Balancing Freedom and the Public Interest in Regulating Loot Boxes
Loot boxes pose a regulatory challenge in the United States.
A US federal court recently fired a class action lawsuit against Google for alleged “Predatory practices” surrounding a game feature called “loot boxes” in the Google Play Store. Parents of minors had claims that loot boxes are illegal “slot machines or devices” under California law.
The case has reignited debate over whether buying loot boxes constitutes a game. And even though the court dismissed the parents’ lawsuit, the precise legal status of loot boxes remains unclear.
Loot boxes are mystery boxes included in video games that users can purchase during play using real or virtual currency. Every loot box offers virtual random surprise items. Because users only know which items they will get from the loot box after they make their purchase, some observers to consider loot boxes a “game of chance”.
Parents who took legal action against Google claimed that loot boxes attracted “Consumers, including children, to engage in gambling and similar addictive behavior” and that loot boxes have the “characteristics of a Las Vegas style slot machine, including the psychological aspects to encourage and create addiction”.
The tribunal assessed Google’s liability under section 230 of the Communications Decency Act, which exonerates platform companies from any liability for content shared on their platforms. Although the court dismissed the lawsuit, it did so because Google simply allowed video game developers to deliver apps to users through its app store. In other words, the court ruled against the parents not because it determined that the loot boxes were not games of chance. On the contrary, it is simply confirmed the legal principle that a platform company “providing third parties with neutral tools to create web content is considered to be fully covered by the protections of section 230”.
Although there have been efforts in the United States to regulate loot boxes through legislation – and a Federal Trade Commission workshop raised the issue of loot box regulation – currently no legal consensus exist in the United States around the illegality of loot boxes.
Other jurisdictions, such as Japan, Belgium and the Netherlands, have find that loot boxes fall under local gambling laws.
Japan was one of the first countries to to respond to the global debate on loot box regulation. In 2012, Japan banned ‘Kompu gacha’, a special type of loot box with which players can collect a final reward if they collect a full set of items from random loot boxes.
Notably, Japan regulates loot boxes under a law protecting consumers from deceptive practices, rather than under gambling regulations. The Japanese regulatory framework for loot boxes differs of most Western executives who focus on in-game currency exchange.
Instead, Japanese lawmakers adopted a consumer welfare perspective that viewed kompu gacha exploitation in the sense that the cost of crafting a set of items in the loot chests exceeded the value of the final reward, with payouts significantly lower than those expected by the players.
Because of this consumer welfare perspective, mechanisms similar to ordinary random loot boxes are not categorically prohibited; instead, the legality of loot boxes in Japan is determined on a case-by-case basis.
In Belgium, on the other hand, certain types of loot boxes are explicitly included in the interpretation of the term “games of chance”. They are considered to be games of chance within the meaning of Gambling and Betting Act under which game developers can be criminally prosecuted.
According to this definition, the Belgian Gaming Commission find the building blocks of the game present in the loot boxes for certain games, for example when a bet serves as a participation fee for the loot box and a game design allows players to spend as much money as possible to have the chance to receive a certain item.
Such strict regulations are a response to the addictive after-effects caused by loot boxes and the vulnerability of minors and gambling addicts on gaming platforms. As a result, several game developers have altered their games offered in Belgium by removing the paid loot box systems in the game.
Likewise, in the Netherlands, loot boxes to qualify like a game of chance in which players can win a prize. But Dutch law differs from the definitions of games of chance in other jurisdictions in that it does not require a bet. In addition, the Dutch Gaming Authority left room for certain types of loot boxes that don’t offer transferable prizes outside of the game; in these cases, loot boxes are not considered games of chance but games.
Due to the lack of uniform regulations and the significant difference in gambling laws between member states of the European Union, the EU requires a country-specific approach.
U.S. lawmakers should consider the policy implications of different jurisdictional approaches to regulating loot boxes. Political debates on loot boxes should not be overlooked as academics to warn against the disconcerting structural and psychological semblance between gambling and loot box spending. Additionally, the increase in video games during the COVID-19 pandemic has amplified such concerns and has increased the need for global regulation.
U.S. regulators and policymakers should monitor industry trends and developments not only around loot boxes, but also around the broader issue of problematic game designs. In the meantime, soft regulations can help solve the problem by raising awareness and developing guidelines for parents and players.
Although the United States has implemented various policies to protect the public, it is also a nation founded on the pillars of liberty and liberty, which can be a challenge for the passage of certain laws and regulations. . Freedom and the public interest must be adequately balanced to achieve an optimal result regarding loot boxes in games.