That same argument doesn't hold water on the internet. Its a communication medium. Its like a flow of information. You don't enter or leave physically spaces. the information flows to you where ever you are. trying to apply the same kinds of laws to the internet is a recipe for disaster because you are effecting everyone at the same time.

Yes, afaik authentication is performed by applications at L7 and as such flows via Internet protocols like anything else.

All kinds of laws are applied to services provided via Internet. For example, once upon a time people said collecting sales tax was an insurmountable problem and a disaster for ecommerce. Time passes and what do you know, people figured out ways to comply with laws.