Taxing the Metaverse

57 Pages Posted: 31 Aug 2023 Last revised: 5 Oct 2023

See all articles by Young Ran (Christine) Kim

Young Ran (Christine) Kim

Yeshiva University - Benjamin N. Cardozo School of Law

Date Written: August 23, 2023


The buzz surrounding the Metaverse has been growing steadily for the past couple of years, but the tax implications of this novel ecosystem remain fuzzy to most tax scholars. Such uncertainty is concerning, given the potential and momentum of this emerging technology. Although the Metaverse evolved from online video games focused only on user consumption, it now allows users to produce income and accumulate wealth entirely within the Metaverse. Current law seems to defer taxation of such until a realization or cash-out event. This paper challenges this approach.

This paper offers novel arguments justifying Metaverse taxation. Because economic activity within the Metaverse satisfies the Haig-Simons and Glenshaw Glass definitions of income, its exclusion will create a tax haven. Tax policy can also play an essential role in regulating the virtual economy. Furthermore, this emerging technology allows policymakers to modernize the tax system. The Metaverse’s ability to record all digital activity and track individual wealth can offer governments a unique opportunity to tax income immediately upon receipt and thus, overcome the traditional realization requirement and its incentive for tax deferral. Immediate taxation, such as a mark-to-market system, would be a more efficient and fairer approach so long as it could overcome intrinsic valuation and liquidity problems.

Therefore, this paper proposes that income and wealth within the Metaverse should be subject to immediate taxation. As support, it considers the tax implications of self-created virtual assets (like NFTs), loot drops, intra-metaverse exchanges, inter-metaverse exchanges, and cash-for-virtual goods exchanges. It also endorses the proposal for unliquidated tax reserve accounts (ULTRAs) as a mark-to-market taxation suitable to resolve immediate taxation’s valuation and liquidity issues. Finally, it demonstrates that governments can use the Metaverse as a laboratory for experimenting with cutting-edge policy, which may benefit broader audiences beyond tax policymakers interested in the Metaverse’s future.

Keywords: metaverse, blockchain, cryptocurrency, NFTs, non-fungible tokens, realization, mark-to-market, MTM, tax deferral

JEL Classification: K34, H2, H26, O38

Suggested Citation

Kim, Young Ran (Christine), Taxing the Metaverse (August 23, 2023). 112 Georgetown Law Journal (2024, Forthcoming), Cardozo Legal Studies Research Paper No.724, Available at SSRN:

Young Ran (Christine) Kim (Contact Author)

Yeshiva University - Benjamin N. Cardozo School of Law ( email )

55 Fifth Ave.
New York, NY 10003
United States


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