Loot boxes are virtual boxes with random content that you can purchase for real money in many video games. There are different reward types: from simple boosters to game changing items that can definitely improve your chances of winning a game. Many players agree that loot boxes provide a big edge and is way easier to get good items by paying than dropping them in-game, for free.
The situation generated controversy due to the fact that video games target minors and pay-to-win systems are incompatible with current gambling legislation. Are loot boxes some sort of gambling?
The randomness of what’s inside loot boxes attracts many. The rush we experience while buying and redeeming these items is in some way likened to what we feel while we gamble online. The scene gets darker when you understand that many underage people have access to these games and in fact, purchase online content. It was confirmed that this business model is based in a minority of players who generate the majority of the profits. Any resemblance to the gambling market? Perhaps…
A loot box is a form of monetisation. The concept was originated in massive multiplayer role-play games and influenced by the advance of free mobile games. They appeared for the first time in 2007, gaining popularity in 2016 with Overwatch.
2017 seems to be the year of fame or disgrace, depending on your point of view. From one side, loot boxes generated record revenues, reaching peak popularity. On the other side, a fierce debate divided the gambling community. International regulators are colliding with antagonistic positions in regards to the same question that keeps calling: are loot boxes skin gambling?
The answer is not simple and depends where you are located. Let’s take a look at some examples:
Loot Boxes Regulation and Legislation
Asia and Oceania
In Asia, loot boxes are considered some sort of gambling. China forbids gambling in their territory and loot boxes fall into this category. Blizzard Entertainment announced to their customers that loot boxes would no longer be available in Overwatch since 2017. In Japan, loot boxes are considered gambling since 2012, but developers found a way around and still offer them.
Australia considers loot boxes as gambling, but also states that has no authority to prosecute companies overseas. The commission suggested adding a R rating to any games offering this feature. New Zealand is reviewing the situation, but in the meantime stated that “loot boxes do not meet the legal definition of gambling”.
While the British regulatory entity – UKGC – took a similar position than New Zealand and suggested “self-regulation” for video games with loot boxes, other European countries decided to take another path:
As off February 2018, Germany is considering banning video games loot boxes after a study from the University of Hamburg showed that elements from gambling where becoming increasingly common in video games. According to this position, loot boxes may infringe the ban on gambling to children and need to be properly addressed. € 8 billion revenues reported in 2016, € 10 billions expected for 2017, a 30% increase from previous year.
The German commission is still deliberating whether to fine developers and publishers who offer this type of feature or prohibit adding it altogether. A final decision should be ready by March.
Belgium has a well known position against online gambling, having one of the toughest legislations in Europe. As expected, the prime minister of justice wanted to prohibit loot boxes, saying that they are dangerous for the mental health of children. Ahead of other European countries, Belgium already categorized loot boxes as gambling.
In Sweden, there’s general consensus about the need of legislation to protect children. They want loot boxes to be classified as a form of gambling, to increase sanctions and impose a stricter policy. Current law have little to no control over this feature which is said to affect gamers negatively, pushing them to an “abusive and addictive cycle”.
What’s all the fuss about?
The truth is that loot boxes have taken the video game industry to another level. Many developers confirmed that most of their profits come from micro-transactions and not from selling the game itself. This feature allowed to offer free-to-play games, monetising them with in-game items that are difficult to get – due to low drop rates.
Loot box defenders argue that because there’s no real money to be won, gambling could not take place. Anyone with some common sense can see this is not true and some legal experts explain why. In many countries, gambling is considered as such because it has 3 elements:
- Consideration: the understanding that you need to pay to play.
- Chance: when you are not certain about the outcome of the game, because it’s out of your control and some luck is needed.
- Prize: Something valuable.
The last point is the decisive one, because while many indicate that value refers to money, many others say it doesn’t. That’s not all. The discussion takes an unexpected turn, almost metaphysical, when trying to define the concept of virtual matter against real items. The debate not only affects gambling agents, game developers and gamers, but the tech community as a whole.
Something must be said. In order to see the real value of loot boxes, judges need to be technologically literates. How can they understand this issue if they have no idea what’s all about?
In-game content for real money
People who gamble online or play video games – like us, understand that value is not always related to money. Virtual items and powerups are valuable items for gamers, and while you don’t win real money from loot boxes, you know that the prize will definitely enhance your gameplay.
In many cases, you can even sell items for real money or the whole account if we are talking about RPG – Real Play Games. I did so many times in my golden gamer years, and also purchased items for real money. It is true that this activity is forbidden by the terms and conditions in many games, but we can’t deny it still exists. Players participate in black markets purchasing in-game content and this is a reality that can’t be denied.
Virtual value is very real, even if you can’t directly win real money from it. Let’s take another example.
Social Media / Public Opinion
Twitter, Facebook, Google + , Instagram…. and many other social networks are a vivid proof of the value of virtual things. People found in social media a way to promote and monetise their work worldwide.
People being judged and condemned online, before found guilty by law. Cyber investigations that bring criminals to justice. Hackers interfering in elections. There are so many examples of how virtual matter becomes very real, and valuable. While we can’t see a direct link to money, we now understand the subtle relation.
Anyone who played video-games know that loot boxes are indeed a sort of gambling. I always played video-games and saw many tempting promotions offering “random prizes” purchasable by real money. Sometimes, you even get some “free boxes” to get you hooked and buy more when they are over. I recall feeling the rush and excitement of opening one of them, and of course, wanting to buy more. If that can happen to an adult, imagine what it does in the brain of a child. A real danger when unsupervised.
If you ask me, I’m totally in favor of regulating this activity. Of course, not all power up items are the same, but specifically the ones that promise a random prize are problematic and should be analyzed in depth.
On the other hand, I believe we can’t go to an extreme and ban specific types of games according to their content. We can’t move forward categorizing any type of micro-transaction as gambling and we shouldn’t be trying to put a stop to tech development with heavy regulation. But there’s a need for regulation here, where millennials spend billions of dollars and are being tempted with gambling style techniques.
We must have a debate, not only to protect children but to regulate a market that is out of control. Leave aside morals, this industry generate billions per year and most of their revenue comes from methods that aren’t supervised. If we are able to discuss it, we may reach a positive outcome after this whole mess. Hopefully, a new ethical framework will be developed soon, with state intervention or self-regulation.