UnReal Estate: Dividing metaverse “land” in a dissolution settlement

Written by:  Hon. Victoria Wood (Ret.) 

 April 1, 2024

In a recent dissolution settlement I facilitated, the marital assets that were subject to division included the young couple’s virtual land investment in a metaverse platform called “Earth 2.” The property was listed on the petitioner’s Schedule of Assets and Debts under number 16, “Other Assets,” with no further explanation as to what type of property it was. This meant I had to do my research.

Of course, I had heard of the metaverse by this point, but had assumed it was just some Facebook subsidiary, techno-progressive combination of social media and gaming that would fizzle once players realized you can’t really live life without leaving the living room. I certainly did not think the metaverse was something I would have the need to understand for my work as a neutral. Turns out I was wrong about that.

I was also wrong to think of the metaverse as essentially just social media on steroids. Metaverse worlds offer users a full virtual existence as an avatar through which they can socialize with other avatars, attend live events, purchase parcels of land, build houses, and conduct other business activities. While even just writing about this type of virtual existence personally makes me want to run out into the warm sunshine to frolic barefoot in soft grass and give people hugs, it apparently has real appeal to a lot of avatars. I mean, to a lot of people. Huge swaths of people, in fact. And commercial enterprises have taken notice.

Corporate Giants Go Galactic

The list of business types investing in the metaverse is broad and includes mega-companies like Nike, Miller Lite, Samsung, JP Morgan and even McDonald’s, among many others. Market value estimates and predictions for the metaverse vary, but many place the current value of the global market somewhere around $500 billion, with predictions reaching around $3 trillion within a decade. That’s a lot of virtual chicken nuggets. (Note that McDonald’s celebrated the 40th anniversary of their signature menu item by opening “McNuggets Land” in the metaverse in 2023.) 

But as interesting as metaverse fast food chains may be, what is most pertinent for Family Law attorneys and neutrals is property valuation. Real estate in “real life” generally holds its value because supply is limited and demand continues to increase with rising population numbers. There is only so much actual, desirable land available for sale here on Earth 1.

Dividing Digital Land

The metaverse, on the other hand, is endless and the “land” is manufactured as digitally-specified areas that are created by a metaverse platform in the form of non-fungible tokens (NFTs). “NFT” is the generic term for the tokenization of digital assets with unique identification codes encrypted and stored on a blockchain. The details of blockchain technology go beyond the scope of this article (thankfully), but the key takeaway here is that the monetary value of metaverse real estate depends on various factors, including the amount of NFT land plots the platform happens to decide to create in their world, as well as the popularity of the platform itself as measured through the number of users and investment dollars it attracts.

Of course, the simplest way to divide a community metaverse investment is to simply sell it and split whatever you might be able to recover. There are online marketplaces and platforms specifically designed for buying and selling virtual assets. But similar to the real world, the fair market value of a property is what someone is willing to pay at any given time. Right now, in early 2024, unless you happened to have scooped up virtual property in Snoop Dog’s Sandbox meta neighborhood, your investment is likely in the tank and hardly worth the effort of remembering your crypto account password in order to liquidate it.

For parties who can agree that their metaverse real estate should not be force-sold as collateral damage in the divorce, they could certainly contract to retain 50 percent ownership of the property, along with other terms regarding information dissemination and the timing and management of possible improvements and an ultimate sale. 

But sometimes, as in the case I helped settle recently, one party will simply insist on receiving their half of the value of the metaverse property investment as part of the marital settlement agreement. I imagine that a party with this mindset is often likely to be the one with the lesser understanding of the metaverse, NFTs, and perhaps investing in general. This means they are undoubtedly going to be mistrusting when the more informed party pushes for their personal appraisal value of the land, most likely at rock bottom prices. Unfortunately, an objective appraisal does not appear to be a viable option in this situation since virtual property appraising is not a profession that seems to have caught on quite yet.

Meta-Mediating

This is where having an informed mediator is extremely helpful in facilitating a resolution that allows one of the parties to hold on to their metaverse property in hopes of a much better return on the investment, if and when virtual property values resurge. Mediators who understand the functionality and performance of the particular metaverse platform involved, the market trends and speculative nature of the investment, and the operational challenges and uncertainty of making a metaverse land sale will be able to speak intelligently to both sides about an optimal division, to question assumptions and establish trust, and to hopefully prevent an undesired and uninformed fire sale. 

With a foundational understanding of virtual asset investments, mediators in dissolution matters involving metaverse property will be able to require parties to provide the bases for their proposed value estimations and be able assess the data and provide a degree of feedback on possible negotiated outcomes. While neutrals certainly cannot serve as evaluative experts in the case, parties and their attorneys should be able to expect their mediator to accept and understand the metaverse investment world enough to help them arrive at a fair, intelligent and civilized resolution for their family law cases here on Earth 1.