Where the Metaverse and Sports Collide

By Alexandra Saba, of Hackney Publications

Sports and technology have almost always been uneasy bedfellows. In many areas, technology has transformed the sports world, making it easier and more enjoyable to embrace sports content. In other areas, traditionalists, i.e. mostly baby boomers, have eschewed technology and what it offers to their consumption of sports content.

However, the baby boomers are aging out, meaning the technology applications will likely accelerate in the sports industry. That is exactly what the lawyers at ArentFox Schiff LLP are counting on.

The firm, which boasts a progressive sports practice led by the iconic Richard L. Brand, as well as Frederick J. Sperling and Maidie E. Oliveau, is busily exploring the emerging concept of the metaverse and how it intersects with sports, from a legal perspective.

“The metaverse is the emerging 3-D-enabled digital space that uses virtual reality, augmented reality, and other advanced internet and semiconductor technology to allow people to have lifelike personal and business experiences online,” according to McKinsey.

With that as the foundation, what follows is an exclusive interview with Brand and Dan Jasnow, another partner at the firm, about their vision for this area of technology and where it interacts with sports.

Question: How would you define the role of the metaverse in sports now? How do you think that will evolve in the future?

Answer: Like many industries, the sports industry’s relationship with the metaverse right now is largely experimental. What we are seeing today is leagues, teams, and athletes trying out different types of metaverse experiences to figure out which add the most value and are most appealing to fans. This includes NFT marketplaces that allow consumers to acquire digital collectibles, interoperability between digital collectibles and popular video games, augmented and mixed-reality venue experiences, virtual replicas of stadiums and arenas, and use of state-of-the-art video capture technology to create immersive new ways to broadcast and experience live sporting events.

As augmented and mixed reality technologies continue to improve and become more widely available, we expect to see immersive experiences become even more central to sports fandom. Imagine, for example, putting on a Meta Quest 3 or Apple Vision Pro to watch the NBA finals as if you were seated courtside. These more immersive experiences will bring fans closer to their favorite teams and athletes, while also generating new licensing and merchandising opportunities to teams and leagues.

Q: What is the relationship between the physical sport world and the metaverse?

A: While definitions of the metaverse differ, we think of the metaverse as an immersive digital ecosystem built on virtual, augmented, and mixed-reality experiences. This eco-system will contain digital assets and technologies that offer new ways for fans to experience physical sports, while improving associated industries like gaming. For example, as noted above, augmented reality devices like the Meta Quest 3 or Apple Vision Pro, together with state-of-the-art camera technologies, could allow consumers to watch live entertainment as if they were seated in the stands, or perhaps even on the field, court, or rink. The metaverse also offers new and powerful ways for individual athletes to deploy their NIL rights, whether by hosting immersive virtual meet-and-greets with fans or by licensing those rights for new commercial uses. For its part, the metaverse offers tremendous new growth potential for the sports gaming industry, as shown by the recent integration agreement involving Nike digital apparel and EA Sports.

Q: Some have compared the potential growth of the metaverse to the dot-com bubble era, to what extent would you say these comparisons are true? Do you predict the same inevitability in popularity?

A: The popularity of the metaverse is certainly not inevitable. It will be up to technology and software developers, as well as leagues, teams, and athletes, to create devices, products, or experiences that capture and hold the attention of fans. Like during the dot-com era, many companies will fail, but those that get it right and successfully navigate the legal issues could revolutionize our relationship to sports and live entertainment.

Q: Given the freshness of the field, are there any regulatory bodies monitoring interactions between leagues/teams/players/fans/venues in the metaverse? Do legal regulations and expectations differ in the metaverse?

A: There are a variety of regulators who are watching the metaverse, including the U.S. Securities and Exchange Commission, which closely scrutinizes the use of NFTs, as well as the Federal Trade Commission, which, among other things, has been monitoring the metaverse and virtual worlds to ensure that user interfaces do not obscure or undermine legally-required disclosures or mislead consumers. In the U.S., companies must also always be mindful of potential class action litigation under state consumer protection and unfair competition laws.

Companies and entities that do business in the metaverse must consider how to reconcile these novel technologies with existing laws, and there may be areas where laws or regulations need to be updated to reflect new technologies, but generally speaking, laws and regulations do not differ for the metaverse. As lawyers, it’s our job to help our clients understand how to apply existing laws and regulations to these new technologies and to help them mitigate legal risks.

Q: How did ArentFox Schiff begin its foray into the sports metaverse world? What work do you do in the metaverse?

A: ArentFox Schiff has a long record of being at the forefront of emerging technology law. Our firm was an early leader in Internet law during the dot-com era of the early/mid nineties and our interest in and work in the metaverse, as well as generative AI, is a continuation of our firm’s deep commitment to understanding emerging technologies and helping our clients navigate unique new legal challenges. In order to be the best partners for our clients in the metaverse space, we also became the first large law firm to purchase land in the metaverse (Decentraland) and build a virtual office. This was, in part, due to the fact that a number of our clients already had a metaverse presence and we wanted to ensure that we, as a firm, could meet them where they are and show them that we understand how to operate in this new digital ecosystem.

Q: How does the firm want to position itself in the metaverse in the coming years? Do you think the style of work that is currently done in the metaverse will stay somewhat static or continue to evolve for the foreseeable future?

A: The metaverse is likely to continue to evolve and the legal issues and our work will evolve too. As suggested by our firm’s motto, “Smart in Your World,” we are and will continue to ensure that we are at the forefront of the metaverse ecosystem so that we can help any of our clients who choose to do business in the metaverse. At the end of the day, we are here to serve our clients and will continue to build and adapt our practice to ensure that we can help them better understand new technologies, exploit business opportunities, and protect themselves against potential legal risk.