Web 3.0 is a huge opportunity for gaming, but inconsistent regulation will present challenges

Web 3.0 presents the gaming industry with new monetization opportunities, but a lack of regulatory certainty could lead to disputes on issues including data privacy and asset ownership

Web 3.0, the next generation of the internet, presents the gaming industry with a major opportunity to explore novel monetization models, where the virtual worlds of games are transformed into genuine economies in which players have tangible ownership of their in-game assets.

The ability to trade or purchase game items can give them real world value via the application of blockchain technology, in the form of non-fungible tokens (NFTs) or cryptocurrency.

However, as a relatively new concept, Web 3.0 is widely unregulated and with shifting regulations around the broader digital economy, Web 3.0 could present challenges to gaming companies and players around asset ownership and other areas such as data privacy.

One grey area is User-Generated Content (UGC); content such as custom maps or game modes, created in-game by players, which can be posted within the game or on external platforms for other players to use.

In the Web 2.0 world UGC is guarded by End User License Agreements which may allow players to profit off their UGC but enables developers to remain in full control by owning the ultimate copyrights. However, as the Blizzard-Valve dispute showed, without clear wordings around intellectual property rights, ownership of UGC can become contentious.

For Web 3.0 games where players own the rights to in-game assets in the form of NFTs, the potential for profit and third-party sales introduces the possibility of dispute scenarios arising in 2024 and beyond for game developers and publishers, as well as their insurers.

They also face multiple regulatory issues around the use of cryptocurrency tokens in game economies. The wide variance in how crypto is regulated in different countries could give rise to potential tax liabilities and will have implications for in-game assets around ownership, transferability, liability for theft or loss, dispute resolution, and treatment in bankruptcy proceedings.

Games developers should also be aware of the Anti-Money Laundering implications of Web 3.0 in relation to in-game assets and consider limitations in T&Cs and smart contracts on the sale or transfer of NFTs to other parties.

Additionally, Web 3.0 games collect, store and handle players’ personal data. Keeping pace with evolving global privacy regulations to ensure compliance will present publishers and insurers with significant challenges.