendment only extended

to the government’s monopolistic control over one’s communications.

Information in the private sphere was not subject to any extension of the Fourth

Amendment. Unlike “the unlawful rifling by a government agent of a sealed

letter,” the telephone wires were not under government control.

323

As such,

“[t]here was no searching. There was no seizure. The evidence was secured by

the use of the sense of hearing and that only. There was no entry of the houses

or offices of the defendants.”

324

in the contents of a phone); Carpenter v. United States, 138 S. Ct. 2206, 2223 (2018) (requiring a

warrant for a search of cell-site location information (CSLI)).

319. U.S. CONST. amend. IV (The “right of the people to be secure in their persons, houses,

papers, and effects, against unreasonable searches and seizures, shall not be violated.”).

320. Tricia A. Martino, Fear of Change: Carpenter v. United States and Third-Party Doctrine,

58 DUQ. L. REV. 353, 356 (2020); see also James J. Tomkovicz, Technology and the Threshold of the

Fourth Amendment: A Tale of Two Futures, 72 MISS. L.J. 317, 324–25 (2002).

321. 277 U.S. 438, 464 (1928).

322. Id.

323. Id. at 464–65.

324. Id. at 464.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 235

Olmstead was eventually rejected by statute

325

and later overturned by

Berger v. State of New York

326

and Katz v. United States.

327

Significantly, Katz

rejected Olmstead’s limited view of the Fourth Amendment.

328

The Court

extended Fourth Amendment protections beyond places to people.

329

As part of

this expansion, the Court reframed the Fourth Amendment as protecting an

individual’s reasonable expectation of privacy.

330

As the Court recently

summarized, “[w]hen an individual ‘seeks to preserve something as private,’

and his expectation of privacy is ‘one that society is prepared to recognize as

reasonable,’ we have held that official intrusion into that private sphere

generally qualifies as a search and requires a warrant supported by probable

cause.”

331

Over time, the list of activities protected by the warrant requirement has

been expanded. In 2014, the Court used traditional trespass doctrine to find that

sneaking onto a person’s driveway without a warrant to place a GPS tracking

device constituted an unwarranted, unlawful search.

332

Justice Sotomayor, in

concurrence, suggested that the real threat is the extended, low-cost volume of

information that can be made subject to government search. As she explained,

“I would ask whether people reasonably expect that their movements will be

recorded and aggregated in a manner that enables the government to ascertain,

more or less at will, their political and religious beliefs, sexual habits, and so

on.”

333

The Court took those concerns seriously. Two years later, the Supreme

Court recognized that the significant amount of personal information on a

person’s cell phone requires that a cell phone be protected by a search warrant

requirement, even when seized as part of a lawful arrest.

334

In the third Supreme

325. See GINA STEVENS & CHARLES DOYLE, CONG. RSCH. SERV., PRIVACY: AN OVERVIEW OF

FEDERAL STATUTES GOVERNING WIRETAPPING AND ELECTRONIC EAVESDROPPING 2 (2012) (“By

the time of the landmark Supreme Court decision in Olmstead, however, at least forty-one of the forty-

eight states had banned wiretapping or forbidden telephone and telegraph employees and officers from

disclosing the content of telephone or telegraph messages or both.”).

326. 388 U.S. 41, 63–64 (1967).

327. 389 U.S. 347, 353 (1967).

328. Id. at 353.

329. Id. at 351 (“[T]he Fourth Amendment protects people, not places.”).

330. Id. at 361 (Harlan, J., concurring) (“My understanding of the rule that has emerged from

prior decisions is that there is a twofold requirement, first that a person have exhibited an actual

(subjective) expectation of privacy and, second, that the expectation be one that society is prepared to

recognize as ‘reasonable.’ ”).

331. Carpenter v. United States, 138 S. Ct. 2206, 2213 (2018) (quoting Smith v. Maryland, 442

U.S. 735, 740 (1979)).

332. United States v. Jones, 565 U.S. 400, 405 (2012).

333. Id. at 416 (Sotomayor, J., concurring).

334. Riley v. California, 573 U.S. 373, 387 (2014).

GARON_21NOV22.DOCX (DO NOT DELETE)

236 MARQUETTE LAW REVIEW [106:163

Court decision on technology searches, the Court again required a search

warrant. In this case, it was for cell site location information (CLSI).

335

Although the Supreme Court decided that the request for CLSI required a

warrant, it tried to provide very incremental guidance regarding the warrant

requirements for searches of third party records.

336

The doctrinal challenge is

that, historically, records held by third parties did not require a search warrant,

and as a result, the government could obtain financial records, repair records,

purchase histories, and many other forms of behavioral records without any

need to establish probable cause or specify with particularity the items to be

searched.

337

In an important pair of decisions during the 1970s, the Supreme Court

created the third-party doctrine.

338

The doctrine developed in the context of a

tax evasion case, where “the Government subpoenaed [defendant Mitch

Miller’s financial records to show his income from an unlicensed still,] seeking

several months of canceled checks, deposit slips, and monthly statements.”

339

There, at least some of the records were “not confidential communications but

negotiable instruments to be used in commercial transactions.”

340

Other

records, however, were turned over to the bank for the purpose of the bank’s

use on behalf of the defendant, but they were still records out of the defendant’s

335. Carpenter, 138 S. Ct. 2206 at 2211–12.

Each time the phone connects to a cell site, it generates a time-stamped record

known as cell-site location information (CSLI). The precision of this information

depends on the size of the geographic area covered by the cell site. . . .

Wireless carriers collect and store CSLI for their own business purposes,

including finding weak spots in their network and applying “roaming” charges

when another carrier routes data through their cell sites. . . . [I]n recent years

phone companies have also collected location information from the transmission

of text messages and routine data connections. Accordingly, modern cell phones

generate increasingly vast amounts of increasingly precise CSLI.

Id.

336. Id. at 2214–15 (“This sort of digital data—personal location information maintained by a

third party—does not fit neatly under existing precedents. Instead, requests for cell-site records lie at

the intersection of two lines of cases, both of which inform our understanding of the privacy interests

at stake.”).

337. See Marron v. United States, 275 U.S. 192, 196 (1927) (“The requirement that warrants

shall particularly describe the things to be seized makes general searches under them impossible and

prevents the seizure of one thing under a warrant describing another. As to what is to be taken, nothing

is left to the discretion of the officer executing the warrant.”).

338. United States v. Miller, 425 U.S. 435, 437 (1976) (ruling that the government obtainment

of bank records was not a Fourth Amendment search); Smith v. Maryland, 442 U.S. 735, 745–46

(1979) (ruling that the government’s use of a pen register was not a Fourth Amendment search).

339. Carpenter, 138 S. Ct. at 2216 (citing Miller, 425 U.S. at 438, 442).

340. Miller, 425 U.S. at 442.

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 237

control.

341

The Court did not see a difference between records provided to the

public and records intended to be treated confidentially between the parties.

342

“The Court thus concluded that Miller had ‘take[n] the risk, in revealing his

affairs to another, that the information [would] be conveyed by that person to

the Government.’ ”

343

In Smith v. Maryland, the Court expanded the third-party doctrine to all

records, without regard to the party’s knowledge that the records were being

kept or the purpose to which they were being put.

344

The Court permitted the

“pen register” information providing telephone records regarding who was

making phone calls into and out of various telephone numbers.

345

Although the

government would be required to have a warrant to listen into the calls, it could

obtain the records from the phone company with a simple subpoena.

346

In her concurrence in Jones, Justice Sotomayor suggested that the third-

party doctrine might be inappropriate for the modern era of historical data

searches and ubiquitous tracking. “[I]t may be necessary to reconsider the

premise that an individual has no reasonable expectation of privacy in

information voluntarily disclosed to third parties,” she explained.

347

“This

approach is ill suited to the digital age, in which people reveal a great deal of

information about themselves to third parties in the course of carrying out

mundane tasks.”

348

Without addressing the continuing application of the third-party doctrine in

established cases, Carpenter declined to extend the third-party doctrine to CSLI

searches.

349

At the same time, however, the decision was intended to be narrow

and incremental.

Our decision today is a narrow one. We do not express a

view on matters not before us: real-time CSLI or “tower

dumps” (a download of information on all the devices that

connected to a particular cell site during a particular interval).

We do not disturb the application of Smith and Miller or call

into question conventional surveillance techniques and tools,

such as security cameras. Nor do we address other business

records that might incidentally reveal location information.

341. Id. at 437–38.

342. Id. at 435.

343. Carpenter, 138 S. Ct. at 2216 (quoting Miller, 425 U.S. at 443).

344. Smith v. Maryland, 442 U.S. 735, 744–45 (1979).

345. Id. at 745–46.

346. Id.

347. United States v. Jones, 565 U.S. 400, 417 (2012) (Sotomayor, J. concurring).

348. Id.

349. Carpenter v. United States, 138 S. Ct. 2206, 2217 (2018).

GARON_21NOV22.DOCX (DO NOT DELETE)

238 MARQUETTE LAW REVIEW [106:163

Further, our opinion does not consider other collection

techniques involving foreign affairs or national security. As

Justice Frankfurter noted when considering new innovations in

airplanes and radios, the Court must tread carefully in such

cases, to ensure that we do not “embarrass the future.”

350

As 5G expands bandwidth, the potential for virtual and augmented reality

to become mobile adds another dimension to the regulation of the metaverse.

Lower courts have split on the issue of whether tower dumps require

warrants.

351

If online worlds include GPS or other location data in the way

Ingress and Pokémon Go take advantage of location information, then law

enforcement (and civil litigators) will have a significant new tool to track the

public’s movement.

Beyond the physical intrusion into one’s home or one’s movements,

however, the law continues to embrace the third-party doctrine enthusiastically.

“Investigators have a handful of tools to compel the disclosure of electronic

data, and a subpoena is the easiest to obtain because the government is not

required to provide cause for obtaining the information. Subpoenas don’t

require a judge to issue them.”

352

Since the Fourth Amendment does not provide a warrant requirement for

most third-party records, Congress passed federal legislation to supplement the

constitutional right. Shortly after Katz extended Fourth Amendment

protections, Congress passed the Omnibus Crime Control and Safe Streets Act

of 1968.

353

Title III of the statute is known as the “Wiretap Act,” which has

been subsequently expanded to also include the Stored Communications Act.

354

The Wiretap Act prohibits the interception of both oral and wire

communications, but also provides a mechanism for seeking a court order to

issue a wiretap or electronic surveillance.

355

350. Id. at 2220 (quoting Northwest Airlines v. Minnesota, 322 U.S. 292, 300 (1944)).

351. See ANNE TOOMEY MCKENNA & CLIFFORD S. FISHMAN, WIRETAPPING AND

EAVESDROPPING § 28:8 (2021); In re Cell Tower Records Under 18 U.S.C. § 2703(D), 90 F. Supp. 3d

673, 675 (S.D. Tex. 2015); Matter of Search of Info. Stored at Premises Controlled by Google, 481 F.

Supp. 3d 730, 738 (N.D. Ill. 2020); United States v. Adkinson, 916 F.3d 605, 608 (7th Cir. 2019), cert.

denied, 139 S. Ct. 2762 (2019).

352. Jay Greene, Tech Giants Have to Hand Over your Data When Federal Investigators Ask.

Here’s Why, WASH. POST (June 15, 2021), https://www.washingtonpost.com/technology/

2021/06/15/faq-data-subpoena-investigation/ [https://perma.cc/4WP7-TKNW].

353. Omnibus Crime Control and Safe Streets Act of 1968, Pub. L. No. 90–351, 82 Stat. 197

(codified at 18 U.S.C. § 2510).

354. 18 U.S.C. §§ 2701–12.

355. Title III of The Omnibus Crime Control and Safe Streets Act of 1968 (Wiretap Act), U.S.

DEP’T OF JUST.:BUREAU OF JUST. ASSISTANCE, https://bja.ojp.gov/program/it/privacy-civil-

liberties/authorities/statutes/1284 [https://perma.cc/5E4E-D7AM].

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 239

The architecture of the Stored Communications Act (SCA) is based on 1986

legislation and has evolved from an understanding of how email

communications are transferred and stored.

356

As a result, the SCA covers

“remote computing services” (RCS), which were third-party data processing

centers and providers or electronic communications services (ECS), which

were precursors to Internet Service Providers (ISPs) that sent and received

customer information such as emails.

357

Over time, as the service providers

integrated the functions, the distinction between ECS and RCS focused on the

status of the record being sought by the government rather than the contractual

relationship between the customer and the service.

ECS includes live communications, digital wiretaps, and files such as

unopened emails. Under the SCA, any file that falls into this category requires

a traditional search warrant to be accessed by the government, unless the access

is available to it under an exception to the search warrant requirement.

358

One possible exception to the search warrant requirement is consent. The

customer’s consent may be circuitous. An ISP may prohibit illegal content such

as gambling, drug sales, child pornography, or obscenity from being stored

within the ISP’s system. The ISP may further reserve the right to disclose such

materials that are illegal and in violation of the ISP’s terms of service.

359

Under

such a ToS, the result would be that the customer has essentially consented to

the ISP turning over the incriminating, illegal files directly to law

enforcement.

360

The potential for law enforcement is significant, particularly if

356. See Orin S. Kerr, A User’s Guide to the Stored Communications Act, and a Legislator’s

Guide to Amending it, 72 GEO. WASH. L. REV. 1208, 1213 (2004).

357. Id. at 1214.

358. See Claudia G. Catalano, Annotation, Criminal Defendant’s Rights Under Stored

Communications Act, 18 U.S.C.A. §§ 2701 et seq., 11 A.L.R. Fed. 3d Art. 1 § 2 (2016) (“A warrant

‘issued using the procedures described in the Federal Rules of Criminal Procedure (or, in the case of a

State court, issued using State warrant procedures) by a court of competent jurisdiction’ is required to

obtain content from an ECS in electronic storage for 180 days or less.”).

359. See, e.g., Laurie Sullivan, Google To Scan Files In Its Cloud Services For Illegal, Harmful

Content, MEDIAPOST (Dec. 20, 2021), https://www.mediapost.com/publications/article/369579/

google-to-scan-files-in-its-cloud-services-for-ill.html [https://perma.cc/N5PY-TSG2] (“A Google

policy . . . focuses on Google’s drive cloud-storage service, restricting access to files that violate

company guidelines and terms of use. Google, using algorithms that scan the content, will keep a closer

eye on harmful content ranging from cybercrime offenses to the protection of copyright law and child

sexual abuse.”).

360. See, e.g., United States v. Kovacs, No. 3:20-CR-51, 2021 WL 3562920, at *8 (S.D. Ohio

Aug. 11, 2021) (“Dropbox initially sent a complaint into NCMEC regarding Defendant’s activities in

2017, MeWe’s September 2019 report—stating that Defendant’s IP address was being used to log into

a MeWe account containing suspected child pornography—provides a temporal reference to the illegal

activity at the time the search warrant issued.”); Dylan Carroll, Child Pornography Statutes and the

GARON_21NOV22.DOCX (DO NOT DELETE)

240 MARQUETTE LAW REVIEW [106:163

the government is both providing contracts to major metaverse enterprises and

asking those enterprises to have expansive rights to protect the public under the

ToS.

For stored communications, the government also has the ability to obtain

records with something less than a search warrant. A subpoena is sufficient to

obtain “(A) name; (B) address; (C) local and long distance telephone

connection records . . . (D) length of service (including start date) and types of

service utilized; (E) . . . subscriber number or identity . . . and (F) means and

source of payment for such service (including any credit card or bank account

number) . . . .”

361

Although there are additional steps between a subpoena and

the transactional logs, the bulk of customer records can be obtained using what

is known as a 2703(d) court order. Here, the judge or magistrate can issue an

order to provide records, so long as the government has established “specific

and articulable facts showing that there are reasonable grounds to believe that

the contents of a wire or electronic communication, or the records or other

information sought, are relevant and material to an ongoing criminal

investigation.”

362

The specificity of the 2703(d) order is substantially less than that of a search

warrant but still stronger than a mere subpoena. These orders collect a great

deal of data.

In the cases that have been determined thus far, courts have

concluded that applications for an e-mail or a text message,

posting to social networking service; cell site location

information, generally; and historical or prospective cell site

location data have all met the “specific and articulable facts”

standard. Most court have found that requests for subscriber

record or information met the standard, but one court found the

application to be deficient in the case before it.

363

Cloud: Updating Judicial Interpretations for New Technologies, 57 HOUS. L. Rev. 727, 736 n.36

(2020) (“[C]ompanies like Dropbox actively work with law enforcement to find and expose users who

use the service for possession of child pornography.”) (citing Kate Knibbs, Dropbox Refuses to Explain

Its Mysterious Child Porn Detection Software, GIZMODO (Aug. 12, 2015),

https://gizmodo.com/dropbox-refuses-to-explain-its-mysterious-child-porn-de-1722573363

[https://perma.cc/HH8A-GWGG] (“Looking at its Terms of Service, Dropbox states that it can search

through your files to see if they comply with its ToS and Acceptable Use Policy. The company can

look for way more than just vile child exploitation images—it can search for hate speech, any illegal

porn, and anything that infringes on someone else’s privacy.”)).

361. H. MARSHALL JARRETT, MICHAEL W. BAILIE, ED HAGEN & NATHAN JUDISH, SEARCHING

AND SEIZING COMPUTERS AND OBTAINING ELECTRONIC EVIDENCE IN CRIMINAL INVESTIGATIONS

128 (2002) (citing 18 U.S.C. § 2703(c)(2)).

362. 18 U.S.C.A. § 2703(d); see Catalano, supra note 358, at 11.

363. Catalano, supra note 358, at 14 (collecting cases).

GARON_21NOV22.DOCX (DO NOT DELETE)

2022] IMPLICATIONS OF A UBIQUITOUS METAVERSE 241

The broad scope of the 2703(d) court orders and the ability to expand

further in situations where the ToS grants the ISP rights to review stored records

will create the potential to undermine public protection from government

surveillance. These fears will undoubtedly reinforce the efforts of DAO

organizers to promote decentralized metaverse systems that add friction to easy

governmental surveillance. These concerns may be even greater in other

jurisdictions where restrictions on government access to personal information

are subject to even less protection.

Concerns over privacy protections from the government will lead to some

architectural choices in the metaverse. Privacy advocates will certainly promote

use of encryption technologies that reduce the ability of ISPs and other third

parties from accessing user information. Privacy, data security, and bandwidth

considerations all suggest that the metaverse architecture leans more heavily on

local storage and processing power. This approach will make the individual’s

smart cell phone an even more important part of their user experience, but the

aggregate storage and processing power could significantly benefit the

exploitation of the technologies. Phones with peripherals (such as keyboards,

monitors, and remote printing) could finally eliminate the duplicative capacity

of laptops and desktops, furthering a consolidation into metaverse technologies.

The movement into the metaverse could also trigger further expansion of

Fourth Amendment jurisprudence into the virtual space. The Supreme Court

has demonstrated its reluctance to rely on the third-party doctrine in ways that

ignore the practical changes technology have had on the public’s lifestyles.

Perhaps, as the metaverse becomes widely adopted, the Court will recognize

that a virtual home is as much as a castle as a house made out of brick and

mortar, providing the same level of protection that the Court has already

extended to the smartphone. If the Supreme Court someday recognizes the

centrality of the metaverse, then the era of Web3 and the metaverse will have

truly arrived.

VII. CONCLUSION

Some version of the metaverse is inevitable. The growth of Roblox,

popularity of Bitmoji, and a generation of online worlds have intersected with

the economic clout of cryptocurrencies and the potential of nonfungible tokens

to usher in a new set of use cases that will evolve to make Web3 as profoundly

different from the current internet as the current environment is different from

America Online and the early internet portals. Even in the domestic

marketplace, the nature of new transactions will trigger a wave of updated

regulation, business model innovation, and wealth transfer that will leave many

wondering how we got here.

GARON_21NOV22.DOCX (DO NOT DELETE)

242 MARQUETTE LAW REVIEW [106:163

Fortunately, the fundamentals for business have not changed. Relationships

are governed by contract law, and contract law is interpreted through a

longstanding common law tradition. Securities laws and antitrust

considerations have been raised in each generation where new business models

have sought to upend the historical way of doing business. Lessons from the

Web 2.0 experience will likely leave both consumers and regulators of start-

ups to seek safe harbors intended to let the new companies develop. Those Web

2.0 companies have grown to dominate the global economy, and the public

appetite for sweetheart deals has likely passed.

The leaders of the Web3 movement are decidedly focused on reclaiming

the property rights lost to Web 2.0. Using NFTs to enforce property and direct

user control to discourage corporate overreach, the Web3 movement has the

potential to rectify the imbalances of the past. At the moment, many of the

promises may be loose predictions, but hopefully, this roadmap will help those

building, investing, and regulating in these future technologies see where an

optimal mix of private contracting, innovation, and government regulation.

Since the movement will bring even more of our daily lives onto the internet,

courts and regulators must also anticipate how that will affect our constitutional

rights and civil liberties.

Two things are certain. First, this future that is already here will look quite

different in the decades to come. Second, the metaverse will be much more than

just a game. The rest has yet to be written.