Author: Avinash Pandey, ILM University
Abstract
The Metaverse is more than just a trend—it’s a new layer of human existence. With users attending virtual classrooms, building digital empires, and even participating in legal trials using avatars, the metaverse challenges the very boundaries of traditional law. As Indian laws remain analogy in a digital age, issues of virtual property, digital identity, smart contracts, data protection, and avatar-based misconduct demand urgent legal recognition. This article explores existing gaps and proposes a pragmatic legal framework, drawing on global practices and judicial insights to align Indian jurisprudence with this next digital frontier.
To the Point
A Clear & Precise Discussion
The metaverse operates as an immersive digital ecosystem built upon blockchain, AI, AR/VR, and decentralized finance (DeFi). It is not a singular platform but a collective virtual space that mirrors and expands real-world activity—social, economic, and legal.
Key Legal Challenges in the Metaverse:
1. Digital Identity and Personality Rights
Avatars are digital representations of a user, but they often carry personal likeness, voice, and mannerisms. Misuse of such avatars could amount to digital impersonation, raising concerns under Sections 66C and 66D of the IT Act, 2000.
2. Property and Ownership
Land, clothing, and buildings in the metaverse are bought and sold using NFTs and crypto-assets. However, these do not fall under the Transfer of Property Act, 1882, nor the Sale of Goods Act, 1930.
3. Smart Contracts
These are code-based agreements executed without intermediaries. But in India, contract law still relies on traditional notions of consent, consideration, and intention—none of which are inherently embedded in smart code.
4. Jurisdiction and Conflict of Laws
If a dispute arises between a user in Bengaluru and another in Brazil, and the platform is hosted on a server in Singapore—which country’s laws apply?
5. Criminal Conduct in the Metaverse
Virtual rape, verbal abuse, stalking, or even avatar defacement—can they be prosecuted under real-world laws? Are avatars protected under the Indian Penal Code or only the IT Act?
The Proof
Stats, Cases, and Authorities
Meta (Facebook) invested over USD 36 billion in metaverse infrastructure by 2023.
Decentral and, a blockchain metaverse, hosted the first virtual fashion week in 2022, attended by global brands. Over 2 million users in India are actively involved in blockchain-based gaming or virtual asset trading.
Market Stats: The global metaverse market is projected to reach USD 936.6 billion by 2030. India alone has seen a surge in interest, with IT giants like Infosys and TCS building metaverse ecosystems for business applications.
Legislative Vacuum: Indian laws like the IT Act, 2000 and IPC do not explicitly cover immersive environments like the metaverse. Most legal interpretations remain analogy in a digital-first world.
WIPO & Blockchain IP Registries: While the World Intellectual Property Organization (WIPO) addresses digital IP challenges, no uniform treaty exists to regulate virtual assets globally.
Legal Jargon in Practice
Term Legal Meaning
Lex loci solutions Law of the place where a contract is to be performed; unclear in decentralized ecosystems.
Avatar Rights Not currently codified, but conceptually overlaps with the right to privacy and personality under Article 21.
DAO (Decentralized Autonomous Organization) Legal status still debated. In India, not recognized under company or trust law.
Token omics financial modelling of virtual tokens, often bordering on securities law territory.
Virtual Trespass An unrecognized but emerging tort, where a user invades another’s virtual space or assets.
Personality Rights: The right of an individual to control the commercial use of their identity (name, image, likeness)—particularly significant for avatars or influencers in the metaverse.
Virtual Property Rights: Though not “immovable property” under Section 3 of the Transfer of Property Act, 1882, virtual assets like NFTs might qualify as “intangible movable assets.”
Smart Contracts: Self-executing code-based agreements without human intervention. Their validity under Section 10 of the Indian Contract Act, 1872 remains debatable.
Jurisdictional Ambiguity: The principle of lex loci delicti commissi (the law governing the location of the offense) becomes intricate in situations where no tangible location is present.
..Avatars & Digital Persona: Representation of an individual in a virtual space—raising questions about defamation, consent, and impersonation under Section 66D of the IT Act.
Judicial and Legal Precedents
K.S. Puttaswamy v. Union of India (2017)
Underpins the right to informational privacy, which should extend to the biometric and behavioural data collected in the metaverse.
Syed Saifuddin v. State of Andhra Pradesh (2005)
An early recognition of software and code manipulation as a criminal offense—relevant for hacking metaverse code.
Trimix International FZE Ltd. v. Vedanta Aluminium Ltd. (2010) 3 SCC 1
Held that even email-based agreements could be valid contracts—setting a foundation for digital and possibly smart contract validity.
Hermès v. Rothschild (2023, US)
US Court ruled that “Metairies” NFTs infringed IP rights—paving way for luxury brands to protect assets in digital fashion.
Global Trends: Comparative Perspectives
United States
The SEC now investigates NFT offerings under securities law.
The DOJ has prosecuted virtual fraud cases involving metaverse-linked Ponzi schemes.
European Union
The Digital Services Act (DSA) and the AI Act emphasize the responsibility of platforms and the regulation of content in immersive environments.
Japan
Issued a Metaverse Governance Guideline (2023) focusing on consumer rights, IP enforcement, and child safety.
South Korea
Declared a Metaverse Strategy 2025, committing billions to VR innovation and proposing an Avatar Rights Law.
Real Metaverse Controversies
2021: A woman using Meta’s Horizon Worlds reported her avatar was “sexually assaulted” within minutes of joining.
2022: Roblox Corporation faced lawsuits in the US for allowing unauthorized music streaming and sexual content in children’s environments.
2023: An Indian YouTuber was impersonated in Decentral and; the fake avatar was collecting money from followers under his name.
These cases signal the emergence of new-age cybercrimes requiring urgent regulatory response.
Legal Philosophy: Can an Avatar Have Rights?
Legal scholars argue that avatars could be treated as extensions of the self under Article 21 (Right to Life and Personal Liberty), particularly if: The avatar is publicly linked to the real-world identity.
The avatar has economic or reputational value (influencer, brand ambassador, etc.).
This leads to a larger debate:
Should avatars be treated like legal persons (like corporations), or merely digital representations with no standing?
Gaps in Indian Law
Area Gap Identified
Property Law No recognition of digital land or virtual goods.
Criminal Law IPC does not include avatar-based crimes like virtual rape or stalking.
Civil Law No clarity on avatar defamation, virtual nuisance, or emotional harm in immersive spaces.
Company Law DAOs are unrecognized—posing risks for investment and fraud.
Tax Law Crypto and NFTs are taxed, but jurisdiction and classification remain unclear.
Proposed Reforms
1. The Virtual Rights and Digital Assets Act (Proposed Bill)
Define digital identity, avatar rights, and virtual ownership.
Recognize contracts executed via smart systems.
2. Digital Property Tribunal
Special fast-track court for NFT, crypto, and metaverse disputes.
3. Inter-Ministerial Committee on Immersive Tech (IMCIT)
A collaborative body established under the Ministry of Electronics and Information Technology (MeitY), the Ministry of Home Affairs (MHA), the Securities and Exchange Board of India (SEBI), and the Ministry of Law and Justice is tasked with overseeing immersive environments.4. User Protection Guidelines for Metaverse Platforms
Implement content moderation, anti-harassment policies, and tools for real-time reporting.
Conclusion
The metaverse is no longer a virtual possibility; it is a digital certainty. Yet our laws remain rooted in physical geographies and tangible identities. India has the talent and technological infrastructure to become a metaverse leader, but that ambition must be backed by progressive, adaptive legal frameworks. Regulation should not stifle innovation—but innovation must never come at the cost of human rights, accountability, or the rule of law. Just as courts once adapted to cyberspace, it is time for them to navigate the metaverse—where avatars need laws, not just pixels.
FAQs
Q1. Is harassment within the metaverse considered a punishable offense in India?
Yes, depending on the nature of the act. Section 354A (sexual harassment), Section 509 (outraging modesty), and Sections 66E/67 of the IT Act may apply.
Q2. Can Indian courts take jurisdiction over metaverse disputes hosted abroad?
Yes, if the impact is felt in India or users are Indian. Precedents like Banyan Tree Holding support a “targeting” test.
Q3. Are smart contracts legally valid?
Not expressly, but if they fulfil traditional contract requirements (offer, acceptance, consideration), courts may uphold them.
Q4. Can someone sue for avatar defamation?
Potentially under tort law if the avatar is strongly identified with a real person and defamation harms their reputation.
