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Are free loot boxes illegal?

Are Loot Boxes Illegal?

No, loot boxes are generally not illegal in most countries. However, their use in video games has sparked much debate about whether they should be regulated like gambling.

What are Loot Boxes?

Loot boxes are virtual items in video games that can be redeemed to receive a randomized selection of further virtual items. They may contain cosmetic items like character skins or weapon camos, or game-changing items like weapons or abilities.

Loot boxes are a form of monetization in games – players can purchase them with real money to try and obtain rare or desirable items. They are an integral part of games like Overwatch, FIFA, and Valorant.

Criticisms of Loot Boxes

While popular with publishers as a source of revenue, loot boxes have come under scrutiny for their similarities to gambling and potential to encourage addictive behavior. The main criticisms are:

  • Loot boxes use similar psychological mechanisms to gambling – the excitement of chance, and variable ratio reinforcement.
  • Paying money for a chance to win a prize of variable value resembles gambling games like slot machines or roulette.
  • The contents are usually not disclosed upfront so players do not know the true value of a loot box.
  • Obtaining rare or valuable items relies on chance – there is no skill involved.
  • Loot boxes may encourage excessive spending as players chase rare items (‘whaling‘)
  • Young people may be particularly vulnerable to developing unhealthy spending habits.
  • Many argue this makes loot boxes psychologically akin to gambling. Hence, they should be regulated the same way in the interests of consumer protection, particularly for children.

    Legality of Loot Boxes

    Most countries do not class loot boxes as gambling legally. They argue that you always win something from a loot box (even if it‘s undesirable), so it does not meet the definition of gambling requiring a game of chance.

    The main jurisdictions to examine the legality of loot boxes are:

    United States

    Loot boxes are predominantly unregulated in the US. They do not fit the federal definition of gambling because you are guaranteed to win something (not a ‘game of chance‘), and the prizes have no real world value.

    However, this may change. In 2019, Senator Josh Hawley introduced a bill to ban loot boxes and pay-to-win microtransactions, proposing up to $5,000 fines for including them in games marketed toward minors. The bill did not become law, but shows there is growing political will to regulate loot boxes.

    The State of Hawaii examined banning loot boxes for anyone under 21. No action was ultimately taken, but they advised game companies to disclose loot box odds voluntarily.

    United Kingdom

    The UK Gambling Commission determined loot boxes do not constitute gambling because the in-game items have no monetary value. They stressed it is the developer‘s responsibility to ensure loot box mechanics are not used exploitatively.

    European Union

    In 2018, regulators from EU nations signed a declaration outlining concerns about loot box monetization and potential links to problem gambling. They committed to monitor the situation but did not announce specific regulations.

    In 2020, the European Commission requested the Scientific Committee on Health, Environmental and Emerging Risks (SCHEER) to assess if additional measures are needed to protect citizens from potential health risks arising from gaming disorder and problematic loot box use. Their report is still pending.

    Australia

    In 2018, the Australian Senate conducted an inquiry into loot boxes and whether regulation is needed to minimize gambling risks. While recommending improved parental controls, they found insufficient evidence to deem loot boxes as gambling under the current law.

    China, Japan, Korea

    Some Asian countries have enforced loot box regulations:

  • China now requires publishers to disclose loot box odds.
  • Japan has banned ‘kompu gacha‘ – loot boxes that encourage collecting full sets.
  • Korea passed a law in 2018 requiring loot box odds to be revealed.
  • The Netherlands and Belgium

    These two countries stand out for their strict loot box laws:

  • In 2018, the Netherlands required loot box odds to be published.
  • In 2018, Belgium banned in-game purchases outright under gambling law. Major games had to remove loot boxes to remain available.
  • Self-Regulation from Game Companies

    In response to growing concerns, many companies have implemented self-regulatory measures:

  • Displaying loot box probabilities – EA, Blizzard, Riot Games, etc.
  • Preventing loot box purchases with real money in games marketed to children – Nintendo.
  • Using non-random loot boxes with pre-determined contents – Valorant.
  • Limited loot box purchases daily/weekly – Overwatch limits players to earning 3 per week.
  • However, most companies oppose legal bans on loot boxes. They stress the need for self-regulation and argue consumers should exercise personal responsibility.

    Ongoing Controversy

    While loot boxes remain legal and popular, concerns persist over their similarities to gambling and whether their monetization is ethical. The psychology underpinning loot boxes is coming under increasing scrutiny.

    For now, most regulators seem to prefer self-regulation by developers. But grassroots campaigns like #GamblingWithLives show the pressure for legal change is growing. With bi-partisan political interest in the US, further government action seems likely.

    So in summary, while loot boxes are generally not illegal currently, their legal status remains controversial and may change in future depending on evolving research and political pressures. As with any monetization method, companies should employ them ethically with player wellbeing in mind.

    I hope this overview has clearly summarized the key issues in the debate around loot box legality! Let me know if you need any clarification or have additional questions.