Loot boxes: Do we still have a problem?

A few years ago, concern over loot boxes hit the mainstream media in a big way. Far from being a harmless add-on that enhanced gameplay, loot boxes were demonised as a sinister means of monetisation and a pathway to gambling addiction (not least among children).

In 2018, Juniper Research reported that over $40 billion was being spent on loot boxes annually. With so much at stake, it is not a surprise that the media jumped on the subject. The Guardian cited a study, funded by GambleAware, that showed there was a clear correlation – using the Problem Gambling Index (PGSI) measure – between loot boxes and problem gambling. The UK Gambling Commission declared they had found that 1 in 3 children aged 11-16 had spent money on them. 

ABC News Australia did a feature exploring, ‘‘What are video game loot boxes and do they encourage gambling?’, in which Dr Sally Gainsbury, Associate Professor from the School of Psychology at the University of Sydney, talked about her concerns over the lack of consumer protection. She stated that, as ‘random chance items’ (in which you make a payment and get something of value), loot boxes were essentially using the same psychological methods and mechanics as online slot games, and that there was indeed a strong connection between them and gambling problems.   

This argument was countered at the time by Kerry Hopkins, Vice President for Legal and Government Affairs at Electronic Arts. She disagreed with the correlation, suggesting loot boxes were not a type of gambling product nor led to gambling. Interactive Games and Entertainment Association suggested that loot boxes were more akin to ‘Kinder Surprise Eggs’ and that they used similar ‘surprise and delight’ mechanics.

In response, the gaming industry took action here and there, with some developers removing loot boxes altogether. Others, such as Fortnite developer Epic Games, made integral changes and adjustments, allowing players to look inside the real-money loot boxes, prior to purchase, in order to remove the gambling element. 

Many countries began to take action, too. Belgium banned loot boxes in 2018, arguing that games of chance and gambling caused too much damage to families. In South Korea, the Fair Trade Commission fined Nexon, makers of Sudden Attack, $875,000 USD over deceptive loot-box practices. Many countries began to investigate loot boxes, and calls for regulation came from all quarters. 

Fast forward to today, and the question becomes, ‘Do we still have a problem?’ The evidence may suggest we do. On the 11th January 2023, Lord Foster of Bath, who has over 20 years of experience in politics and gambling regulation, addressed the House of Lords on the subject of loot boxes and child gambling. Lord Foster began by reminding the government that a white paper looking at the link between loot boxes and gambling had been approved twice (by the previous administration) but has still not surfaced. He called for urgency in addressing the matter and questioned when a government meeting with Peers for Gambling Reform (PGR) would take place. Lord Foster confirmed that a consultation on loot boxes showed overwhelming evidence that there is a very clear direct link between loot boxes and gambling harm, but that the government had responded by saying they are going to take no action themselves. Instead, they were going to ‘hope’ that the industry would do more to try to encourage further research into the subject. 

Addressing the House, Lord Foster went on to share how loot boxes relate to gambling. Loot boxes, he said, should be seen as gambling and treated as such. He pointed out that when you want to improve your character in a video game, there are usually two ways: in-game purchases or loot boxes. He likened the loot box to a lucky dip, whereby you ‘hope you get what you are looking for’. This, he says, makes them a game of chance, and as such, they should be treated as gambling. 

However, with no monetary prize in a loot box, they do not meet the current legal classifications for gambling. Lord Foster also revealed that in the UK alone there are 60,000 children aged 11-16 who are classified as gambling addicts. And a further 85,000 children aged 11-16 who are deemed ‘at risk’ of becoming gambling addicts. 

With statistics like that, is it responsible for the UK Government to ‘hope’ the industry would address the problem itself? If the government won’t take charge, who will? Can loot boxes be self-regulated enough to save harm? 

If loot boxes are indeed gambling, then inspiration can be taken from the iGaming industry itself. At SiGMA, the Malta Gaming Authority and the Maltese government addressed several issues with regulation, corruption and resilience within the industry. The take-away message stood firm in that, to survive and protect players and indeed the industry itself, regulation is a must. Action must be taken decisively and light should be shone on areas that operate in the dark.

It would seem that the European Parliament is willing to shine a light on the potential harms caused by loot boxes and other possible nefarious practices in games – such as gold farming (which can lead to human rights abuse, fraud and financial crime). A recently published Report on consumer protection in online video games: a European single market approach called for a unified European Parliament resolution on the matter. 

Discussion centred on finding ways in which a common European approach to loot boxes could result in the necessary steps being taken to provide adequate protection for consumers, calling for the negative aspects of ‘pay-to-win’ loot box models in the gaming industry to be addressed. The report recommends that game developers show greater transparency and calls for item probability mechanisms to be implemented. It is also recommended that PEGI ratings are further utilised to include more in-game purchase warnings. The report even goes so far as to call for a ban on paid loot boxes to ensure minors are protected. 

Above all, though, it is concluded that a unified approach is what is needed most. The European Parliament cites ongoing court cases in the Netherlands and Slovakia and a lack of regulation as the main threats to minors and young children.

Do we still have a problem with loot boxes? For as long as there is no consensus on their harms and no unified regulations, it would seem that we do.

Article produced by Expert Buyers Guide.