The fight against loot boxes and gambling in gaming
Regulators around the world began cracking down on a practice in the game industry known as “loot boxes” this past year.
Loot boxes are a mechanism where companies allow players to buy a randomised selection of in-game items for real-world currency. Crucially, the contents of the loot box is only revealed after the purchase is made.
Publishers of game franchises use the monetisation strategy across their best-selling titles, often resulting in consumer backlash.
This backlash was not only about loot boxes, however, and could be traced to unhappiness over the inclusion of “microtransactions” in games.
The essence of the complaints were that publishers were charging full price for their latest games, and then either forcing or strongly encouraging players to spend more money to get the full experience.
At launch the “standard” edition of games from high-end publishers usually retail for between R900 and R1,000, while a deluxe or collector’s edition is R1,500 or more. These prices may vary depending on whether the game is being bought for PC, Xbox One, or PlayStation 4.
While many games allow loot boxes and other digital items to be purchased with currency that can be earned within the game, publishers were accused of crippling the gameplay experience to encourage players to spend real money.
Examples of titles which faced such accusations, include Middle Earth: Shadow of War, Star Wars: Battlefront 2, and Destiny 2.
Courting controversy
The crackdown on loot box mechanics began in the Netherlands in April 2018, when the country’s gaming authority ruled that four out of 10 games it had investigated needed a gambling licence to continue operating within its borders.
Subsequent media reports named FIFA 18, Dota 2, PlayerUnknown’s Battlegrounds, and Rocket League as the first wave of offenders.
According to the ruling, the issue was twofold: the content of the loot boxes in the four offending games was determined by chance, and the prizes had market value because they could be traded outside of the game.
Belgium’s Gaming Commission soon followed with its own announcement, saying that FIFA 18, Overwatch, and Counter-Strike: Global Offensive violated the country’s gambling legislation.
The country’s Minister of Justice, Koen Geens, said that he requested the investigation after a scandal with the loot boxes in Star Wars Battlefront 2.
In July, Valve disabled the ability to trade in-game items for CS:GO and Dota 2 within the Netherlands as a stop-gap to ensure it complies with Dutch law, while it engaged the country’s gaming authority.
The French gambling regulator also criticised loot boxes, and while it did not classify them as gambling it did say that further investigation was planned.
Consequences
Following investigations, Eurogamer reported in September that Belgium had launched a criminal investigation against EA after the company failed to implement changes to FIFA 18’s loot box mechanics.
While Activision Blizzard, Valve, and 2K Games disabled loot boxes in their games in Belgium, EA made no changes to its games. It also argued that its games could not be considered a form of gambling, and that it does not authorise any way to cash out in-game items or currency for real money.
Despite this, 15 gambling regulators in Europe signed a declaration on their concerns that game publishers were blurring the lines between gambling and gaming.
The regulators stated that developers and publishers must ensure that features in games, such as loot boxes, do not constitute gambling under national laws.
At the same time, researchers from York St. John University and University of York presented the results of a survey of 7,000 gamers to the Australian Environment and Communications Reference Committee.
The survey was a response to a journal article published in June titled “Video game loot boxes are psychologically akin to gambling” and found links between loot box spending and problem gambling.
An Australian Senate inquiry later recommended that the country’s Federal Government conduct a comprehensive review of loot boxes in video games.
Towards the end of November, the Federal Trade Commission (FTC) in the United States also agreed to investigate loot boxes after an official request by a senator.
In response to the pending FTC investigation, the Entertainment Software Association stated that loot boxes are not gambling as the have no real-world value, always give players something, and are entirely optional.
Troubling statistics
While publishers continue to argue that loot boxes do not technically constitute gambling, the UK Gambling Commission has raised concerns that nearly a million young people have been exposed to gambling through loot boxes.
The commission found that the number of children who have a gambling problem has increased four-fold in two years, and over 50,000 children in the UK are now considered to have a gambling problem, it stated.
It also found that 450,000 people between the ages of 11 and 16 gamble regularly, which is more than those who have consumed alcohol, smoked, or taken drugs.
Popular types of gambling for underage users in the UK include slot machines, scratch cards, and bets with friends.
Gambling Commission executive director Tim Miller said that while talk of underage gambling conjures images of children sneaking off to casinos, the reality is more complex.
“The most common activities that children gamble on are not licensed casinos, bingo providers, or bookies,” Miller said.
“We found children preferred to gamble in informal environments, out of sight of regulation – private bets between friends or playing cards with their mates for money.”
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