Loot boxes on video games: grey area between gaming and gambling

With a focus on the legal situation of the different European markets, our expert Carla Vicente delves into an issue that has generated controversy in recent times and that requires the greatest responsibility in regulatory terms as it concerns the relationship between children and betting.

By Carla Vicente, specialist in Gambling Law and Legal Advisor to the Portuguese Ombudsman*

Email: carla.vicente@provedor-jus.pt

Website: https://www.linkedin.com/in/carla-vicente-90315282/

“(…) We must ensure that children and adults are not confronted with games of chance when they are looking for fun in a video game.” (Belgian Minister of Justice, 2018) (a)

Loot boxes are virtual mystery boxes in videogames which may be purchased with in-game items or virtual currencies, but also with real money to unlock special characters, equipment or skins in a game (e.g., a powerful weapon; virtual gold coins, maps) to help players, for instance, to compete better or advance faster.  There’s pay-to-win and a lucrative monetization mechanism. A characteristic element of the loot boxes is the chance: though we always get something from a loot box, we don’t know what it will be. Sometimes, the content of the loot box has a market value. These features raise the issue of gambling on videogames where, probably, none of the protective gambling measures are applied.

For these reasons (and, certainly, because these types of games are often played by young people under the age of 18), several governments and other entities in Europe are taking restrictive measures. Some of them had already forbidden different types of loot boxes; others submit them to a previous license and the rest is studying this issue, as we will see. There are very fresh news from UK and Spain.

Also, the Pan-European Game Information (PEGI), Europe’s Self-Regulating video game body, decided to provide age classifications for video games in European countries and to help European parents to make informed decisions on buying computer games. On April 13th, 2020, PEGI announced that video game publishers will start to provide additional information about the nature of in-game purchases if these include random items, like loot boxes. The information will be included in the form of a notice on physical packaging and on digital storefronts. For this purpose, paid random items are those that can be purchased directly with real money and/or those that can be exchanged for an in-game virtual currency that can be purchased directly with real money. (b)

The European Games Developer Federation (EGDF) recently offered its support to the gambling authorities in disseminating guidelines on the implementation of their national regulation among game developer community. EGDF welcomed the focus of European gambling authorities closing illegal practices such as “skin betting”, where third party sites allow minors to bet and trade virtual items. (c)

LOOT BOXES AS GAMBLING

Let’s start with the Belgium case. (d) Concerned about the protection of minors and vulnerable players, on 2018, the Gaming Commission investigated Star Wars Battlefront 2, FIFA 18, Overwatch and CS:GO. These last three were considered games of chance, therefore, illegal gambling under the Belgian Gaming Act: they have a game element, involve a stake, lead to profit or loss. Chance is a key factor. The Commission stated that the loot boxes must be removed from those games, otherwise, game operators could be subject to potential criminal and law suits, facing a prison sentence of up to five years and a fine of up to €800,000. That can be doubled if children are involved in the offense. Overwatch and CS:GO removed their loot boxes for games in Belgium. Electronic Arts decided, only on January 2019 and after further discussions with the Belgium authorities, to stop offering FIFA points for sale in Belgium. This means that players in Belgium will not be able to purchase points to obtain FIFA Ultimate Team packs.

Netherlands (e) 

The Gaming Authority studied loot boxes on 2018, after concerns were raised by gamers and parents. The study revealed that four of the ten studied loot boxes contravene the Betting and Gaming Act because: (1) the content of these loot boxes is determined by chance, and (2) the won prizes can be traded outside of the game, e.g., transferable to other players. Offering these types of gambling without a government license is prohibited. The Gaming Authority also concluded that all of the studied loot boxes could be addictive: loot boxes are similar to gambling games such as slot machines and roulette in terms of design and mechanisms.

Denmark (f)

An individual assessment is necessary to determine if loot boxes are covered by the Gambling Act. A license from the Gambling Authority is required if the following criteria are met: it involves a stake; there is an element of chance; it is possible to win a prize with monetary value.

Spain (g)

On November 2020, the General Directorate for the Regulation of Gambling announced that the Government will modify the Gaming Law in order to reclassify loot boxes as games of chance.

STUDYING THE PROBLEM

On 2018, the Gaming Regulators European Forum (GREF) (h), an association of gambling regulators, published a joint “Declaration of gambling regulators on their concerns related to the blurring of lines between gambling and gaming”, whereby they committed to analyze the characteristics of video games and social gaming to assess whether they can be qualified as gambling. On 2019, the body published some conclusions (i): there are special concerns with loot boxes, social casino gaming and the use of gambling themed content within video games available to children. It is recognized that each national gambling regulation defines what gambling is, but more accurate information should be given to consumers about games.

United Kingdom (j)

The UK Gambling Commission repeatedly held that loot boxes in video games do not constitute gambling under the UK law, unless they have outside value. On the other hand, on July 2020, the UK House of Lords published a report on the harms of gambling, which contained the recommendation to immediately bring loot boxes under the gambling legislation and regulation. Government launched a call for evidence to understand the impact of loot boxes (ended at November 2020). This followed a commitment made by the Government to review the Gambling Act, with a particular focus on loot boxes.

The conclusion of this issue is that loot boxes are getting more and more attention due to their gambling features and the need to protect consumers, particularly children.

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Footnotes:

(a) https://www.koengeens.be/news/2018/04/25/loot-boxen-in-drie-videogames-in-strijd-met-kansspelwetgeving

(b) https://pegi.info/pt-pt

(c) http://www.egdf.eu/documentation/7-balanced-protection-of-vulnerable-players/consumer-protection/lootboxes/

(d) https://www.ea.com/en-ca/news/fifa-points-belgium

(e) https://kansspelautoriteit.nl/english/loot-boxes/

(f) https://www.spillemyndigheden.dk/en/skin-betting-and-loot-boxes-video-gaming-or-gambling#skin-betting-in-denmark

(g) http://www.congreso.es/public_oficiales/L14/CORT/DS/CM/DSCG-14-CM-30.PDF

(h) http://www.gref.net/update-blurring-of-lines-between-gambling-and-gaming/

(i) http://www.gref.net/wp-content/uploads/2019/10/Synthesis_final-draft_v4_clean.pdf

(j) https://www.gov.uk/government/consultations/loot-boxes-in-video-games-call-for-evidence

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*Holding a degree in Law, with two Postgraduates Courses in European Law and a Postgraduate Course in Administrative Law, in the last ten years, Carla Vicente has specialized in Gambling Law, focused on the protection of players and the implementation of responsible gaming policies. As Legal Advisor at the Ombudsman’s Office in Lisbon, Portugal, she handles player requests and complaints against some gambling operators, the Regulatory Service (SRIJ) itself and even against applicable legal provisions. Thanks to her hard and valuable work, Vicente was able to achieve important legislative changes and to correct some irregular practices in the sector.