Government says video game loot boxes will not be regulated

The mid-2022 Belgian loot box prevalence rate of 82.0% is numerically higher than the mid-2021 UK loot box prevalence rate of 77.0% (where no effective loot box regulation has been imposed or enforced) (Xiao, Henderson, & Newall, 2021). However, this could simply be due to loot boxes becoming increasingly more prevalent due to the passage of time, which is a general trend that has previously been observed amongst UK iPhone games (Xiao, Henderson, & Newall, 2022). It should not be suggested that loot box prevalence has somehow become higher due to, or despite, the ban. The present study provides evidence that the Belgian ban does not appear to have effectively reduced loot box prevalence. The latest research has presented conflicting evidence as to whether loot box purchasing is practically harmful to players’ wellbeing. Indeed, regulators in many countries tried to see whether existing gambling law can be applied to regulate loot boxes. However, after a slew of legal interpretations were published between 2017 and 2018 by the UK, Denmark, Belgium and the Netherlands, etc., not many substantial developments have occurred with loot box regulation.

• Where prizes are successfully restricted for use solely within the game, such in-game features would not be licensable gambling, notwithstanding the elements of expenditure and chance.
• Thus, policymakers are debating whether loot boxes require regulation as bona fide gambling.
• In August 2020, the FTC released a staff perspective paper in response to the workshop held a year prior in 2019 about loot boxes and microtransactions.
• The present study provides evidence that the Belgian ban does not appear to have effectively reduced loot box prevalence.
• Time will tell how the political battle plays out but microtransactions aren’t going anywhere anytime soon.

It is not clear what this will be, though the report specifically states that "the loot boxes must be removed" to come into line with gambling legislation. US authorities decided that games using loot crates did not constitute gambling because players do get some kind of reward when they acquire the boxes. Belgium’s Minister of Justice, Koen Geens, was keen to focus on how children are confronted with loot boxes, calling the mix of gaming and gambling "dangerous for mental health". Despite growing concern about their characteristics and rising popularity, tnt tumble loot boxes remain unregulated in the UK, whereas countries such as Belgium have deemed them to be gambling products. Loot boxes, video game features used by nearly 40% of children, have clear links to problem gambling, according to a study that has reignited calls for them to be regulated as betting products. All interested parties should be clear, that where gambling facilities are offered to British consumers, including with the use of in-game items that can be converted into cash or traded (for items of value), a licence is required.

Hard to regulate

Identity V was known to contain loot boxes in the UK and in China but has not been removed from any countries’ Apple App Store as of 7 June 2022. Exploratory analysis revealed that the Belgian version of Identity V continued to contain paid loot boxes in Belgium. Among the authors’ recommendations were that any regulation has extremely precise definitions to avoid any possible workarounds; that loot boxes are included in game labelling and age ratings; that the odds of winning items be clearly shown including the average cost of enough boxes to obtain a rare item; establishing spending limits; and more. There is growing evidence that supports that loot boxes are a form of gambling and, as a result, the United States should take more of an active role in regulating them like they do other forms of gambling. As indicated by the increasing number of countries around the world who are beginning to take steps to regulate video game companies, it seems inevitable that regulating loot boxes as a form of gambling will become an increasingly important issue in the United States.

If you have an addictive personality or your child is playing these types of games, loot boxes are definitely better avoided. It is highly likely, for example, that Game 96, DomiNations (Nexon & Big Huge Games, 2015), contained loot boxes (specifically, the Council Recruitment system) that were accessible only after a few dozen hours of gameplay given that suspected loot box probability disclosures were found in said game. NetEase, the company operating Game 36, also operated another relatively popular game, Identity V (NetEase, 2018), that was not within the highest-grossing list studied.

Loot boxes for adults only under proposed new law

NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us. “In addition, numerous regulatory bodies around the world, including those in Australia, France, Ireland, Germany, and the UK, have come to a conclusion starkly different than that of this committee,” it added. As one of Australia’s leading law firms,
Clayton Utz gives confident, innovative and incisive legal advice. While the Australian Parliament was presented with the Newcastle and Loughborough study, conflicting evidence and reasoning may prevent legislators from enacting a law.

7. Some reflections for the Belgian public and Belgian policymakers

The goal with Kompu Gacha was to collect a complete set of specific virtual items. Typically, some items in the set were easily acquired but there was always one or more that were harder to get. In April 2020, the ESRB announced a new “Interactive Element”—used to describe disclosures for video games that highlight a game’s interactive or online features that may be of interest but do not influence a game’s rating. In video games, a loot box (also called a loot crate or prize crate) is a consumable virtual item which can be redeemed to receive a randomised selection of further virtual items, or loot, ranging from simple customization options for a player’s avatar or character to game-changing equipment such as weapons and armor. A loot box is typically a form of monetisation, with players either buying the boxes directly or receiving the boxes during play and later buying "keys" with which to redeem them. These systems may also be known as gacha (based on gashapon – capsule toys) and integrated into gacha games. According to the article, potential legislation to regulate loot boxes, as opposed to an outright ban, is likely the best strategy going forward, by establishing a 21-year minimum age requirement for games that include loot boxes.

Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor. With a game of chance, the reward always seems so within reach, like it’s just going to take one more box.

Government says video game loot boxes will not be regulated

Given that there is significant interest in emulating this regulatory approach, it is important to assess whether this Belgian ‘ban’ on loot boxes has been effective. One objective measure is to assess whether loot boxes have been effectively removed from games marketed in Belgium. It is not known whether these games are monetising using methods which do not involve loot boxes in Belgium, or whether these games are continuing to sell loot boxes in Belgium. If the latter is true, then these video game companies are either operating contrary to Belgian gambling law and liable for criminal prosecution or operating under a gambling licence (which appears unlikely as none are known to have been granted to video game companies at the time of writing). Previous experience from other industries providing potentially harmful products, e.g., alcohol, tobacco, and traditional gambling, has suggested that these educational programmes might be at risk of being ‘hijacked’ by industry interests and thereby fail to promote an unbiased narrative, e.g., normalising alcohol use (van Schalkwyk et al., 2022).

In general, when a player receives a loot box, whether earned or purchased, they are going to receive some virtual items—they just don’t know which ones until they access or open the loot box. The odds of receiving a less sought after player is always greater than those for receiving a superstar. The rarity of the superstar cards is often what drove people to purchase pack after pack of baseball cards in hopes of getting lucky. The relevant defendant companies have since decided not to challenge the decisions, partly because these did not set any precedents that future courts must follow.

Impact on game design

This would likely disincentivize video game companies from including them in their mainstream games, out of fear of losing sales, and thus help to regulate the exposure of minors to the gambling elements of loot boxes. Indeed, beyond industry rules, the UK advertising regulator has also determined that Hutch Games was in breach of advertising rules for failing to disclose the presence of loot boxes on its games’ Apple App Store and Google Play Store listings. Companies should ensure that all video game advertising (including on social media) provides, at a minimum, the legally required information. Given that the UK advertising rules stem from EU consumer protection law, I suggest that the legal position is similar in other EU countries (and am indeed in the process of asking relevant regulators to enforce the law). The approach taken in the past few years has generally been to determine whether different types of loot boxes legally constitute ‘gambling’ in different countries and, if so, then seeking to regulate them using pre-existing laws.

Another issue that arises with loot boxes and other game mechanics is whether the presence of these mechanics in a game should impact that game’s age and content ratings. Content ratings typically indicate the appropriate age group for and type of content including in a video game. Some advocate that even if these mechanics are not gambling, they have an addictive effect and therefore this should be reflected in the games rating. However, the following are examples of loot box-related laws or legislative activity in a few countries. Loot boxes have been used in massive multiplayer online games (MMOs) dating back to at least 2007, but as free to play video games proliferated, this mechanic has been increasingly employed as a monetization technique in other games. Loot box mechanics are known by various other names, including loot crates, lockboxes, crates, and packs, among others.

Companies must possess a licence before offering gambling services; however, video game loot boxes are not a product that can be duly licensed within the existing regulatory framework. This means that offering loot boxes for sale in Belgium requires a gambling licence, but no such licence can be applied for and obtained by a video game company, and thus all paid loot boxes constitute illegal gambling and even adults are not allowed to purchase them. However, the restrictive course of action taken by Belgian policy is potentially overregulation because not all consumers will be harmed by loot boxes, yet now all Belgian players, both children and adults alike, cannot buy loot boxes. Loot boxes and other newer monetisation methods, compared to the old model of selling the software, allow for many players (including some who might not be able to afford purchasing the software) to gain access to entertainment and play certain games for free (Xiao, 2021b). The Belgian ban has arguably infringed upon the freedom and right to choose of players who would never have been harmed (Xiao, 2022d). Indeed, in contrast to this prohibiting approach, other alternative regulatory approaches that better ensure consumer choice (although potentially providing less consumer protection) are available.