GamePolitics has an article about a research paper issued by the AU government's Institute of Criminology titled "Crime Risks of Three-Dimensional Virtual Environments." The paper discusses the legal questions raised by game worlds and avatars, ranging from regulation of in-game currency to a report of virtual rape. "A person controlling an avatar that is unexpectedly raped or assaulted might experience the physical reaction of 'freezing,' or the associated shock, distrust and loss of confidence in using [3D virtual environments]. While civil redress for psychological harm is conceivable, the 'disembodied' character of such an incident would invariably bar liability for any crime against the person. However, Australian federal criminal law imposes a maximum penalty of three years imprisonment for using an internet carriage service to 'menace, harass or cause offence' to another user. Further, US and Australian laws ban simulated or actual depictions of child abuse and pornography. Therefore, any representations of child avatars involved in virtual sexual activity, torture or physical abuse are prohibited, regardless of whether the real-world user is an adult or child."
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