• Michalis Papachristodoulou

Loot boxes and card packs: Kinder eggs or concealed exploitative betting?

With the latest instalment of FIFA, one of the best-selling video-game franchises, hitting the shops these days, the annual round of debate concerning the legality of card packs has arisen anew. Card packs are a feature of the game that requires a payment by the user to get a randomised assortment of different player cards (which have extremely varied value) and several other items, in what has become the most lucrative part of the game for its creators.

Whilst this process may appear fun at first, it soon becomes apparent to third party viewers that this feature amounts to little more than gambling; yet it remains not regulated as such. The same applies for loot boxes, skins and other similar mechanics in which players are paying for a randomised item. Legal changes are mandated to regulate this multi-billion industry which seeks to make an extortionate profit out of children and gamers.

Development of Loot boxes

From their initial conception, loot boxes were meant to capture the thrill of relying on luck and the potential of receiving something valuable. They were originally meant to act as a reward, incentivising players to spend more time and effort to achieve objectives within the game. The more levels a player completed or the more wins a player accumulated, the more loot boxes the player would earn and, consequently, the player increased the probability that he would win rarer and more valuable items. This iteration of loot boxes is not only acceptable, but commendable as it rewards the time investment made by players with tangible rewards that enhance their gaming experience. It is this gaming experience which is, after all, the reason for purchasing the game in the first place.

In recent years, though, the purpose of loot boxes has shifted to the generation a new source of income for game-developers, post-sale of the game itself. Rather than rewarding players for their dedication and effort to master the game, developers have instead tapped into the innate need of people to one-up each other by offering loot boxes for sale. A game user can, now, just purchase a loot box that previously would have taken hours of work to earn. Within these loot boxes lies the hope of obtaining rare items. Such items could have significant value, both in-game and in terms of real-world money.

Current legal state

This business strategy of selling the chance of a reward to the general public seems suspiciously similar to that of gambling and various stakeholders have taken notice of this. The House of Lords Select Committee on the Social and Economic Impact of the Gambling Industry recently completed an in-depth investigation into the gambling industry in the UK and the adequacy of the current provisions in the Gambling Act 2005. Under the relevant statute, gambling is defined as ‘gaming, betting, or participating in a lottery’. After its examination of loot boxes and similar game mechanics, the Select Committee concluded that loot boxes are an example of the first type of gambling; gaming.

‘Gaming’, within the meaning of the act, refers to ‘playing a game of chance for a prize’ and there is no need for this game to involve other human players. An essential component to classify an activity as gambling is the prize element. This requires that the player can earn either money or money’s worth when participating in the game. It is for this reason that loot boxes have not been considered as gambling yet, as the items won are argued to have no monetary value.

The reality contrasts to this assertion. Digital marketplaces for game items have developed both within games themselves and through informal forums. Many games allow for the sale or exchange of the items won within the game and this may involve the transfer of money, illustrating that these items do have a monetary value.

This, amongst other considerations, led the Select Committee of the House of Lords to recommend that loot boxes and other similar mechanics should be classified as games of chance and be regulated as such. The Netherlands took a more balanced approach. Under Dutch law, the transferability of an item won through a loot box is essential to determine the loot box’s legality. If the items can’t be transferred, they can’t have monetary value, and such a loot box would be legal. Such an approach seems logical and could pave the way forward for the regulation of loot boxes.

Surprise Mechanics and Panini stickers

In defending the loot box element of their games, game developers have made various assertions to avoid falling within the regulatory remit of betting regulations. Supporters of FIFA’s card packs have compared them to Panini stickers. These are a series of stickers, each having the picture of a footballer, and each sticker corresponds to a slot in a sticker album. The ultimate goal is to complete the sticker album by getting the cards of all the players in the relevant album. Whilst there are similarities between the two, Panini sticker albums have an end-goal, beyond which no more purchases are needed, and each card has the same probability of appearing in a package, meaning no card is rarer than the rest.

Another argument made by a representative of EA, the developers of the FIFA series, was that loot boxes are ‘surprise mechanics’ more akin to Kinder Eggs, focusing on the fun side of this feature. Players are guaranteed to get some items as a return, even if those items are of low value. EA also argues that since players can earn their way to loot boxes, the payment element of this feature can be circumvented altogether.

Yet, the comparison to Kinder Eggs is not a very persuasive one. Kinder Eggs are not purchased solely for the toy inside, in contrast to loot boxes. The chocolate egg itself is, more often than not, the main element of the Kinder Egg product for consumers. More importantly, EA’s argument that loot boxes are an enjoyable part of the game has backfired, as scientific research has long established that gambling releases dopamine into the gambler’s neurological system. This dopamine hit may be the source of enjoyment for players, but it can also become a source of addiction.

A recent study found that ‘young people who spend money on loot boxes are more than 10 times as likely to be problem gamblers than those who do not’. With 31% of children between the ages of 11-16 having paid for loot boxes, often without the consent of their parents, it becomes apparent why a regulatory change is needed to prevent the creation of a generation of problem gamblers. It is for this reason that Belgium has declared that loot boxes are a form of gambling, which is prohibited under Belgian law.

Looking Forward

With millions being spent on loot boxes daily, and a huge part of that being contributed by children, the need for more regulation is clear. Loot boxes have morphed into a form of gambling and, as Simone Vibert, a Senior Policy and Public Affairs Analyst from the Children’s Commissioner’s Office rightly argued, ‘If a product looks like gambling and feels like gambling, it should be regulated as gambling’.

For more information, read the Select Committee's report here.

#law #betting #regulation #lootboxes #cardpacks #consumerprotection