A note: Everyone’s talking about the metaverse. And as someone who has spent their whole career at the nexus of politics, technology and regulation, I’ve found myself asking the question: how are we going to regulate the metaverse? In an attempt to answer that, I’ve spent the last month researching and having open discussions with my team about what that could look like.
What follows is a result of those discussions. The memo breaks down the hard questions policymakers should be thinking about now - before it’s too late. As we have often seen with all types of emerging technology, especially social media platforms, regulators always arrive too late to the game. Now is the time for leaders to begin asking the right questions.
This is the chance to be thoughtful about how to regulate the Metaverse. While we don’t believe that we have all the answers for regulating an entirely new entity, we hope this is a starting point for an open conversation between the tech community and policymakers.
We’ve learned a lot from building and working with some of the world’s biggest tech companies disrupting highly regulated industries, and we have a second chance to do things right and create new regulations for a changing digital world.
It’s long, but it’s important. I hope you enjoy it and please feel free to share your thoughts with me online at @BradleyTusk.
Memo: Regulating the Metaverse(s)
It’s a term on the tip of everyone’s tongue and yet still a concept that lacks clear definition. It’s an idea that is capturing the brightest minds at the biggest technology companies – Apple, Facebook, Microsoft – and yet no one really knows what it will be.
While questions remain, what we do know is that it’s coming. Arguably, it already exists. We know it will integrate today’s internet with virtual reality (VR), augmented reality (AR), and blockchain technology. We know it’s going to be a place where people will interact with each other, where they will buy and sell goods, services, information and access. It’s also a place where communities will form around education, culture, entertainment and faith, and where the traditional boundaries of personal data, property, and privacy will be thrown wide open. We know it’ll resemble, in some ways, the digital world we already know and in others, it will be completely different.
Finally, it will be a place where our current social structures — our governments, our schools, our religious institutions, our social service agencies, our cultural and political organizations — will have to quickly adapt if they want to play a meaningful role.
It’s obvious to us that issues of safety, privacy, taxation, worker classification, and consumer regulation that already preoccupy the tech world today will all be critical to the functioning of the Metaverse. We also know that it will function around and beyond traditional sovereign borders. All of which makes it both really exciting and potentially dangerous.
While policymakers can’t develop specific, detailed regulations for the Metaverse until we have a better sense of what’s actually coming, we can avoid making the same mistakes we did with Facebook, Instagram, Twitter and social media generally if we can develop an intellectual framework for regulating the Metaverse now.
As we have seen so often with all types of emerging technology, especially social media platforms, regulators always arrive late to the game. Now is the time for leaders to begin asking the right questions. This is the chance to be thoughtful about how to regulate the Metaverse.
Hard questions like: who runs the Metaverse? Who maintains it? Who’s in charge? How do you regulate a digital entity designed to transcend sovereign borders? How do you ensure safety in a digital, non-sovereign concept? How do you prevent consumer fraud and protect against online predators? Who has the legal power to do this? What are the risks of terrorism in the Metaverse? How would counter-terrorism work? How should privacy rights work? How about taxation? Consumer protection? Do people own their own data? Is it portable? How do you handle worker classification? How do you regulate industries that move largely online, like gaming? How do you avoid another digital divide? Can you move government services onto the Metaverse? If so, which ones? Education? Health care? Voting? The DMV? There are so many questions and at the moment, so few answers.
So let’s get out ahead of it. This is the chance to get it right.
I. What is a Metaverse?
Before diving into the legal framework that underlies the Metaverse, it makes sense to broadly define what a Metaverse is. For this memo, what we call a Metaverse is a 3D, fully immersive, virtual representation of the world that “represents a broad shift in how we interact with technology.” Unlike most existing games and simulations, a metaverse is persistent. Like a public street or a neighborhood, it’s there even when you’re not, and things keep happening.
Up to this point, technology has mostly been about building tools and experiences. Now we’ll be building worlds. And though they won’t be completely divorced from the physical world like, say, Animal Crossing, the boundaries between the real and the virtual will be in flux. Each Metaverse will draw these boundaries to suit its particular purposes.
Yes, we think the odds are extremely high that there will be more than one Metaverse. A likely scenario is that we’ll move from one to the other, like we do now with streaming services. Many, presumably, will be built and controlled by private companies, like Meta and Microsoft. Governments may create their own, too. It won’t all be about leisure and entertainment. Some may serve very specific technical purposes, such as a Metaverse of air traffic: an immersive environment that shows everything in the sky — aircraft, helicopters, drones, flying cars — including detailed schematic of airports, flight plans, traffic rules (including no-fly zones), and other data that allow all kinds of aircraft to interact with one another rather than relying on each vehicle’s own internal routing. Such a system could enable the sharing of our airways to a far greater extent than is now possible. This is something the Federal Aviation Administration needs to start thinking about before a private company — like one that aims to dominate the delivery of goods via drones — tries to gain de facto control over this critical public resource.
II. Our Thesis
Based on what we know about the metaverse, we believe:
- The problems we have regulating technology companies now will be reproduced and amplified in the Metaverse. You think policing state-sponsored disinformation is hard on Facebook and Twitter? Wait until you try it in 3-D.
- The first order of business must be to do no harm to children. We have allowed the digital world to evolve in ways that are uniquely harmful to young minds. We must avoid perpetuating this grave error.
- Governing the metaverse will necessitate the active involvement and coordination of three main constituencies and a new paradigm of cooperation and accountability. It starts with the companies themselves who need to develop their own safeguards and protections from the ground up and not wait to feign surprise at the bad things that emerge. Then we will need contributions from private groups with specific interests and expertises, such as parents, mental-health professionals, free-speech advocates, constitutional-law theorists, civil rights activists, futurists and many more. Finally, there is our government, which must ditch its own timid, wait-and-see approach and proactively guide this process.
The metaverse, after all, is a human endeavor and as such it will attract and harbor its share of destructive human behavior. That is no reason to be afraid of it or to come out against it; rather, it’s a reason to develop innovative ideas about governance alongside its construction. The clearer we make the rules, the better the Metaverse will be for everybody.
III. What Rights Do We Have in the Metaverse?
In a virtual world, you are no more than the sum of your data. Which is a troubling concept. Forget worrying about your credit card number being stolen. If someone else has access to all your data, they can essentially be you. Protecting your rights on the Metaverse begins with protecting your data. So how do we do that?
Data Ownership: It’s taken a long time, but regulators in the EU, and increasingly in the United States, are waking up to the idea that people have a right to own their personal data online. In today’s internet, personal data like name and likeness can’t be processed in the EU or California without approval from the individual. In anticipation of what’s coming, regulators should expand these rights to ensure people have full rights, ownership and control over their personal data in every Metaverse. These rights should include not just your direct identifiers, but also your unique creations – if you have a screen name or image (or imagine yourself in a fantastical way), you should have a set of basic [data] rights to avoid misidentification in the Metaverse.
Right now, whether your personal data extends to data about personal property is less than clear under the law. And the Metaverse will raise tricky questions about how you stretch these rights; what if, for example, the Metaverse represents the world only vaguely – where will the limits of your rights end? Should protocols (like KILT) be required to ensure that individuals maintain control of their identity?
Both of these questions raise another. Right now, you can’t sell your identity, but you can sell your property. In the Metaverse, will you be able to sell either? Both? Can you sell your Metaverse property rights without selling the physical world property? What systems of property tracking will arise to track these property transfers? Will this tracking system be its own Metaverse?
Privacy?: Questions of your right to own your data also call into question how to protect your data in the Metaverse. The Metaverse may exist outside of sovereign borders and jurisdictions, but it will be hard to function effectively if companies have to adhere to different privacy standards for users sitting in different jurisdictions. Common privacy standards are needed, at least within and across the United States.
Furthermore, the Metaverse presents the potential for a massive increase in both the quantity and quality of the personal data being generated (think of a VR headset that can tell exactly what catches your attention by tracking your eyes), further increasing the likelihood of that data then being abused. This makes establishing consumer-centric privacy protections from the outset a pressing matter.
Overall, the Metaverse would benefit tremendously from universal privacy standards that protect everyone using it, giving clear guidelines for entities operating in the Metaverse and laying out repercussions for violators. Adopting the GDPR (the European privacy framework) doesn’t have to be the standard for the Metaverse, but elements of it could set a solid floor for data protection: determining what kinds of data can be collected, switching to an opt-in regime, and giving users the right to access, rectify and erase their collected information establish a good starting point.
Portability?: Unless there’s somehow just one Metaverse that encapsulates everything, each Metaverse would be less meaningful or valuable if you have to have a new identity in every platform. In order to protect consumers from monopolistic capture, regulators need to act early to ensure that every Metaverse allows for interoperability (something like a crypto wallet) so that users can keep track of all of their data and transfer that data among metaverses.
Yes, there will be translation issues, but it will be in the interest of all metaverses to allow consumers to move among Metaverses in a way that puts them in control of their identifiable information and data. That way, they can choose from among the many Metaverses depending on which representation of the physical world best suits their purposes.
How realistic is this politically?
Not as bad as you may think. Yes, enacting any sort of federal legislation in the United States seems virtually impossible, but if one issue unites both parties, it’s that they hate Facebook. In fact, they hate social media platforms in general. While they rely on them, some blame the platforms for their own safety being placed in jeopardy on January 6. And unlike vaccines, guns, immigration and seemingly everything else these days, there’s pretty broad consensus among voters that their data should be protected and that their interests should be prioritized ahead of really wealthy companies. It’s way past time for federal action on privacy and data rights and though it would be premature to tailor these new laws to the Metaverse, a precedent can be established for future legislation.
IV. How Will We Be Protected from Censorship, Abuse and Exploitation?
For much of the Metaverse, we should assume that users will have a broad right to free speech. The right to speech has historically been bounded by restrictions on when, where and how people may speak. However, Section 230 of the Communications Decency Act has historically given platform providers immunity from liability for these provisions. But that protection has been so increasingly under threat – even Meta has been advocating for limitations. Change is coming.
An overly simplistic view of the Metaverse is that by expanding a “platform” into an entire digital world, Meta et al are trying to create a new space where they can absolve themselves of the whole moderation mess. We believe this is not the case and that the hosts of any particular Metaverse (or, if you prefer, the points of access to the Metaverse) will still have content moderation responsibilities. These responsibilities will continue to be messy and they will continue to be both under- and over-inclusive. That is the nature of speech regulation. But consider what we have at stake.
Our society is only beginning to grapple with the safety implications of social media platforms. Everything from widespread misinformation that threatens our democracy to live-streamed terrorist attacks are happening online today and could be significantly amplified in the Metaverse. How do we ensure accurate information prevails, especially in a context where the alteration of reality is the point? Life on the Metaverse will not look or feel like real life, and that’s by design. So how do we keep people safe?
The Metaverse has been pitched as a virtual space for social engagement. Although the sensory inputs and outputs will be different from what we’re used to in the physical world, the Metaverse will still be a forum for communicating. That means we need to consider not only the implications of this new technological platform on our right to freedom of speech, but also the responsibility that platforms in the Metaverse have to moderate speech for the safety and protection of others: something which the existing social media platforms have failed to do.
There should be especially strong considerations for how children will participate in the Metaverse. We are learning more every day about the deleterious effects social media platforms have on the well-being of young people, particularly teenage girls. Cyberbullying, sex trafficking, stalking and other corrosive activity could find a very comfortable home in the Metaverse. Conversations need to start now between companies, experts and regulators about guardrails built specifically for the benefit of children.
This is an area that requires particular attention and urgency. Most government child welfare agencies already struggle to handle problems in the real world. They are going to need more resources (and, in some cases, different leadership) to figure out how to protect kids in the Metaverse.
How realistic is this politically?
- Regulations for the Metaverse addressing the risk of sexual harrasment, sex trafficking, stalking and cyberbullying should attract widespread support. Imagine being the politician who votes against that bill? And like data protection/ portability, this type of legislation could be enacted now to apply to the current internet and then incorporate provisions for the expansion into the Metaverse.
- It is also already likely that Section 230 will be changed in some way. Will the changes be substantial enough to really alter the way the social platforms conduct themselves? That is a political process that deserves a lot of scrutiny.
- The speech question is even harder. Since the core issue is what non-speech actions in the Metaverse should still qualify as free speech, addressing those proactively will be difficult. It seems likely that these issues get resolved over time through the judiciary. This is where interest groups can be most effective.
V. How Will We Buy Stuff Without Being Constantly Conned, Ripped Off and Defrauded?
The reason so many smart companies are working so hard to be the first to define the Metaverse is because, like everything else, it presents a new opportunity to sell more people more stuff. The vast majority of businesses that sell things to people are currently regulated, directly or indirectly, by municipal or state government. E-commerce already is regulated in various forms, but in most cases, it’s a real-world good or service that just happens to use the internet for distribution. A garden hose is subject to the same basic framework of regulation whether it’s bought from the local hardware store or Amazon.
The Metaverse, where all goods and services are themselves digital, presents a different sort of challenge. If you’re buying a skin on Fortnite, is that the same as buying a filing cabinet on walmart.com? If an item’s value is solely digital, does it need the same level of oversight from regulators? Do consumers need the same level of protection in the Metaverse that they do in the physical world? Should regulators be tasked with preventing the sale of fraudulent NFTs? Or is it fair to say that’s not their problem?
Our belief is that the market for new things like NFTs will be far more resilient if consumer protections are built in. At some point, there will be no difference between the filing cabinet that sits by your desk and the one that exists on the Metaverse. In fact, you might not even have one by your desk, which makes the one in the Metaverse that much more important and worthy of protection. If we’re really going to be spending major portions of our life in virtual worlds, they have to be safe. It’s like taking the subway in New York City. If it’s not safe, the people who don’t have to use it stop using it.
In this regard, companies who are building metaverses have a major incentive to making our belongings feel safe and secure. But we can’t rely on that alone, any more than we can in the real world. There is a major role for government here to define the new era of consumer protection.
How realistic is this politically?
Consumer protection tends to be the purview of state and local government. While passing new legislation or enacting new regulations in so many jurisdictions is daunting, it’s also feasible. You can get things done at the state and local level. Odds are, some enterprising Attorneys General, state legislators, city councilmembers or consumer affairs Commissioners will see the opportunity to create something new, get a lot of attention and start putting ideas out there. That process will create a template of universal anti-fraud protections that can then be replicated across the nation. It will take several years at least, but if a few bold regulators and elected officials start now, the work could be completed in time. This is a big opportunity for politicians.
V. How Are Workers Classified and Protected?
Where we are: Current labor law in the United States puts all workers in one of two buckets — full time employee or independent contractor. This is an outdated, broken system that fails to capture the nuance or reality of the sharing economy. Most Uber drivers or DoorDash delivery people, for example, don’t fit either category.
If we were forming policies based solely on logic and not politics, we would create a third category where workers have many of the protections afforded to full time employees and the flexibility awarded to independent contractors. But the sharing economy companies are afraid of higher operating costs and legal liabilities if a new framework were implemented and the unions need sharing economy workers to be treated as full time employees because that’s how they collect dues from them. So as we head into the 2022 state legislative sessions, the odds of any state taking the lead on an intelligent new model are low.
We have learned something useful from the failures of the reclassification efforts so far. First, workers really do prioritize their own flexibility and seek out opportunities in the sharing economy. Second, workers really do need more access to social safety net protections than they have under our binary system. These two conditions beg to be recognized and accommodated by our laws.
Where We Need To Be: To the extent the metaverse will be a hub of job creation, elected officials and regulators could mandate the companies responsible for this growth pool their resources and contribute to a portable benefits fund, administered by states or the federal government, to cover healthcare, paid sick leave, retirement savings and more.
In the same way that states like New York have been able to levy onerous tax rates on sports-betting apps, policymakers will have their maximum amount of political capital in the early days of this emerging technology. We have seen the same story repeat – when companies get integrated into the lives of their workers and their customers, it can be extremely difficult for government to force them to change. By mandating a high degree of worker protections at the dawn of the Metaverse, we can set a standard that would be impossible to implement later when companies have more power.
We know the Metaverse will open up tremendous opportunities for profit and work. But what will work look like in this context? Could the Metaverse actually be a place where people are free from control and direction of their employers or will it replicate the same labor dynamics as the physical world? If the answer is the former, then our current W2 /1099 system could prevail. If it’s the latter, we will have to think of a truly new way forward to enable innovation while still maintaining workers’ rights.
It’s not as far away as you think. Amazon originally started as a place where people could buy books. It has grown to be one of the largest global corporations and biggest employers of all time, with plenty of its own complex labor issues. The Metaverse obviously has this potential for both growth and abuse. There will certainly be conflict and hardship as new jobs are created and others are lost. It’s fair to say the United States has done a terrible job managing the decline of manufacturing. We need to learn from those mistakes as we look ahead to the Metaverse and give more serious consideration to policies like Universal Basic Income. Finally, we need to ensure all Americans have the hardware and broadband needed to access the Metaverse. We can avoid creating a new digital divide if we think about it on the front end.
How realistic is this politically?
- States can’t even figure out how to classify Uber drivers, so let’s not hold our breath for the development of a new worker classification system for people in the Metaverse. However, there are signs of a movement toward offering piecemeal and targeted benefits, such as New York’s Excluded Workers’ Fund. So we know it’s possible to extend protections to people (in this case, undocumented workers) who are outside of the traditional social safety net. Given the shift toward more creative labor solutions, maybe not impossible.
- Avoiding a digital divide should be easier. The federal infrastructure bill passed in November contains $65 billion for broadband expansion. It may not be necessary for governments to address the hardware issue at all since it’s in the interest of the big Metaverse companies to make sure everyone has the equipment they need, just like how Apple, Samsung, AT&T, Verizon and the others have figured out how to get phones in the hands of most American adults.
VI. Who Pays What in Taxes?
If the Metaverse is purely digital, should local taxation exist? If so, who has the authority to impose those taxes? Is it the nexus where the Metaverse user is physically located? If the provision of goods and services shifts away from traditional brick and mortar retail and traditional e-commerce and if economic activity on the Metaverse is not taxed, how do governments replace the lost revenue? If goods and services are paid for on the Metaverse with cryptocurrency (which seems extremely likely in some form), how is the conversion taxed? How will cities and states prevent people from simply using VPNs to evade local taxes? If a metaverse ties to specific tax jurisdictions and a person can transport their digital presence to a different jurisdiction, will there be a split of taxable events?
What about people who will earn their living on the Metaverse? Are they just paying taxes to the government wherever they live? Wouldn’t many of them just move to a tax haven, much in the same way many Americans are fleeing high tax jurisdictions like New York and California for low tax jurisdictions like Texas and Florida? Should there be a global standard of taxation for the Metaverse, not unlike the global minimum corporate tax currently advocated by Treasury Secretary Janet Yellen? Should taxation map to where the hardware that runs the metaverse? Where the metaverse participants physically exist? What happens in cases like games or learning exercises where a metaverse participant exists in multiple locations simultaneously?
These jurisdictional and governance questions are especially relevant when considering the complexity of regulating financial instruments in the Metaverse. It is presumed that much of the economy of the Metaverse will be powered by cryptocurrencies, decentralized applications, and blockchain technology. While these types of technologies are relatively new, so far, policymakers have struggled to come up with commonsense regulatory frameworks. How do we promote innovation and growth of the digital economy while preventing fraud and money-laundering?
The very basis of how we regulate finance is going to need to be reconsidered. Our laws and rules are jurisdiction-specific, and what will those mean in the Metaverse? Who’s responsible when a decentralized finance app (DApp) goes down, doesn’t work properly, or is manipulated? How can market participants trust crypto markets that aren’t overseen by regulators? Should there be building codes for applications such as in the physical world with regard to storms, earthquakes, and other present risks? Should the Metaverse have its own financial regulatory bodies that can create and enforce a fair set of rules for participants to abide by? If so, how would that vision coexist with the Metaverse’s promises of decentralization and lack of trusted third-party intermediaries?
In some ways, the emergence of the Metaverse raises the question of whether the traditional model of taxation and government service provision is the best way to redistribute wealth. The more that our lives move into digital space and the more that our economy is based in the Metaverse, how, who and where we tax becomes insanely complicated. Which is, again, why a concept like Universal Basic Income (UBI) needs a full airing. The metaverse could allow for multiple simulations regarding UBI, and could remove the common pitfalls regarding UBI in an open society by offering a “clean-room” sandbox in which to simulate the UBI economic effects without signal pollution.
And if millions or billions of people transfer their social lives, personal wealth and real estate to metaverse platforms, what mechanisms then exist to protect them? What if one of the Meta platforms goes down? Do all of its users lose everything? It took the Great Depression for the United States to invent the Federal Deposit Insurance Corporation and restore trust in the banking system. Will we have to wait for a disaster of a similar scale to build safeguards for the new economy that will emerge in the Metaverse?
How realistic is this politically?
- State and local governments are not going to take kindly to losing massive amounts of tax revenue (even the Republicans would rather give that money to a constituency than just lose it outright and never get credit for it). Once the issue comes to a head, it’s likely they will act. However, the federal government may also need to get involved because presumably most payments in the Metaverse will be in some form of cryptocurrency, which makes it a Treasury/ SEC question. So far, the crypto community has not made itself relevant enough politically to matter, (despite building a $2T USD financial system in 15 years from a cold start), which means that the Treasury Department will not feel any material pressure to develop sensible, thoughtful regulations anytime soon. But if the SEC issues new regulations on crypto anyway, they’d likely deal with the conversion issue.
- The issue of people working and existing mainly in the Metaverse moving to tax havens is harder to solve because it reflects a current trend seen in the United States. The politics of the states on the left have only moved much further left, actively seeking to impose even higher taxes. So the Metaverse may hasten the departure of talent from states like New York, Massachusetts and California absent a re-thinking by those states of their economic policies.
- Finally, Universal Basic Income is a very big idea that will take a lot of work to implement. But if there’s ever a time and an argument for a reshfiting of how government works and how we care for people, the advent of the Metaverse may be it. The City of Miami is already starting to experiment with this concept through it’s MiamiCoin initiative. It’s not quite the same thing, but it’s a conceptual step in the right direction. It is also encouraging to see Mayors like Eric Adams in New York City embrace crypto. This will hopefully reflect how they approach the metaverse too.
VII. What Does This Mean for Everything Else?
By which we mean the things we know and care about at Tusk Holdings, which include government services, political campaigns, healthcare, religion and gaming.
The provision of government services online is already better than most people realize. Paying a parking ticket or ordering an EZ-Pass or filing a noise complaint works reasonably well. However, service provision in the Metaverse could extend well beyond just digitizing paperwork.
What if, for example, some of the work currently done in schools were conducted within the Metaverse? On one hand, no parent (me included) would say that their kid was better off with remote schooling during Covid. On the other hand, given the cost of building new schools and facilities and the disparity between school districts in wealthy and poor communities, providing some schooling within the Metaverse could really help lower income districts and students. If kids can be transported through a virtual world that looks and feels extremely real both today and throughout history, imagine the potential for hands-on learning and cultural awareness – something no history book could ever provide. And all kinds of services – one on one therapy, tutoring, special needs services, college counseling – that are far more common in wealthy school districts could be made available to all students far more easily.
Or take health care. We learned during Covid that both patients and doctors often preferred digital care to going to a doctor’s office and sitting in a waiting room filled with sick people. What if doctors could use artificial intelligence to not only treat basic issues remotely but complex health conditions, too? What if services like x-rays could be taken remotely in the Metaverse? What if we combined digital care with at home care and eliminated the need for most hospitals and health care facilities?
The Metaverse has the potential to vastly increase accessibility to care, supplementing some of the current shortcomings of telemedicine (for example, simulating a physical exam), creating 3D clinics, offering enhanced remote patient monitoring, improving medical student training, expanding PTSD treatment and much more. But how do we ensure that a patient’s privacy and medical records are secure? The Metaverse will need an updated version of HIPPA to ensure patient safety. What if techniques become possible primarily - OR ONLY - in the Metaverse, where removing stimulus in the physical world or focusing the attention of a patient proves beneficial? To further complicate this example, what if the patient is tended to by a team of professionals in diverse physical locations that have varied local regulations?
A goal of the Metaverse could also be to identify expensive facilities that government funds or runs (schools, hospitals, universities, social service offices, the DMV, voting) and replace at least parts of those processes and costs with a better, far cheaper digital version. The provision of all types of social services could be better in the Metaverse (and not having to go to the DMV may be the greatest benefit of all). Some local governments are already using blockchain to give communities stimulus checks and vouchers. That’s just the start. Even the way that government organizes its own data could be significantly improved if databases were taken off Excel and put onto the Metaverse. There is a chance to introduce a chain of custody on patient data, as well as remove the problem for the patient of having to inefficiently furnish the same piece of data at multiple points along the treatment journey.
Social services could also be reimagined along the same lines. You can’t stock a food pantry in the Metaverse but you could provide counseling, AA sessions, social work, monitor foster care homes and a lot more. Religion could also exist in a solely digital fashion with the Metaverse providing a place for worshippers to congregate and feel together. It could also nurture new forms of religious practice and leaders that obviate the need for a physical structure at all. Perhaps the boldest opportunity, however, is how the Metaverse might usher in a wave of new religions entirely. Which will make protecting religious freedom all the more important.
Moving quickly from the sacred to the profane, let’s consider a human activity like gambling, which will surely flourish in the Metaverse (imagine sitting at a roulette wheel or throwing dice in what feels like the coolest casino anywhere, at anytime, from anywhere in the world). As more and more of it continues to move from rundown local casinos to virtual settings, regulators will need to shift their focus accordingly. How do you license gaming entities operating solely on the Metaverse? Do local laws around what types of gaming are and are not allowed still apply? Will Metaverse casinos operate like a mall, where each game is a window to a local culture or by local rules (roulette in France, poker in Las Vegas, baccarat in Italy)? Can casinos operate as a roll-up or wrapper for the operation of these games, or are they considered an application which must be registered in a jurisdiction, which does not lend itself well to decentralized application design? How would you enforce them? How do you collect taxes and how do local and state governments replace the revenue lost from physical casinos?
The opportunity for smart, forward thinking gaming companies, especially those who can offer multi-faceted platforms that enable people to interact and consume more and more forms of wagering (sports betting, esports wagering, ibingo, ilottery and igaming) is tremendous. Regulators will have to work hard to keep up. The 46 states who offer lotteries will also have to reconceive their entire approach or risk losing significant funding for schools and other programs.
Finally, we will also need to think about how political campaigns will function in the Metaverse. The nature of campaigning will change dramatically and the opportunity to make voting far more accessible will exist. Laws around campaign finance, matching airtime, FCC standards, truth in advertising, limitations on electioneering around polling sites, voting standards and more will all need to be reimagined entirely.
How realistic is this politically?
- The creation of better government services in the Metaverse will depend on individual politicians and their staffs. Those with talent and vision will act on the opportunity. The lazy and corrupt will lag behind.
- Moving parts of the education system into the Metaverse will likely vary by geography within the United States. In states where teachers unions hold real political power, change is extremely difficult to achieve. In other states, less so.
- Passing legislation related to gambling is always difficult so figuring out a new regulatory structure (and figuring out how to save the lotteries) will likely require one or two visionaries to advance their ideas and then hopefully that becomes the template for everyone else.
- Updating HIPPA is difficult but less so than issues that are more ideological and partisan.
- Protecting religious freedom in the Metaverse means being able to predict what new types of religions emerge from the Metaverse and what existing institutions are threatened by it. This is more likely to get resolved in the courts over time.
- Adjusting electoral rules will be incredibly difficult because each party automatically opposes what the other party wants to do and no politician will want to take any steps that could reduce their chances of re-election.
- And everyone would support a virtual DMV. Everyone.
VII. And, Oh Yeah, What About National Security?
The longer it takes governments to recognize that so much of life as we know it is moving deeper online, the more of an advantage they will give to bad actors to set up shop within the Metaverse and evade scrutiny. In the same way that regulation always trails innovation, it also trails bad intentions.
Rather than assuming human nature will radically change and suddenly improve once the Metaverse is here (spoiler: it won’t), we should assume that whatever harm can be done on the Metaverse will be done and we should develop measures now to protect our national security.
Which laws and practices can be formulated to protect the citizens of a country when regional, cultural, or linguistic work is distributed within a Metaverse application that integrates independent contractors for a specific task that requires interaction with privileged information or personnel? If we simply rely on physical-world standards, do we risk losing an edge in intelligence, outreach and analysis? To extend this point, it becomes important to codify what is a breach of trust or improper sharing and handling of information. Inevitably, information extraction and interrogation techniques which do not apply to the physical world, but do apply in the Metaverse will need to be strictly regulated.
That means thinking like villains and imagining how our security can be compromised on the Metaverse. Figuring how to thwart these activities will, of course, be an on-going concern. But as with all these issues we’ve been talking about here, our chances of protecting ourselves from the worst outcomes are much greater if we build the systems smartly in the first place.
How realistic is this politically?
- Anything that does not require legislation or promulgating regulations is typically much easier. On the terrorism/ national security front, charging the Department of Defense and the Department of Homeland Security, the FBI and others to come up with a plan is at least theoretically feasible and would only require executive action.
- In terms of international cooperation, we shouldn’t expect much to actually get done anytime soon. It’s probably not even worth the time until the problems grow severe enough that countries have no choice but to work together to address them (although this has still not happened in a real way with climate change, so it may be awhile).
A Few Final Thoughts
This is the moment. Once a new technology is fully developed and offered to the public, good luck putting the genie back in the bottle. But if regulators take the time and put in the effort to think about the Metaverse now, about the threats and opportunities it poses, it can, for once, get out ahead of a new technology rather than starting from behind. Moreover, with the current climate of cryptocurrency price corrections, there is a timely opportunity to work with key stakeholders to propose viable regulatory mechanics.
Imagine creating a version of JASON — a group of elite scientists from academia and industry who have advised the U.S. government on critical issues since the Cold War — but specifically for the Metaverse. Imagine working groups, formed and activated now, of agency professionals, think tank gurus, technology experts, scientists, legal scholars, social psychologists, state regulators, and maybe a few elected officials who can start tackling the questions raised in this memo. Imagine being ahead of the curve for once.
To be clear, this memo isn’t meant to answer every question about how the Metaverse might be regulated. It’s meant to spark a conversation. It’s meant to identify the key issues and most important, to start building an intellectual framework for moving forward. Thank you for taking the time to read it.
And a special thank you…
- **To everyone who helped prepare this memo including Bob Greenlee, Michaela Balderston, Meaghan Collins, Erika Tannor, Kelsey Bensch, Alex Sommer, Kristina Howard, Henry Greenidge, Jon Sabol, Quinn Shean, Rachel Livingston, Christian Goode, Jocelyn Bucaro, Anne Gifford, Lisa Quigley, Harper Montgomery, Brad Welch, Frank Speiser, and Hugo Lindgren. ***