EU Court Brands Loot Boxes as Illegal Games of Chance

Loot boxes in video games have been a point of contention worldwide for years. Gaming companies like EA have reported earnings in excess of $1.5 billion annually from selling in-game microtransactions, which reward the buyer with randomly selected characters, items, or buffs to make them more successful at the game they’re playing.

The problem with these loot boxes is that they employ the same random prize rewards and near-win tactics to engage the consumer that instant slots do. However, the player base for these games, including sports titles like Madden Football and  EA Sports FC (formerly EA FIFA), includes youth under 18.

 Austrian Court Lays Down the Law

Joining a growing number of European regulators, the Court of Appeal (Vienna Regional Court for Civil Matters) in Austria sided with third party litigation funding firms who have made it their goal to get loot boxes correctly categorised as gambling.

The case in question focused on the FIFA Ultimate Team (FUT) packs that players of EA's esports football game are encouraged to purchase to acquire higher-skilled players, allowing them to be competitive in both local and online matches.

The court found that these digital assets required real money to acquire, have real-world value (based on the cost of receiving them and the secondary market that exists for these assets), and that their process of being awarded aligned with the mechanics of other games of chance of like video slots.

While EA representative argued that FUT packs could be acquired through gameplay with no need to spend cash, the court referred to the gaming company's own reporting, which showed that it would take 4000+ hours of gaming to build a competitive team, which they deemed to be an “exorbitant effort” aimed at coercing sales.

 The Initiation of a Costly Precedent

As all gambling in Austria falls under the state-run monopoly, the ruling that loot boxes constitute illegal games of chance could result in a flood of litigation.

Under the current gambling act, any illegal gambling activity by a company licensed to operate in the country will allow consumers the right to a full refund as “any gambling contract with unlicensed operators is declared void and players' stakes can be reclaimed”.

There will also be a knock-on effect on companies facilitating the processing and provision of loot boxes. These companies could come under fire for participating in illegal gambling activities and tax evasion based on the different structures used to tax transactions relating to games of chance.

Two More Steps to Lock It Down

While the ruling is legally binding, two additional steps need to be taken to solidify it in Austrian law:

1. A Supreme Court ruling affirms that loot boxes constitute unsanctioned games of chance in contravention of the Gambling Act.
2.  A ruling loot boxes as a whole, not just those provided by EA in its FIFA and FC esports games.

Once there is clarification on the above, we can expect to see a quick turnaround in how in-game microtransactions are handled in the country and to what extent players who have made gambling-related deposits are able to band together to withdraw their funds.