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What’s the problem with loot boxes?

4 min read

Technology, Media & Telecoms, Games & Interactive Entertainment

Whats the problem with loot boxes

In the world of video games and microtransactions, the line between gaming and gambling is somewhat blurred and this is a conundrum that has provoked strong opinions across the industry for several years. At the heart of this debate sit “loot boxes” – love them or hate them, they are here to stay for the time being unless and until gambling legislation is updated to address these contentious items.

Loot boxes and randomised rewards

“Loot boxes” are in-game items that can be purchased using real-world money but which provide players with a randomised reward of uncertain value, and they have become a go-to method of generating revenue for some game developers.

The problem lies in the amount of cash that gamers are encouraged to spend in microtransactions, seeking to obtain a useful or desirable asset – whether it’s a new skin for your character that makes you stand out in the crowd, or a new weapon or piece of equipment to give you the edge against other players. As the outcome of a loot box is random, there is potentially no limit to the amount that a player must spend before obtaining the specific item they’re after.

Loot boxes that require real-world cash have hit the headlines a number of times in recent years, with horrors stories of kids draining their parents’ bank accounts or forcing their parents to remortgage their homes. It is easy to draw parallels with gambling (and gambling addiction), but gambling regulations intended to protect both consumers and the industry haven’t quite caught up.

Loot boxes and the law

Whether or not loot boxes fall within the scope of gambling laws depends to a large extent on whether the items obtained from the loot box constitute “money or money’s worth”.

In-game currencies and items typically cannot be exchanged back into real-world money. Guidance from the UK Gambling Commission expressly states that game items or currencies which can be converted into cash or traded for items of real-world value are considered to be “money or money’s worth” for the purposes of gambling legislation. If there is any element of chance involved in obtaining these items then this would almost certainly fall foul of the law (in the absence of the game developers holding valid gambling licences). This practice is invariably prohibited in developers’ licence agreements for games for this reason.

However, where in-game items cannot be traded for cash (as is usually the case), the Gambling Commission’s guidance makes it clear that these items are not money or money’s worth and, as such, this falls outside the scope of UK gambling laws.

There have been a number of calls in the last couple of years for UK gambling laws to be updated to cover loot boxes and similar models that have become prevalent in the console, PC and mobile gaming markets, including reports from the Department for Digital, Culture, Media and Sport (DCMS) Select Committee and a House of Lords Committee.

These reports have prompted the UK government to address this issue head on, and a call for evidence was announced in June 2020 which ran from September to November. A DCMS policy paper published on 8 December 2020 confirms that the findings from this call to evidence will help inform the Government’s upcoming review of gambling legislation to ensure that it is fit for the digital age.

Other countries including China and Belgium have taken a harder stance on loot boxes, with Belgium going as far as an outright ban. It is unclear in which direction the UK will go, but it is likely that we will soon see an overhaul of gambling legislation that may see loot boxes and similar mechanics being regulated more strictly.

At Brabners, our specialist gaming and esports lawyers have a long history of advising and supporting game developers and other organisations in the gaming industry – get in touch to find out how we can support your business.

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