Neil Falconer: Loot boxes in the line of fire

Neil Falconer

In computer gaming a loot box is essentially an in-game virtual lottery. A box is purchased by a player with real money. The virtual items found within loot boxes may be something highly valuable to the player (such as a rare weapon), or it may be something basic (such as clothing). It is a game of chance.

In the UK gambling is governed by the Gambling Act 2005 and regulated by the Gambling Commission. The commission does not currently view loot boxes as gambling. To be categorised as gambling under the Gambling Act it is not enough that loot boxes are a game of chance. They also need to offer prizes of “money or money’s worth”. Therefore there must be an option for the virtual items to be “cashed out”. Games offering loot boxes do so in a “closed loop”. This means that items won through purchasing a loot box cannot be sold outwith the game.

However, the Gambling Commission has acknowledged there is a plethora of websites outwith the “closed loop” which allow players to sell items for money. These websites operate a black market, creating a scenario in which player’s purchase loot boxes in the hope of winning valuable items to then gamble or trade for real money. But, in this scenario, who is actually facilitating the gambling? The game designers who create the game of chance, or the black market websites which allow the outcomes of this game to be monetised? Currently the Gambling Commission takes the view that it is the latter.

The Dutch Gaming Commission, however, has taken a harder view. Their decision was taken on the basis that as loot box prizes could be sold outside the game they had monetary value, regardless of whether or not the game designers directly facilitated the monetary sales.

The concept of paying for items of unknown value is not new. Panini sticker books and Pokémon cards both followed this model. While the basic principles of loot boxes may be akin to these non-digital equivalents, the scale and speed of damage can be far greater. Once credit card details have been entered, boxes can be repeatedly purchased one after another. Hundreds of pounds can be spent in a very short period of time. Psychological studies into loot boxes have suggested this activity is more akin to playing a slot machine.

If purchasing loot boxes does exploit the same psychologic impulses as more traditional gambling such as slot machines, it may raise similar social responsibility concerns as are reflected in current gambling laws and could concern parents of child gamers and vulnerable persons.

With this in mind, in September this year fifteen gambling regulators from across Europe agreed to form a collaboration to “address the risks created by the blurring of lines between gaming and gambling”. As is often the case with developing technical areas, the law and regulatory bodies will need time to catch up with the industry and establish effective regulation.

Neil Falconer is a senior solicitor at Thorntons LLP