Branding the Future: Advertising, Metaverse and NFT Law – Part 1

In his 1992 sci-fi thriller Snowfall, author Neal Stephenson allowed his characters to escape dystopian Los Angeles into a completely virtual realm he called the Metaverse. Thirty years later, in the age of the Internet, apps and social networks, the fantasy has come true. Companies are introducing new technologies such as virtual and augmented reality, cryptocurrency, and non-fungible tokens (NFTs) at an increasingly rapid pace.

These companies are ready to welcome us as we move more of our lives online every year. The best known of these is, of course, Meta, Inc. (formerly known as Facebook), but a phalanx of others, ranging from web3 companies like Coinbase, Autograph, and Decentraland to more traditional brands like Volkswagen , Roblox, and even HSBC are working to tap into the newfound public enthusiasm for all things Metaverse and showcase cutting-edge marketing and branding experiences.

For example, last year, Yahoo, Selfridges, Pokémon and fashion designer Charli Cohen developed a metaverse experience known as ElectricCity, which allowed consumers to simultaneously purchase real and digital copies of the same garment in using an interoperable virtual avatar. These branding campaigns have become so ubiquitous that industry publication Adage maintains a continuously updated list of how brands are using NFTs.

Below, we discuss some of the legal issues that can arise in this ever-evolving field as more brands enter the metaverse and begin to use NFTs for advertising, branding, and business opportunities. promotional.

What are the legal implications of advertising in the Metaverse?

Although the metaverse may open up an exciting new universe of marketing opportunities, few of the legal rules that will apply are new. Indeed, many of us have applied federal and state advertising laws to new media and technologies many times over the past 20 years – first with the widespread adoption of the Internet, then the introduction of social media (in various formats), advancements in mobile advertising, etc.

In fact, we’ve been discussing how to apply these laws to “virtual worlds” since the launch of “Second Life” in 2003. Additionally, the Federal Trade Commission (FTC) has made this clear in advertising guidelines such as “.com Disclosures: How to Make Effective Disclosures in Digital Advertising,” which is currently being updated for the third time in two decades, that regardless of the technologies involved, many of the concerns will be the same.

  • Make sure your advertising is truthful and not misleading, and that all disclosures are made clearly and prominently
  • Acquire the necessary intellectual property (IP) rights
  • Acknowledge and Disclose Mentions
  • Follow promotions rules where applicable, including price promotion and gift laws
  • Ensure contract issues are resolved, including terms of service and privacy issues

Advertisers should always be concerned about violating federal advertising laws (such as the FTC Act and Lanham Act) and state consumer protection laws that prohibit misleading advertising in the metaverse. And the same industry regulators and watchdogs, such as the FTC, the Consumer Financial Protection Bureau, state attorneys general, and the National Advertising Division, continue to pursue bad actors out there. That said, new (or rarely seen) players, such as the Securities and Exchange Commission, have pursued actions involving claims of celebrities endorsing cryptocurrency investing, taking the position that they should be regulated as securities. In addition, certain types of claims may present a higher regulatory risk.

What does misleading advertising look like in the metaverse?

The legal issues surrounding the Metaverse and the NFT are attracting considerable attention from regulators and class action lawyers. For example, a class action lawsuit was filed against online retailer StockX in the US District Court in Miami, alleging, among other things, that StockX misled customers regarding its NFT products. Specifically, the plaintiffs alleged that StockX made false and misleading statements regarding the availability of products that customers were supposed to be able to redeem for their NFTs, and the authenticity of the products themselves. These actions, according to the plaintiffs’ complaint, were in violation of Florida’s Deceptive and Unfair Trade Practices Act.

Similarly, in January 2022, rapper Lil Yachty filed bogus federal and state claims against Opulous and Ditto LTD in the Central US District of California. In this case, Lil Yachty alleged that Opulous used his image, name and trademarks without his consent in various advertisements and promotions for an NFT drop by Opulous, and falsely represented that the advertised NFTs were endorsed by Lil Yachty and that buyers would be able to purchase Lil Yachty’s copyrighted works.

These types of claims are occurring with increasing frequency as companies attempt to quickly pivot to take advantage of the metaverse’s perceived profitability.

Be sure to read Part 2 of our series, “Branding the Future: Advertising Law, the Metaverse, and NFTs.” We will discuss raffles, endorsements, and intellectual property in the metaverse.

About Jimmie T.

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