Loot Boxes – the next level

Loot boxes gambling

We have already covered some basics relating to loot boxes in our article. After writing the article there have been some major developments in the gaming world – so let’s take a look at the recent issues regarding the infamous in-game reward mechanism. 

What exactly is going on?

During the fall of 2020, two Canadian video game players filed a class action lawsuit against Electronic Arts (EA) over loot boxes and other monetization mechanisms that EA has used in its games. Loot boxes have become a very common way for game developers to monetize their games and reward players. As a quick recap, players can purchase loot boxes in the games, to win bonus items which are either used as accessories or game-enhancing elements. The plaintiffs in the EA lawsuit have been playing EA’s games, in which they had also spent money on loot boxes. The plaintiff claim is based on the fact that they see loot boxes as gambling products offered in-game, and thus EA would be in breach of Canadian legislation as EA does not have a gambling license in Canada.

Meanwhile in the Netherlands, a similar case unfolded where the court ruled that loot boxes should be viewed as gambling products and forbidden within the jurisdiction. The court sided with the gambling authorities who claimed EA was in violation of local gambling regulations in its FIFA game. The court in fact ordered EA to disable all loot boxes within three weeks. If it was unable to remove the loot boxes on time, EA and its Swiss company would both face a fine per every week it continues to sell loot boxes (the maximum allowable fine being EUR 5 million). The court also dismissed EA’s request for disclosing the payment decision from the public.

The case and ruling apply only in the Netherlands, hence this may only affect EA’s business there. It has also been reported that EA will appeal the decision, but in any case the atmosphere is that something needs to be decided with regard to loot boxes and banning in-game loot boxes entirely, seems to be the quickest option that authorities are settling on. 

Is banning the only solution?

As shown in the previous cases, it seems that the attitudes towards in-game loot boxes have grown more negative during the past years. It also seems that banning the whole loot box system has become a quick fix, instead of looking for other less extreme solutions to deal with the downsides related to loot box mechanisms. The same trend can be seen in Belgium, where loot boxes were ruled as illegal gambling mechanisms already in 2018, or France, where lawsuits on similar grounds have been filed against EA this year. But is banning the only, let alone the best option, to deal with the issues related to loot boxes?

When it comes to gambling in the context of European Union (EU) legislation, member states can decide on and organize their gambling services freely, provided that they comply with the fundamental freedoms under the Treaty on the Functioning of the EU, e.g. the freedom to provide services, even though gambling legislation is in the competence of the member states to decide on. In a report commissioned by the European Parliament this July, the findings suggest that banning loot boxes in some countries impacts the freedom to provide services and therefore impacts the EU single market with regard to games. Thus, the suggested course of action would be for the member states to develop a common approach to loot boxes, in order to avoid the internal market for games becoming further fragmented.

The report suggests that, as there isn’t a clear consensus regarding whether loot boxes should be considered gambling products, due to the fact that they can also be compared to ‘mystery boxes’ (for example Pokémon trading cards etc.), shifting the angle from gambling to consumer protection, would broaden the scope of potential actions that could be taken to protect underage gamers. This would also allow the EU to take actions, if necessary.

Suggested solutions

The issue with a simple solution such as banning a feature, may be the broadening of the scope of what features or content is allowed within games. For example, should the Netherlands case set a precedent that loot boxes are to be considered simulated gambling and thus illegal or a gambling product on its own, what else may fall under the scope in the future.  As an example, there are already several games where gambling is simulated in one way or another. Thus, simply put, this opens the gate to a broader vetting of what games are and are not allowed to offer or simulate. This could mean banning simulated gambling features even in games that are aimed at adults.

One suggested option to the loot box issues, is setting a minimum age limit for example where simulated gambling is allowed, prohibiting the use of loot boxes in games for minors as well as introducing mechanisms to verify the age of the player.  As young gamers may not understand the value of money or the mechanisms behind loot boxes or similar reward mechanisms, they are more vulnerable to the related risks. Thus, the suggested age limits could provide an effective solution to protect younger players but allow adults to enjoy loot boxes and similar mechanisms. 

Such a solution would of course require a stricter approach to age limits, as well as actually monitoring that they are implemented. Up until now it has been the duty of parents and guardians to monitor what games their kids are playing, unfortunately this is not the reality, therefore the solution to this issue would fall on the gaming industry, developers and publishers. As loot boxes are a viable monetization mechanism, this issue could be solved by implementing “Know Your Customer” -processes and other verification methods to control who accesses the games. This is already the case with the iGaming (online gambling) industry. This would allow game developers who wish to use loot boxes and other similar reward mechanisms, to continue to do so, both safely and more responsibly.

Responsible gaming and marketing measures have become central in the iGaming industry, especially in the form of gambling license requirements, at least within most regulated EU countries. Such solutions have now been introduced by at least some console and PC game publishers, such as EA. Taking a leaf from the iGaming industries book, EA for example allows its players to monitor their gaming through its new features in its FIFA game, via the so-called FIFA Playtime, which tells players how much time and money they have spent on the game as well as an option to set limits on both. Furthermore, console providers have also set new policies regarding loot boxes. Sony, Microsoft and Nintendo now require all publishers of upcoming games to disclose the odds of earning rare items. Additionally, although age limits have not been discussed at large in the loot box context, as mentioned, age limits could be a key method to enforce, monitor and control loot boxes and the scope of age limit ratings such as those set by the Pan European Game Information (PEGI), could easily be broadened to cover loot boxes and similar mechanisms. 

The above measures, of course, may not directly affect PC gaming, except with regard to PEGI age ratings, but as many game publishers publish their games on multiple platforms, some of the measures will have an effect on PC games as well. With regard to mobile games, the platforms through which they are provided already have a stricter approach in certain cases, especially with regard to age limits as well as content provided within the games, but the issue remains that monitoring access is again left to the parents. 

The above mechanisms are just some of the methods that could be used to ensure that gaming content is being provided to the intended audience.

So how do we move forward?

It is a fact that loot boxes have caused controversy in recent years, but game publishers are now taking steps to address the issue. Banning is often an easy solution, but it doesn’t necessarily take future developments into account. Therefore, instead of banning loot boxes completely, regulators and the gaming industry at large may instead look into mechanisms, that allow for the enjoyment of said reward mechanism in a responsible way and by the relevant audiences. As loot boxes can offer players new ways to boost their gaming experience as well as allow game publishers to monetize their games, why should they be banned outright, especially as gambling itself is not banned completely and is becoming increasingly available, although highly regulated, around the world. As monetizing a game in itself is difficult enough, it may be more productive not to limit the monetization methods, but rather to ensure they are provided responsibly. 


Text and additional information:
Juuso Turtiainen, Associate, +358 40 764 8910, juuso.turtiainen@lexia.fi
Anni Kaarento, Legal Trainee, anni.kaarento@lexia.fi