Based on the principles of ‘rule of law’ this research-in-progress paper theorizes the key role of internal governance procedures within virtual worlds for promoting digital entrepreneurship. By fostering adequate trust, internal governance procedures within VWs, provide the requisite amount of certainty, transparency, predictability and legitimacy to the transactions carried out within the VWs. In summary, this research proposes a plausible framework for conceptualizing the adoption and diffusion of VWs as a platform for digital entrepreneurship.