Are Loot Boxes Gambling? Gaming Giants Vow Crackdown

Are loot boxes a form of gambling? It's a question that has been a hot topic in the video games industry over the past couple of years, and one that has recently forced the hands of Microsoft, Nintendo and Sony into clamping down on the practice.

What are loot boxes and why are they so controversial?

Loot boxes – that is, in-game 'mystery boxes' that offer a selection of randomised items to players – have become a staple of many triple-A gaming titles released in the 2010s. While they were initially seen as a fun way of rewarding players with surprise in-game cosmetic items (with Blizzard's Overwatch being a widely praised example), they've since come under fire for being closely associated with gambling, as more users increasingly spend real money on the chance to win particularly sought-after, game-changing items.

https://www.youtube.com/watch?v=nVn89eFMh6Q

Loot crates, as they're also known, hit the headlines for the wrong reasons following the release of Star Wars: Battlefront II back in 2017. Publisher, EA, came under severe criticism for two main reasons: firstly, they locked away key gameplay advantages and characters inside loot boxes and secondly, they allowed users to purchase said boxes with real money – fostering a 'pay to win' mentality in the eyes of critics.

Are developers promoting gambling to children?

The practice was widely condemned, and despite an about-turn with regards to Battlefront II's microtransactions, the issue led to the spotlight being turned on the idea of loot boxes as a whole. The mechanics of the boxes, their item distribution and probabilities, have been compared to those of slot machines, with experts theorising that the incentive of possible mystery ‘jackpots’ keeps players invested through the 'compulsion loop' – a mentality commonly associated with gambling addiction.

Couple that with the aforementioned fact that many games allow users to effectively purchase loot boxes with real-world currency, critics argue, and you essentially have an unregulated form of gambling. Not only that, but with many video games aimed at audiences under 18, there is also the argument that underage players are, at the very least, being introduced to supposedly ‘acceptable’ forms of a harmful gambling mentality; the most severe directly gambling themselves.

Which countries have made loot boxes illegal?

With widespread media reports in 2018 of incredible amounts of money being spent by single consumers on in-game loot boxes – EA again being under the spotlight for its FIFA Ultimate Team 'packs' – lawmakers and regulators around the world began taking the issue very seriously. In April 2018, courts in Belgium and The Netherlands determined that some forms of loot boxes violated existing gambling regulations - mainly, when real-world money was involved.

Elsewhere, as you can see in our interactive map below, other governments and regulators have made similar determinations about whether or not loot boxes are a form of gambling. Notably, some Asian countries including China, Japan and South Korea require developers to disclose the payout rate of loot crates, while Australian lawmakers have proposed classing them as gambling and subjecting them to strict regulation.

Where do the UK and US stand on the issue?

For its part, the Gambling Commission in the UK has claimed that loot boxes cannot, under current legislation, be classified as gambling as there is no official way to monetise the items found within them – that is, they can't (through official channels, at least) be sold for real money. The Digital, Culture, Media and Sport Committee, made up of cross-party MPs, recently held an enquiry into whether the practice was harmful. Appearing at a hearing, EA vice president, Kerry Hopkins, claimed that loot boxes were "quite ethical", comparing them to Kinder Surprise eggs.

Over in the US, Washington Senator Josh Hawley introduced a bill in May 2019 proposing to ban the sale of games containing loot boxes and microtransactions to minors. While the proposal is a long way from becoming law, the Federal Trade Commission has also announced plans to investigate the practice as well.

https://www.youtube.com/watch?v=nVYEqaFZJWo

What have Sony, Microsoft and Nintendo said about loot boxes?

Perhaps fearing the imminent introduction of loot box regulation, the three major console manufacturers – Sony (PS4), Microsoft (Xbox One) and Nintendo (Switch) – issued a joint statement alongside the Entertainment Software Association this month, pledging to crack down on loot boxes from 2020.

Rather than banning the practice outright, the companies have instead taken a similar approach to Japan, China and South Korea, requiring "paid loot boxes in games developed for their platforms to disclose information on the relative rarity or probability of obtaining randomised virtual items". The policy will apply to both new games and existing game updates, with implementation planned for sometime next year.

The measure was introduced under the promise of allowing users to make a more informed choice when purchasing loot boxes, although critics will almost certainly argue that it doesn't go far enough to protect children from gambling.

Could this be the end for loot crates?

Ironically, merely days after the ESA's statement, the EA-published Apex Legends has come under heavy criticism for its implementation of loot boxes during its in-game Iron Crown event, with analysts determining that players would have to spend a minimum of $170 USD (£140) to unlock all of the items introduced during the limited-time update.

https://www.youtube.com/watch?v=6NwTWlND9R0

With loot boxes projected to generate $50 billion (£41 billion) for the gaming industry per year worldwide by 2022, it seems unlikely that they will be disappearing completely anytime soon. However, as opposition to loot crates continues to grow at a similarly meteoric rate year-on-year, it's clear that developers will have to adapt the system's core mechanics, and ultimately ensure its fairness, in order to secure its long-term survival.