Owning a domain name isn’t just about claiming your spot online; it’s about recognizing domains as valuable digital assets worth protecting. Most of us register a domain to create a digital home for our business or passion project. However, domains can also be registered by legitimate investors looking to generate a profit, or by bad actors aiming to exploit brands for financial gain or deception.

Sometimes, the intent is fair—a new business might find that its ideal domain name is already taken because someone registered it early as a smart investment. Other times, it’s not so innocent—a company might discover a lookalike domain meant to trick customers or cash in on its brand.

Predatory practices like cybersquatting can sometimes be confused with domain investing. Often lumped together, the terms cover different behaviors—some strategic, others outright unlawful.

For any business operating online, understanding these differences is key. It helps you spot potential issues early, and decide when a situation is harmless, when it’s questionable, and when it crosses into unlawful territory that could put your brand at risk.

With that in mind, let’s break down each term and highlight how they differ.

Domain investing: getting there first

Domain investing is registering a domain name primarily to resell it later—not necessarily intending to build a site, business, or product. The idea is to predict what others might want, secure it first, and then sell it at a profit.

To realize that profit, investors resell domains on secondary marketplaces or through auctions. The practice is often likened to real estate investing: buying property not to use it yourself but because you believe someone else will pay more later.

When done without infringing on trademarks, it’s a legitimate, lawful practice.

Here are some key traits of domain investing:

  • Can involve any domain name with perceived value—generic phrases, trends, or even personal names.
  • It’s not unlawful—many investors stay within the law by focusing on generic or descriptive terms, not trademarks.
  • Can overlap with other kinds of investing: domains are often traded like real estate in secondary marketplaces.
  • May use “parked pages,” simple placeholder sites that typically display ads, to monetize the domain while waiting for a good buyer.

For example, registering bestcoffeesupplies.com with the intent to sell to a retailer is generally fine, since it doesn’t reference a trademark.

Cybersquatting: could get you into legal trouble

Cybersquatting, sometimes called typosquatting, is registering a domain that targets a trademark in bad faith—to confuse users, divert traffic, or pressure a brand into purchasing the domain back.

Unlike domain investing, it exploits the reputation a brand has already built—usually by registering a domain that mimics a real brand name. The goal is often to divert traffic, but it can also escalate into DNS Abuse if the domain is used for phishing.

In other cases, the registrant simply bets that a company will pay for its own name in a different TLD or a slightly misspelled variation. Whatever the approach, the result is the same: cybersquatting is an unlawful practice that can trigger legal disputes and lead to steep financial penalties.

Here are some of the key traits of cybersquatting:

  • Involves a trademark or brand
  • It’s defined by bad-faith intent—reselling domains at inflated prices, redirecting users to competitors, or hosting fraudulent content.
  • It’s an unlawful practice—the use of trademarks that cybersquatters don’t own violates trademark rights and applicable laws.
  • It’s governed by specific legal frameworks:
  1. The Uniform Domain-Name Dispute-Resolution Policy (UDRP) is a global administrative process overseen by the World Intellectual Property Organization (WIPO) that allows trademark owners to challenge bad-faith domain registrations outside the court system. This can result in a domain being transferred to the trademark owner or cancelled. The UDRP doesn’t award monetary damages, but, because it is faster and less costly than litigation, it has become the primary tool for resolving international cybersquatting disputes. The UDRP (and its cousin, the URS) applies to all gTLDs. Some ccTLDs have also opted into it or created their own similar system.
  1. While Canada relies on the Canadian Trademarks Act to cover cybersquatting, the United States created a specific law about it: the Anticybersquatting Consumer Protection Act (ACPA). Enacted in 1999, the ACPA allows trademark holders to sue cybersquatters in court—a framework quite similar to the UDRP. However, just because there isn’t a specific law against it in Canada doesn’t mean it’s not still illegal.

Final thoughts

Domain names are a great way to protect your great idea, to monetize one you might execute in the future, or to invest in ideas that someone else might like to implement. When done right, domain investing is a legitimate way to participate in the online economy—one that rewards foresight without crossing legal lines.

The trouble starts when domains lean on existing trademarks or brand names. That’s when investing turns into cybersquatting, and instead of profit, you’re more likely to end up with a takedown, a UDRP decision, or an unfriendly letter from a lawyer. In other words, invest wisely, and don’t let a good idea get caught on the wrong side of the law.