12 December 2022
December 2022/1 – 1 of 3 Insights
Recently, the Metaverse promises to become a platform for a gambling offering in a new dimension. This has not been overlooked by the industry. More and more operators are therefore attracted to various Metaverse worlds/projects currently being developed. In this context, the legal challenges are increasingly coming to the forefront. The following is intended to provide a brief overview on the regulation on online gambling and the new challenges arising through the Metaverse.
Like almost every article about the Metaverse, it must be shortly explained what the Metaverse actually is or better should be. Currently, there is not yet a single Metaverse. Rather, there are various efforts to develop and establish a three-dimensional successor to the internet as we know it today. It is still in the early stages of development, but many envisage that the Metaverse will steadily converge with real life in terms of authenticity and will eventually become as common as the internet is today. Thereby the predictions for the Metaverse go in different directions. Some prognoses assume that one of the many Metaverse projects will prevail and will be regarded as "the Metaverse" in the future. In contrast, other forecasts assume that the Metaverse will consist of a multitude of interconnected and synchronous virtual platforms. Regardless of the future design, users will be able to experience this new world via avatars to interact with each other as they would in the real world. In the long term, as technology such as virtual reality and augmented reality develops, the boundaries between the real and the online world in the form of the Metaverse will gradually become more and more indistinct.
Common Metaverse projects include 3D representations of retail shops where one can try on clothes in the Metaverse and have them delivered to the real world. In this regard, the possibilities of gambling in the metaverse are also highly versatile. Imaginable would be a kind of casino/gambling hall which could offer all forms of gambling. Moving through the virtual space, the user could decide whether to communicate with others present or concentrate on a game of chance. And all this without having to leave the house. With the advances in technology, a gaming experience can be expected that will match and, at a certain point, surpass that of the “real world”. Furthermore, totally new betting offers such as a Metaverse horse race or a Metaverse boxing match are conceivable.
Online gambling is heavily regulated in most European jurisdictions, including Germany. Operators may only offer their services on previously designated domains. According to the German regulation a player may not play in different areas or with different operators at the same time.
The German online gambling market was only partially liberalized in July 2021. Operators can now apply for a license i.a. for online poker, sports betting and virtual slot machines, but the regulation does not include online casino table games such as Black Jack and Roulette and live casino games with the possibility of participation via the internet.
Gambling amounts are limited across operators and various other player protection mechanisms apply. In addition, the individual games are approved by the authority on an individual basis and the authority ensures that the games do not have too high an addictive potential. New Metaverse gambling formats could not be permitted under the current regulations. All these points restrict the possibilities of gambling in the Metaverse accordingly. Furthermore, it would be unclear how age control (18+) could be guaranteed.
Another key limiting factor could be the payment processing. Licensed operators are only allowed to accept Euros from verified bank accounts of the players. Right now, the most common payment methods in the various Metaverse projects, however, are anonymous crypto-payment methods such as Bitcoin.
Metaverse has the potential to completely revolutionize the internet as we know it. Over the long term, it is possible that an online parallel world will be created that can completely redefine the boundaries between the physical and digital worlds. In this new world, it is only logical that gambling will also be in great demand by players. The current regulation of gambling in the Metaverse is still completely undefined within the major jurisdictions in Europe. There is no specific regulation or possibility to acquire gambling licenses for the Metaverse or individual Metaverse gambling formats such as horse races in the Metaverse. The current regulation for Germany is aimed at a conventional online offer via specific internet domains. It remains to be seen when regulators will deem it necessary to issue special licenses for the Metaverse or to establish separate rules for the Metaverse. The legislators would do well not to allow a legal vacuum to develop here. Initial moves are being made in this regard. The US state of Wyoming, for example, passed a law that allows sports betting to accept "digital, crypto and virtual currencies". It remains to be seen whether further legislators will follow and create a framework for offering gambling in the Metaverse. Until then, the development of the Metaverse should be monitored closely.
Recently, the Metaverse promises to become a platform for a gambling offering in a new dimension. We provide a brief overview on the regulation on online gambling and the new challenges arising through the Metaverse.
12 December 2022
Issue #16 | We keep you up to date with everything you need to know about the Metaverse.
12 December 2022
by Multiple authors