Feds are coming for the Metaverse - from Axie Infinity to Bored Apes

NFTs in the metaverse should generally be considered titles, but developers have been slow to recognize this fact. Expect regulatory settlement to come quickly for Axie Infinity, Bored Apes, and other projects that have thrown caution to the wind.

The Metaverse is a futuristic iteration of the internet, featuring a digital economy and an immersive virtual environment along with other interactive features. This relatively nascent space has grown so much in popularity in recent years that conservative estimates suggest that by 2024, its total valuation could top $800 billion. Meta (the parent body behind Facebook and Instagram), Google, Microsoft, Nvidia, Nike, and others have made Fortune 100-sized metaverse splashes.

But high valuations come with scrutiny from increasingly tech-savvy financial regulators. Unlike traditional tech products, which often spend years prioritizing growth over revenue, some metaverse projects impose questionable monetization schemes on their users before launching a live experience. Metaverse real estate is a prime example of this practice, with platforms like Big Time Games selling land in their metaverse before opening access to the game.

Generally, the U.S. Securities and Exchange Commission does not intervene unless retail investors face a predatory claim to their dollars without fully disclosing what they are investing in. The line for what counts as title is often blurred, but in the case of the metaverse, the practice of land sales should generally be considered security...