Loot boxes are a digital form of monetization in video games where the players either buy the boxes directly or collect the boxes during gameplay and buy the keys to redeem the boxes. They are also called prize crates. These virtual items when redeemed give a player other virtual items that are valuable in gameplay called loot. They range from upgrades and customization options for player avatars to gaming equipment such as armour, money and weapons. They are a means to keep generating game revenue for the games developer while avoiding subscriptions and paid downloadable content. Players can also buy new cosmetics within gameplay making it more realistic and interesting. Recent cases of grey market game skin gambling have resulted in various countries adopting regulations for loot boxes.
Why gaming regulations are to be put on loot boxes
Chance rewards are associated with gambling. Loot boxes are considered to have an inkling of chance, as the players do not usually know what they are getting. Most gambling legislations, rules and legislation however do not cover loot boxes as the items awarded to the players are assumed not to have monetary value. However, it has become known that some people exchange loot box winnings for money and that in some cases loot boxes are put in play to profit from problem gamblers. It is believed that loot boxes have also exposed children to harm. Statistics show that in the UK, at least 31% of children between the ages of 11-16 had at one point paid for loot boxes. Psychologists have cited evidence that these in-game features are designed to exploit people with psychological tendencies towards gambling like behaviours. These indications are being used to show the need of putting regulation and relevant legislation when it comes to loot boxes. Many countries are now adopting appropriate regulations for loot boxes.
Are loot boxes gambling?
The question of loot box regulation is centred around the debate on whether loot boxes should be considered as gambling. On one hand it is argued that loot boxes have, the same mechanics as games you would find in online casinos, slot machines and lotteries to be specific. The experienced with loot boxes is highly likened to when you visit a site where you can try scratch cards online as both are a matter of chance. However, gaming industries argue that since loot boxes are voluntary and virtual in nature they do not fall under gambling laws. They believe that loot boxes are far away from gambling as players never lose, but always receive valuable items that enhance their gaming experience. These conflicting ideas has have left this matter undetermined making it hard to put in place regulations for loot boxes.
Different countries regulations with regard to loot boxes
Loot box regulations in the UK
Following an inquiry by the Digital, Culture, Media and Sport Committee into loot boxes, a recommendation has been put forward that the sale and purchase of loot boxes should be considered gambling and be subjected to appropriate regulation. The whole idea behind this is to protect young and vulnerable players from potential harm. The recommendations state that loot boxes should be regulated, as they are a matter of chance for a prize just as it is with gambling. This was made concerning their Gambling Act of 2005. They also recommended that loot boxes be excluded from games aimed at minors. Game ratings are also expected to take into account the presence of loot boxes. They also advised video game publishers to be on the lookout for third party trading of in-game items in exchange for real world money. Lastly, they recommended that publishers share player data with the relevant regulating authorities for monitoring and researching psychological manipulation resulting from video games.
Loot box regulations in the USA
In 2018, discussions on regulating loot boxes started taking lawmakers interests. This was sparked by the wave of discussions and debates on loot boxes that was taking place in countries in the European Union. At the federal level, bills were proposed, research was done and regulatory bodies into this gaming practice launched investigations. However, this agenda did not take flight as the US government was shut down and the talks on loot box regulations stalled. In November 2018, Sen. Maggie Hassan who is the most outspoken advocate for loot box regulation in congress pushed the Federal Trade Commission (FTC) to investigate loot boxes. The FTC investigation is still ongoing and it is unclear as to whether a public report will be released. If the FTC were to find loot boxes to be deceptive and unfair, they would have to put in place regulations to protect consumers, especially young gamers. If these regulations pose a challenge for the FTC, the courts will have to come in and give a clear verdict on whether loot boxes fall under the existing gambling regulations. Most of the current US gambling regulations originate in the 17th century and it is widely believed that with the great advancements in technology there is need for these to be reviewed and made up to date. Loot box advocates however argue that this could easily be solved by having platform holders such as Google and Apple improving their parental control measures for online micro transactions.
Just recently, a parliamentary committee to introduce loot box regulation and mandatory age checks when purchasing loot boxes submitted a recommendation. This came as one of six recommendations in a report on protecting the age of innocence. The report also recommended the addition of warnings to video games that come with any of the various forms of micro transactions with particular emphasis on loot boxes and skins. They however also recommended that any regulations and legislation should be done in consultation with the gaming industry. The nation’s 2001 Interactive Gambling Act does not currently classify loot boxes as wagering despite public concern that they are exposing minors to gambling tendencies. To emphasize these recommendations they quoted a similar government inquiry in the UK and the resulting call for loot box regulation in the UK.
In South Africa there is no specific regulation governing loot boxes. South Africa has two acts regulating gambling. These are The Lotteries Act and The National Gambling Act. Based on the definition of a lottery in the Lotteries Act, loot boxes may be classified as lotteries as they are a matter of chance. However, this cannot be used with the National Gambling Act to classify loot boxes as gambling because loot boxes do not involve any betting or wagering. This may serve as an indirect legislation towards regulating loot boxes. However, there is need for direct legislation on loot boxes to keep publishers from contesting the existing legislation.
Currently there is no adequate or appropriate legislation for loot boxes in Canada. However a bill was put forward to make it illegal for games intended for minors to contain pay to win micro transactions and loot boxes. Hawley’s bill also regulate the sale of loot boxes in interactive games and products.
Since loot boxes require the players to use real world funds to chance on getting items, it is quite appropriate to classify loot boxes as gambling or lotteries. The only argument that currently stands is the inability to convert loot boxes to real world money. However, cases have become known of third party transactions, through https://gambla.com/uk/banking/paypal/, that are doing exactly that. Laws may vary from country to country but in order to protect minors and vulnerable parties, necessary legislation and regulation has to be put on loot boxes.