Lawless Virtual World

In the past week or so Julian and Duncan have had interesting posts about applying laws to terra nullius and moon stations. (See here and here). But there is yet another world in which we are in unchartered waters headed to virgin territory: the virtual world. By now we have long wrestled with electronic commerce and the application of law to cyberspace. But with the establishment of virtual worlds in metaverses like Second Life, we are encountering problems for which law has no easy answers.

For those not in the know, Second Life is a privately owned, subscription based virtual world designed by Linden Labs in which virtual residents participate in a virtual economy. The Second Life “metaverse” is inhabited by more than 1.8 million people and is growing exponentially. It has a marketplace that supports millions of U.S. dollars in monthly transactions. This commerce is handled with the in-world currency, the Linden dollar (L$), which can be converted to U.S. dollars at a fluctuating exchange rate. People really do buy and sell Linden dollars using real world currency on the SL Currency Exchange with current volumes at over 800,000 per day. Each subscriber to Second Life selects a virtual persona, called an avatar, to lead a virtual life that includes using the Linden dollar to participate in a virtual marketplace for the purchase and sale of virtual goods, services, and real estate.

This is no longer fun and games. Harvard Law School now has a virtual presence in Second Life, and any avatar who so desires can take a real Harvard Law School course taught by real Harvard Law School professors at this virtual extension school. Larry Lessig has an avatar who has already spoken in Second Life and Judge Richard Posner has an avatar and is giving a lecture there tomorrow.

The possibilities for virtual worlds extend far beyond Second Life. This summer Indiana University has a “synthetic worlds initiative” in which participants will use videogaming technology to put themselves into a 19th-century U.S. political convention to caucus and compete for political platforms and the nomination of a President.

And if one wanted to leave Second Life and create a new utopian virtual world, it would be a great place to test John Rawls’ idea of a social contract and the original position. Although no one has done it to my knowledge, during the establishment of a new Rawlsian virtual world, each individual could be in a veil of ignorance about their avatar. But what they do know is that they will not get to choose their avatar, because in the Rawlsian virtual world someone else would choose it for them. How should such a world be structured in light of that lack of choice?

With all these endless possibilities, what’s the problem? The problem is that because there is a real-world market for exchanging U.S. dollars for Linden dollars, simply entrusting governance to Linden Labs will not suffice. Subscribers to Second Life now have virtual holdings that make them real-world millionaires if they cash out, with major tax implications. And if you do cash out, which country’s taxing authority should collect? With easy exchange of real dollars into Linden dollars, money laundering and tax shelters can be used to hide real assets in virtual property. Virtual “liberation” organizations such as the Second Life Liberation Army are destroying the virtual property of real-world corporations such as American Apparel. Is there real damage if one can put a dollar figure to these attacks on the virtual property? And if a rogue program called CopyBot can copy virtual property and reproduce it at no cost, thereby diluting the value of such property, what should be the consequence? Reportedly the entire virtual economy on Second Life is threatened by CopyBot.

And then there is virtual sex. Adults are using their avatars to have virtual sex with each other, with one of them capable of morphing into a pre-teen girl during intercourse. Since no minors are officially allowed in Second Life, it is impossible to say whether any real-world minors are harmed by this virtual sex. But of course, adults may freely give their accounts and passwords to minors if they so choose, and some virtual child prostitutes claim to be real-world minors. If so, is such activity illegal? Is there a defense that I thought my avatar was having virtual sex with a real adult posing as a virtual minor, rather than a real minor who was posing as a real adult posing as a virtual minor? And if that conduct is illegal, which government from which country is supposed to prosecute the offender?

Obviously governance in this virtual world is in its infancy. That’s why a symposium like this one last week at New York Law School at first glance may sound like a flight of fancy. But there are real world issues that require careful thought and analysis regarding this lawless virtual world.