Property Rights in the Metaverse: Beyond Terms of Service

Abstract

The rapid growth of the Metaverse has completely redefined what ownership means in the virtual world of the Digital Age. The value of virtual real estate, as well as other virtual digital currencies and assets such as NFTs and cryptocurrency, plays a major role in defining this segment of our Digital Age culture. Yet, despite these developments, most metaverse platforms rely primarily on Terms of Service (ToS) agreements to govern ownership, lacking grounding in established property law principles. Current judicial developments and pronouncements by Indian courts recognizing cryptocurrency as property reflect an emerging trend that signifies an inclination to address and protect virtual assets as property rights instead of contractual privileges. Evaluating whether virtual property merits legal recognition as property is imperative. It requires an examination of the limitations of platform-based governance models, an analysis of comparative caselaw and jurisprudence from across the globe, and an evaluation of the position of virtual property in property law. This article asserts that the metaverse has outgrown contractual rights, necessitating a hybrid framework grounded in property law principles.

Introduction

The twenty-first century has seen, if not a wholesale change, at least an evolutionary adjustment in how people relate to property. Ownership, no longer inextricably linked with material possession, is increasingly being transferred into virtual spaces in which value can exist independently of physical form. This evolution finds perhaps its most perfected expression in the metaverse. Gone are the days when the metaverse was just a place where one could game or socialize in digital worlds; today, the metaverse is a persistent virtual ecosystem in which people buy land, build structures, work, and earn income through actual money.

Transacting in virtual real estate on platforms like Decentraland, The Sandbox, and Otherside has reached values rivaling physical property in metropolitan cities[1]. Corporations hold conferences, artists sell their digital galleries, and people make a living entirely off these virtual spaces. But despite this economic reality, the legal status of such assets is deeply uncertain.

This is the central paradox of metaverse ownership: users are behaving and investing like owners, and trading like owners, but the law often treats them as license holders. Under most platforms’ Terms of Service agreements, they reserve the right to revoke access, modify content, or terminate accounts at will without compensation. A user who spends significant amounts of money buying up virtual land, for instance, may legally own little more than a revocable contractual permission.

This growing disjunction between economic reality and legal doctrine raises fundamental questions as to the nature of property in the digital era: Can ownership exist without physical possession? Can private corporations define property relations independent of state law? Most important, can virtual assets evolve beyond contract law into legally enforceable property rights?

Understanding the Metaverse and Virtual Digital Assets

‘Metaverse’ denotes a persistent, interactive virtual world accessed via digital avatars. Unlike other cyber realms, the metaverse is meant to be constant, interactive, and economically active. As a result, items accumulated in such realms are not representative but rather the building block of a working ‘digital economy’.

Virtual Digital Assets comprise a variety of assets such as virtual currency, the digital version of non-fungible tokens (NFTs), virtual land plots, virtual wearables, and rights. These digital assets tend to be stored using “Blockchain technology,” making them distinct, transferable, and verifiable. Ownership is granted through the allocation of specific keys.

Unlike traditional digital content prone to duplication, blockchain-based VDAs exhibit scarcity and uniqueness akin to physical property, particularly because this digital format is hard to duplicate. VDAs thus resemble property more closely.

Nevertheless, with regard to the interface or channel through which these users are accessing these resources or these collected assets—specifically with regard to the metaverse platform—overall control is what is claimed.

The Dominance of Terms of Service

Most metaverse platforms rely on Terms of Service (ToS) agreements to regulate user rights, typically containing these provisions:

• Users are granted only a limited, revocable, non-transferable license to access virtual assets.
• While blockchain may record ownership (e.g., Decentraland states: ‘All title and ownership rights over each piece of LAND lies with its owner’[2]), platforms retain broad discretion to modify, suspend services, or terminate accounts without liability.
• Platforms reserve the right to change or stop offering services at any time.
• No compensation is owed for account suspension, asset loss, or platform shutdown.

Such agreements are legally categorized as standard-form contracts with no scope for negotiation[3]. Though enforceable in principle, these standard-form agreements involve unequal bargaining power and override users’ reasonable expectations.

The result is that ownership in the metaverse is not subject to the public legal order but rather to the private ordering of corporate entities. This, in turn, gives platforms the power to behave like sovereign authorities[4] because they can seize virtual property at will, without the intervention of judiciary.

This kind of contractual absolutism is utterly at odds with property law, which has long granted rights redressable against the entire world and guarded their holders against arbitrary expropriation. When digital investments achieve significant economic scale, continuing dependence on contractual licenses becomes legally untenable.

Limitations of Contract Law to Govern Virtual Property

Contract law governs obligations between parties (rights in personam), offering no protection against third parties. Property law operates in the opposite way: property law grants rights in rem—rights against the whole world.

Purely contract-governed virtual assets have a number of weaknesses:

• Lack of permanence, since contracts can be easily terminated unilaterally.
• No Insolvency Protection: Users rank as unsecured creditors if the platforms go bust[5].
• Absence of constitutional safeguards: Contractual rights do not attract Article 300A protection.
• Jurisdictional uncertainty: Global platforms complicate enforcement.

Treating substantial investments and revenue-generating virtual businesses as mere contractual privileges undermines commercial certainty and investor confidence. The insufficiency of contract law thus demands movement to property-based protection.

Judicial Recognition of Digital Assets as Property

There has been a growing acknowledgment by various court systems throughout the world that digital assets are not simply theoretical information.

The Madras High Court in Rhutikumari v. Zanmai Labs Pvt. Ltd. (2025) explicitly recognized cryptocurrency as ‘property capable of being enjoyed and possessed in a beneficial form and capable of being held in trust,’ citing Ahmed G.H. Ariff v. CWT [6]and Jilubhai Nanbhai Khachar v. State of Gujarat[7]. Though issued in an adversarial context, these rulings carry broad implications.

International jurisprudence has reinforced this trend. Cases such as AA v Persons Unknown (2019) EWHC 3556(Comm) [8], CLM v CLN (2022) SGHC 46 [9], and Ruscoe v Cryptopia Ltd (2020) NZHC 728[10] , affirm crypto as property due to its identifiability, exclusivity, transferability, and permanence. These are collectively indicative of a judicial movement away from physicality as a necessary prerequisite for ownership, towards emphasizing functional attributes rather than physical form.

Reimagining Property: From Possession to Control

Traditional property concepts classify property as follows:

• Things in possession (Tangible Property)
• Things in Action (Enforceable through Legal Claims)

The two categories do not easily capture digital assets. The latter cannot be physically possessed, nor is ownership based on anything other than enforcement of contracts.

Modern legal thought has identified a third conceptual category – intangible property that can be subject to exclusive control.

Blockchains operate on the principle of key management. Whoever owns the key essentially wields sole power or control in this context. This technological exclusivity mirrors physical possession. In the information era, possession is thus constructive rather than physical, as with shares, intellectual property, and electronic securities. Recognizing control as equivalent to possession integrates virtual assets into existing property law without radical overhaul.

Are Metaverse Assets “Things in Possession”?

Though the assets of a metaverse do not have a tangible form, they possess all the characteristic incidents of property:

• Identifiability using token IDs
• Exclusivity through cryptographic access
• Transferability on decentralised networks
• Market-recognized economic value
• Persistence independent of platform interfaces

These characteristics justify their classification as legally possessable interests.

Ownership cannot be defeated by intangibility when much wealth does not have physical manifestations in a digitized economy.

Decentralized virtual assets thus may reasonably be considered “things capable of possession in law,” if not in fact.

Legal Remedies for the Misappropriation of Virtual Assets

Once identified as property, VDAs become the subject of a variety of legal protections.

• Injunctions: Courts may block unauthorized transfers, freeze wallets, or prevent marketplaces from allowing suspicious sales.
• Trust-Based Remedies: Where platforms or exchanges hold assets on behalf of users, courts may impose constructive or resulting trusts, particularly in fraud or misappropriation.
• Tracing: The transparency of blockchain allows for sophisticated tracing remedies that enable courts to follow digital assets across wallets and transactions.
• Constitutional Protection: Article 300A of the Indian Constitution requires[11] that deprivation of property be by authority of law. Arbitrary confiscation through Terms of Service may therefore face constitutional challenge once VDAs are recognized as property.

Platform Sovereignty Versus State Law

Tension arises between platform governance and state authority. In general, metaverse companies rule economic behaviour, resolution of disputes, and asset ownership via private rules.

But private contracts cannot override basic tenets of the law. Property law is a creature of public policy, not private whim.

Allowing platforms to unilaterally extinguish ownership interests risks creating parallel legal systems immune from constitutional accountability.

The courts will, therefore, be more likely to claim jurisdiction where substantial economic rights are at stake, firmly reinforcing the notion that digital spaces are no exception from the rule of law.

Need for a Hybrid Legal Framework

Currently, India has no extensive statutory regime pertaining to digital property. While s 2(47A) recognizes VDAs for taxation [12], it does not confer proprietary status.

Future framework should include:

• Statutory recognition of digital assets as movable property
• Distinction between custodial and non-custodial holdings
• Insolvency protection of virtual asset holders
• Jurisdictional clarity in dispute resolution
• Limits on unilateral platform power

Such a hybrid framework would balance innovation against legal certainty in a way that encourages responsible growth of the digital economy.

Implications for the Future of Property Law

The metaverse raises important questions about re-examining basic legal principles. The law of property has to change from a land-based system to a more versatile system.

Recognizing digital property neither weakens traditional law nor disrupts its evolution. The law has long adapted to accommodate shares, intellectual property, and electronic securities. Failure to adapt will leave significant economic activities in a legal wilderness.

Conclusion

The Metaverse, therefore, is not merely indicative of change through innovation, but rather an overhaul and shift regarding property. Where real capital is placed and livelihoods created through virtual constructs and businesses, such cannot and should not be treated as fantasies.

While ToS govern access, they cannot fully define ownership. Recognized property rights must withstand unilateral corporate action.

Current legal developments in jurisprudence in recognizing digital assets as property are only the first step in a process of legal transformation. Recent jurisprudence clarifies one principle: in the digital era, legal ownership no longer requires physical possession. As the line between the physical world and virtual reality continues to blur, we must extend the reach of property law into virtual space as well as physical soil to ensure that the rule of law follows value wherever value resides.

References

[1] DappRadar & Decentraland data (2021-2024), noting peak 2021 sales exceeding US$100 million and a US$2.43 million parcel: https://dappradar.com/decentraland.

[2] Decentraland Terms of Use cl 3.2 https://decentraland.org/terms/ (accessed 24 January 2026).

[3] Indian Contract Act 1872 s 2(h).

[4] The Sandbox Terms of Use, cl 4.2, https://www.sandbox.game/en/terms-of-use/ (accessed 24 January 2026).

[5] Insolvency and Bankruptcy Code 2016, s 36(3)(b).

[6] Ahmed GH Ariff v CWT AIR 1971 SC 1691.

[7] Rhutikumari v Zanmai Labs Pvt. Ltd (Madras High Court, WP No 28472 of 2024, 2025) (unreported).

[8] AA v Persons Unknown [2019] EWHC 3556 (Comm).

[9] CLM v CLN [2022] SGHC 46.

[10] Ruscoe v Cryptopia Ltd [2020] NZHC 728.

[11] India Const, art. 300A.

[12] Income-tax Act 1961 s 2(47A).