Loot boxes have become something of a focus for legislators as they consider what things do and don’t constitute aspects of gambling. It’s come about as part of the British government’s attempt to upgrade the 2005 Gambling Act to make it effective for the modern day, given that the 2005 version of the act didn’t take into account how prevalent the Internet would become.
It might seem like something of a trivial point, but the world of loot boxes is a lucrative one and whether or not they’re a form of gambling is important. They have already been banned in many countries, which is why the Department for Culture, Media and Sport spent a long time considering them back in 2019. We’ll look at it in closer detail here.
A Potted Guide to Loot Boxes
Before we spend too long delving into the legal arguments around loot boxes, it’s firstly important to establish exactly what it is that we’re talking about. Loot boxes are essentially like virtual treasure chests that can be bought whilst playing certain computer games. They tend to contain an unknown item or items, so what will be in them is something of a lottery.
They can be specific characters, such as classic players in games like FIFA, or they could be a way of customising characters with weapons or outfits in action games. They can show a player’s status within a game and sometimes they can be necessary for a player to progress to the next level of a game. They’ve been made possible by cloud gaming.
Why They Matter
When computers and computer games first began to become popularised, the games would be on disks and players would play them against the computer or against friends in the same room as them. The development of the Internet has meant that more and more games can be moved online, downloadable from a central database and updated regularly.
This means that computer game makers can create games that are immediately playable but that can also offer an additional form of income thanks to upgrades via loot boxes. In 2018, it was predicted that this secondary market would be worth £35 billion in revenue by the year 2022. This was in spite of the fact that their use resulted in consumer backlash.
Loot Box History
Loot boxes developed out of randomised loot drop systems that existed in early forms of massively multiplayer online role-playing games. They would involve important ‘loot’, such as clothing, weaponry or health boosts that would be ‘dropped’ into a game at random. The first example of the move to monetised loot boxes was in a Japanese game called MapleStory.
Players would pay as much as one hundred yen for a Gachapon ticket, which game them randomly allotted game items. From there, more games became to use this method of monetising free-to-play games. Once their popularity became clear, other companies began to introduce the notion of a loot box into their offerings. The most obvious example being FIFA’s Ultimate Team Mode.
Arguments for Them as Gambling
In 2019, a parliamentary committee of MPs working on behalf of the Department for Digital, Culture, Media and Sport investigated whether or not loot boxes should be considered to be a form of gambling. The MPs felt that the mechanics of how loot boxes work meant that they should indeed be classified as a form of gambling.
The main reason for this was that they involved paying real-world money for something, the contents of which was down to a game of chance. That would mean that they would fall under the jurisdiction of the UK Gambling Act, which has been law since 2005. The group of MPs took evidence from numerous quarters on the issue to get a rounded picture.
The likes of Facebook, which owns Instagram, Snapchat and the makers of the game Fortnite, Epic Games, were all spoken to, but the committee found that at least some representative of the gaming industry were ‘wilfully obtuse‘ when spoken to over the issue. The data-rich immersive technologies were ‘business models’ that concerned the MPs.
One of the major concerns around loot boxes is that they demonstrate a similar level of addictiveness to other forms of gambling. The committee heard from one person who had got into more than £50,000 worth of debt playing RuneScape, with Jagex, the game’s makers said that people could spend up to £1,000 per week of £5,000 per month on the game.
Arguments Against Them Being Gambling
Prior to the DCMS committee’s investigation into loot boxes, the United Kingdom Gambling Commission had looked into them themselves and decided that they were, in fact, not going to be classed as a form of gambling. This was based on the fact that the prizes gained from loot boxes had no monetary value, therefore not coming under the Gambling Act’s jurisdiction.
The 2005 Gambling Act defined gambling as playing a game of chance for money or money’s worth. If a prize isn’t either money itself or something that is the equivalent of money then it is not defined as gambling. By trying to prevent secondary markets in which loot box prizes can be sold, video game makers have done their best to keep them as non-gambling.
The issue for companies, such as EA, which makes FIFA, is that there are plenty of secondary markets in existence that allow gamers to sell and buy loot box prizes. That means that they then do have a monetary value, which shifts their definition into the world of gambling. The argument comes down to whether they have to be legitimately bought and sold.
There’s also an argument that loot boxes are essentially just the modern version of baseball cards or stickers that kids used to buy to fill their Panini sticker books many moons ago. They would be bought in bulk and then swapped with others, sometimes even sold. There was never a call to make Panini stickers or baseball cards a form of gambling.
Concerns Around Children
One of the chief reasons that so many people are keen to have loot boxes classified as a form of gambling in the United Kingdom is that they’re seen as something of a gateway to harder forms of gambling in the future. Children are disproportionately likely to spend money on loot boxes because they’re more likely to play video games on a regular basis.
When speaking to the DCMS committee, Neil McCarthur from the Gambling Commission admitted that the UKGC had ‘significant concerns’ around children playing games that had elements of ‘expenditure and chance’. As far back as 2017 a Gambling Commission report pointed to skin betting as a major problem for children.
Skin betting is when a prize won on a game can be sold for real money, with the report back in 2017 finding that as many as 45% of children aged eleven to sixteen knew what it was and 11% of them had placed bets using in-game items. One such person was fifteen when he started skin betting and lost more than £2,000 in the four years that followed.
How Other Countries Have Treated Them
The country of Belgium banned loot boxes in 2018, with the decision coming after an investigation into Battlefront II, FIFA 18, Overwatch and Counter-Strike: Global Offensive. The gamers of Belgium didn’t argue, with many finding them to be dishonest and presenting people with an unfair advantage within the game.
Loot boxes continued to exist in Belgium after the decision, but only ones that could be won by good gameplay as opposed to bought for money. The difference between Belgium and the United Kingdom in terms of knowing how to deal with loot boxes was that the gambling rules were already stricter in Belgium, so that gave the Belgians a cultural head start in banning them.
In June of 2019, a United States senator introduced a bill to ban loot boxes in the USA. It came off the back of the country being one of sixteen signatories of a 2018 agreement to investigate loot boxes in the realm of digital gambling. The others were as follows:
- Czech Republic
- Isle of Man
- United Kingdom
In March of 2020, Australia introduced legislation that would mean that being attempting to buy loot boxes would need to provide identification. The idea was to restrict the boxes to people over the age of eighteen. Similar plans were re-introduced in America for the same reason, with a former US Presidential candidate in the form of Andrew Yang saying that they need regulating.
The Netherlands made a similar decision to Belgium, investigating ten different forms of loot boxes in 2018 and discovering that four of them violated the country’s gambling laws. The makers of the games that they featured in were forced to change them to comply with the law, but the Dutch Gaming Authority also felt that the laws were inadequate in terms of dealing with loot box issues.
What the DCMS Said About Loot Boxes
Back to the United Kingdom and the approach to loot boxes taken by the Department for Culture, Media and Sport after their committee’s investigation was concluded. Having spoken to numerous different representatives of the gaming community, including the Vice-President of EA Games who said that they were akin to Kinder Eggs, the committee felt it had enough information.
The Kinder Egg comparison was dismissed by Ryan Brown, a gaming journalist. He said that gamers wish they weren’t there and even those that bought them weren’t happy about their presence in games. It was a take that was largely agreed with by the committee, who said at the conclusion of their investigation that they should be regulated as gambling.
The DCMS also felt that their sale should banned entirely when it came to children. Any games aimed at children should have loot boxes ‘stripped out of them’, whilst games that offer them should have an appropriate PEGI age rating. Whilst they were only recommendations and not laws, it is believed by many that they will be included in any update to the 2005 Gambling Act when it eventually comes about.