The Fine Line Between Gaming and Gambling
In July 2020, the British House of Lords published a recommendation to reclassify loot boxes in video games as a form of gambling. The recommendation came as part of a report on the harms of gambling, claiming there were 55,000 problem gamblers in the UK between the ages of 11 and 15. The report called for loot boxes in video games to be immediately reclassified so as to fall under the regulations of the 2005 Gambling Act. Where does gaming end and gambling begin? This is the crucial question that legislators around the world are trying to answer, particularly when it comes to the sticky issue of loot boxes. In contrary to the UK, the NZ Department of Internal Affairs has decided that loot boxes are not gambling under the 2003 Gambling Act. So, why are so many other countries around the world debating this question?
Blurry boundaries
Gambling content can enter video games in a number of ways. The most obvious way is in simulated gambling games that look and feel like a real casino games, for example, digital lotteries, roulette, blackjack and poker for credits or other digital rewards. Next, there are video games with embedded gambling content. In these games, gambling is not the central focus of the game, but is simply inserted into the background story. The classic example is Grand Theft Auto: San Andreas by Rockstar Games, which includes a casino where you can win money to help you advance in the game. Games with embedded simulated gambling or gambling-like activities pose a problem for legislators. Fortunately, Grand Theft Auto is an R18 game and isn’t marketed to children.
Things become even trickier when “gambling-like” activities are an integral part of a video game marketed to a wider public, including children or adolescents, since these games escape gambling legislation in most countries and can lead to addictive behaviours and out-of-control spending. Whereas land-based casinos and classic online casinos, the type that offer regulated online pokies and other casino games, must follow particularly strict legislation and offer mechanisms to protect their players.
The controversial loot box
Loot boxes are a way for video game publishers to continually monetise their games and are part of a new economic model that has become popular in the video game industry. Games are often free-to-play or sold at a much lower prices than in the past, but they contain in-game shops, seasonal updates or expansions, special events, downloadable content, premium subscription services and the controversial loot boxes.
Loot boxes are either dropped in the game or sold in an in-game shop. You can pay with money or use in-game credits to buy or open a box full of mystery rewards. It’s like a lucky dip. Inside the loot box is a random set of items. Players may find an incredibly rare or desirable item in the box or something that will give them an advantage over other players. Of course, most loot boxes only hold cosmetic items, like a new skin, which just looks really cool. Sometimes, the player will have options to buy a rare or even legendary loot box with the price of the loot box being increased accordingly. High price loot box = more valuable prizes. Or at least, that’s the theory. But how many times have you been disappointed by the contents of a lucky dip or surprise bag as a child; or even a pack of Pokémon cards? You pay a certain amount and could have an incredible deal or a rotten deal, it all depends on chance.
The origin of loot boxes
Loot boxes take advantage of our desire for rare and special items. They differ from other downloadable content sold in the in-game shop because you purchase without knowing what you have bought. You take a gamble. The loot box concept was invented for Japanese gacha mobile games in the early 2010s. In these games, a player could win certain characteristics for their avatar by pulling or spinning a “gacha”, which often resembled a slot machine or roulette wheel. Traditionally, gambling was heavily regulated in Japan but somehow the loot box concept managed to sneak into Japanese mobile gaming and was a sensation. This occurred at about the same time that the first professional Japanese poker player won WSOP.
As Makena Kelly, writing for theverge.com explains, the idea was adopted in the West and eventually developed into a system of never-ending in-app purchases. Initially, it was used in free-to-play games that needed loot box money to fund game development. Inadvertently, this also created an opportunity for players to continually spend money trying to get the perfect gear with no mechanisms to protect them from developing addictive behaviours or prevent children being exposed to gambling.
In the same article, Makena Kelly tells the story of one woman who lost control of her loot box spending. CadenceLikesVGs developed a gambling problem with a free-to-play RPG called Path of Exile developed by the Kiwi studio, Grinding Gear Games. Loot boxes cost US$3 to open and arrived in the in-game shop every three months. To obtain the item you want you needed to open several of these boxes. At the end of the season, many of the items would be sold directly in the game’s shop, but at exorbitant prices. The temptation for players to score themselves a deal was high. In Candice’s efforts to try and complete her gear sets, she had spent between $140 and $400 dollars at a time on loot boxes. But the internet is full of stories of people spending much more. Since this is happening in a video game and not in an online casino, there are no mechanisms in place to prevent harm to players. Compare this to the case of a reputable online casino, like JackpotCity, which is highly audited and required to follow legislation to protect players and apply legal age limits on this type of activity.
Should loot boxes be considered gambling? A resounding “maybe”.
The Entertainment Software Association argues that loot boxes cannot be equated to gambling because they are a “voluntary” feature. At the time when Hawaiian legislators were starting to take an interest in loot boxes, they declared that “Depending on the game design, some loot boxes are earned, and others can be purchased. In some games, they have elements that help a player progress through the video game. In others, they are optional features and are not required to progress or succeed in the game. In both cases, the gamer makes the decision”. Of course, this sounds like a very hollow argument, since it is people who choose to visit a casino or not too, yet it’s still considered gambling. And real casinos have a clear advantage, children and addicted gamblers will not be admitted entry. Ryan Morrison, an American lawyer wants loot boxes to fall under gambling legislation rules. He points out that loot boxes meet the criteria to be considered gambling activities already in 50 states in America: “You’re putting something of value in, your money, and you’re buying something that has odds to it that you are unaware of, that’s chance, and you’re getting something that you value or don’t value”. In other words, you’re gambling.
While most countries agree that loot boxes are problematic and that gambling laws need to be changed or updated, so far very little has been done in practice.