Resetting the Lines Between Gamification and Gambling

Lootboxes have become one of the most divisive monetisation practices in the world. Many companies believe they are a necessary and user-friendly way for video game studios to avoid charging for their releases. Players can install and play a hot new release for free and support the games they love by buying in-game items like card packs, weapon skins and other microtransactions.

The real-world execution of loot boxes is far more predatory. Companies like Electronic Arts charge a premium for games like FIFA and then add an aggressive loot box system to entice users to spend insane amounts on building competitive teams.

 Letter of the Law vs the Spirit of the Law

Despite the blatant use of slot machine mechanics in loot boxes, they have avoided being classified as gambling due to a single technicality; their items have no financial value.

 In almost every gambling jurisdiction playing games of chance by staking real money in the hopes of winning real money is the basis for their definition of "gambling". By not making their items saleable within their ecosystem, developers claim it's not gambling.

While this fancy legal footwork passed muster for a while as gambling regulations mature, responsible gambling becomes a greater priority, and people over profit becomes an oft-voiced mantra, regulators are beginning to say “No more” to loot boxes.

Austria Makes Loot Boxes Illegal

March 2023 saw Austria join a growing number of countries that have discounted this theory. Placing the well-being of its citizens above such a thin technicality, an Austrian court ruled that video game loot boxes violated their gambling regulations.

The ruling resulted from a lawsuit against Sony Interactive Entertainment Network Europe Ltd by more than one thousand FIFA players. The Padronus law firm led the case, which has a history of taking on cases related to online gambling and winning. 

Based on player spending, they pursued a rash of individual payments ranging from €800 up to €85,000. The court, however, settled on a set refund per plaintive of 338.26.

Welcome to the Anti Loot Box Club

The randomised risk-reward cycle that these loot boxes rely on has led to the following countries already banning them from appearing in any games:

1. Japan – In 2012, the country declared gacha mechanics illegal because the game cannot be played without spending real money to progress. Much like player cards in FIFA, these gacha games used packs with random rewards to incentivise purchases.
2. China – In 2016, China passed a law that would allow loot boxes if they showed the items they contained and the probability of each item. They have also limited how many may be purchased in a day.
3. The Netherlands – In 2018, they became the first European Union member to ban loot boxes. The updated regulation found them in contravention of local gambling laws as the items they offered as prizes had financial value on the secondary market.
4.  Belgium – In 2018, Belgium took their regulations a step further by making loot boxes a unique form of illegal gambling activity. This decision allowed them to bypass the "no financial value" loophole.

Two big holdouts in the gambling versus gamification debate surrounding loot boxes are the United States and the United Kingdom. It is believed that this is purely for economic reasons. While both countries have openly stated concerns about the predatory and behavioural aspects of the practice, both are essential centres for the developers of these games. Banning the practice will lead to significant financial losses, which will, in turn, cost thousands of local jobs, which could explain their hesitance to commit.