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Gaming or gambling? The regulation of video game ‘loot boxes’

Purchased within video games using real-world money, virtual currencies or in-game items, loot boxes provide a player with rewards ranging from cosmetic items to substantial gameplay advantages. The House of Commons recently published its research briefing on concerns and regulation surrounding such ‘loot boxes’ and in this article, we will take a brief look at their treatment in the UK and Europe.

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Published 9 December 2024

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Gaming or gambling? The regulation of video game ‘loot boxes’

Purchased within video games using real-world money, virtual currencies or in-game items, loot boxes provide a player with rewards ranging from cosmetic items to substantial gameplay advantages. The House of Commons recently published its research briefing on concerns and regulation surrounding such ‘loot boxes’ and in this article, we will take a brief look at their treatment in the UK and Europe. The release of ‘EA FC 25’ at the end of September is of particular relevance here, as EA and the loot boxes in their footballing titles often fall in the contentious grey area between gaming and traditional gambling.

Why are loot boxes concerning?

From a regulatory perspective, the key point of concern in respect of loot boxes, is that the player is unaware of what item or benefit they will receive. This aspect of chance is often compared to traditional gambling, however, the Gambling Commission has confirmed previously that loot boxes fall outside of their authority under the Gambling Act 2005 (the Act). This exclusion is primarily due to the Act’s requirement for gambling to result in rewards of money or money’s worth. Although secondary markets outside the control of developers and publishers present an opportunity for in-game rewards to attain a real-world value, these are in breach of the end user licensing agreements in place with players[1]. As a result of this distinction, regulatory action in the UK has been focused on cracking down on the websites which facilitate trading of in-game rewards[2] rather than regulating loot boxes themselves.

The previous Government stopped short of extending the Act to explicitly cover loot boxes, citing ‘implementation challenges’ and the risk of ‘unintended consequences’ by possibly capturing other random reward mechanisms, such as mystery contents in a pack of physical trading cards.[3] As a result, loot boxes in the UK currently sit in a grey area, their use largely guided by the industry  (most recently in principles published by UKIE), albeit, subject to continuing government oversight as the introduction of targeted regulation in the future has not been ruled out.

The European Perspective

At a European level, there has been a range of views regarding loot boxes, which can be summarised by considering the treatment of EA’s football titles in three countries. In Belgium the sale of loot boxes is a violation of gambling legislation, therefore, the sale of in-game loot boxes risks prosecution for studios without adequate licencing. In the Netherlands, EA were initially fined €10,000,000 in 2020 for their continued sale of loot boxes in breach of the country’s gambling laws. Nevertheless, EA’s appeal to the highest Dutch court was successful in 2022 on the argument that the loot boxes didn’t constitute a game of chance by themselves, instead, they formed part of the skill-based FIFA 22 game.[4] In Austria in 2023, a court held that FIFA’s player ‘packs’ constituted unlawful gambling and therefore EA were subject to claims from players who were entitled to reclaim the money they had spent on loot boxes.[5] As recently as last month, a higher Austrian court ruled that loot boxes do not constitute unlawful gambling and players cannot reclaim money spent on them.  The conflicting conclusions and uncertainty of treatment only further highlight the legal grey area loot boxes sit in and the corresponding risk for developers looking to include them in their games.

Current landscape

With the regulatory approach so uncertain, some developers are self-regulating and exercising additional caution in their use of loot boxes. As an early example, Epic Games removed the mystery element from their loot box system from Fortnite in 2019 with their CEO raising concerns that the games of chance cause harm to gamers.[6] Even as far back as 2017, EA removed the gameplay affecting rewards from their Star Wars Battlefront 2 game following serious player backlash prior to its launch. Some studios are finding that actively stepping away from the loot box system towards in-game cosmetics (with no gameplay advantage) alongside clear purchasing structures can lead to commercial advantages such as that highlighted by Call of Duty’s removal of its the loot box system yielding “double digit percentage” growth in their in-game sales the following year.[7]

That is not to say that change is being unanimously adopted – at times even by the same studios and publishers. The direct post-launch income created by the sale of loot boxes is enough for developers including EA and the creators of the popular Counter Strike: Global Offensive games to continue with their loot box system even in the face of national bans, fines and, although often appealed with some success, initially negative judicial treatment.

It is important to note that it is not just the presence of in-game loot boxes which can land developers in hot water, but also the advertising around the games which contain them. A recent BBC investigation discovered that regulations imposed by the Advertising Standards Authority, requiring disclosure of loot boxes in a game’s advertising, are widely ignored across mobile games, with around 90% of game adverts failing to disclose the presence of in-game loot boxes.[8] Whatever discretion there may be currently, industry failures to self-regulate and abide by advertising regulations are likely to lead to increased negative publicity around the issue and may invite stricter enforcement action in the future.

All that to say, developers should exercise caution when looking to incorporate loot boxes and similar mystery prize schemes into their titles as the consequences of a misstep can be risky – whether in the form of legal intervention or extreme negative publicity.

 

[1] 2.2 (92) Government response to the call for evidence on loot boxes in video games – GOV.UK (www.gov.uk)

[2] Loot boxes within video games (gamblingcommission.gov.uk)

[3] 5.2 Government response to the call for evidence on loot boxes in video games – GOV.UK (www.gov.uk)

[4] FIFA 22 loot boxes no longer regarded as gambling in the Netherlands as ban overturned, Roelien van Neck (twobirds.com)

[5] Austria | The End of Loot Boxes? (taylorwessing.com)

[6] Fortnite boss says game loot boxes ’cause harm’ – BBC News

[7] Call of Duty Players Spend More In-Game After Season Pass and Loot Boxes Removed – IGN

[8] Top-selling mobile games breaking rules on loot boxes – BBC News

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Shorter Reads

Gaming or gambling? The regulation of video game ‘loot boxes’

Purchased within video games using real-world money, virtual currencies or in-game items, loot boxes provide a player with rewards ranging from cosmetic items to substantial gameplay advantages. The House of Commons recently published its research briefing on concerns and regulation surrounding such ‘loot boxes’ and in this article, we will take a brief look at their treatment in the UK and Europe.

Published 9 December 2024

Associated sectors / services

  • Corporate
  • Digital

Authors

Gaming or gambling? The regulation of video game ‘loot boxes’

Purchased within video games using real-world money, virtual currencies or in-game items, loot boxes provide a player with rewards ranging from cosmetic items to substantial gameplay advantages. The House of Commons recently published its research briefing on concerns and regulation surrounding such ‘loot boxes’ and in this article, we will take a brief look at their treatment in the UK and Europe. The release of ‘EA FC 25’ at the end of September is of particular relevance here, as EA and the loot boxes in their footballing titles often fall in the contentious grey area between gaming and traditional gambling.

Why are loot boxes concerning?

From a regulatory perspective, the key point of concern in respect of loot boxes, is that the player is unaware of what item or benefit they will receive. This aspect of chance is often compared to traditional gambling, however, the Gambling Commission has confirmed previously that loot boxes fall outside of their authority under the Gambling Act 2005 (the Act). This exclusion is primarily due to the Act’s requirement for gambling to result in rewards of money or money’s worth. Although secondary markets outside the control of developers and publishers present an opportunity for in-game rewards to attain a real-world value, these are in breach of the end user licensing agreements in place with players[1]. As a result of this distinction, regulatory action in the UK has been focused on cracking down on the websites which facilitate trading of in-game rewards[2] rather than regulating loot boxes themselves.

The previous Government stopped short of extending the Act to explicitly cover loot boxes, citing ‘implementation challenges’ and the risk of ‘unintended consequences’ by possibly capturing other random reward mechanisms, such as mystery contents in a pack of physical trading cards.[3] As a result, loot boxes in the UK currently sit in a grey area, their use largely guided by the industry  (most recently in principles published by UKIE), albeit, subject to continuing government oversight as the introduction of targeted regulation in the future has not been ruled out.

The European Perspective

At a European level, there has been a range of views regarding loot boxes, which can be summarised by considering the treatment of EA’s football titles in three countries. In Belgium the sale of loot boxes is a violation of gambling legislation, therefore, the sale of in-game loot boxes risks prosecution for studios without adequate licencing. In the Netherlands, EA were initially fined €10,000,000 in 2020 for their continued sale of loot boxes in breach of the country’s gambling laws. Nevertheless, EA’s appeal to the highest Dutch court was successful in 2022 on the argument that the loot boxes didn’t constitute a game of chance by themselves, instead, they formed part of the skill-based FIFA 22 game.[4] In Austria in 2023, a court held that FIFA’s player ‘packs’ constituted unlawful gambling and therefore EA were subject to claims from players who were entitled to reclaim the money they had spent on loot boxes.[5] As recently as last month, a higher Austrian court ruled that loot boxes do not constitute unlawful gambling and players cannot reclaim money spent on them.  The conflicting conclusions and uncertainty of treatment only further highlight the legal grey area loot boxes sit in and the corresponding risk for developers looking to include them in their games.

Current landscape

With the regulatory approach so uncertain, some developers are self-regulating and exercising additional caution in their use of loot boxes. As an early example, Epic Games removed the mystery element from their loot box system from Fortnite in 2019 with their CEO raising concerns that the games of chance cause harm to gamers.[6] Even as far back as 2017, EA removed the gameplay affecting rewards from their Star Wars Battlefront 2 game following serious player backlash prior to its launch. Some studios are finding that actively stepping away from the loot box system towards in-game cosmetics (with no gameplay advantage) alongside clear purchasing structures can lead to commercial advantages such as that highlighted by Call of Duty’s removal of its the loot box system yielding “double digit percentage” growth in their in-game sales the following year.[7]

That is not to say that change is being unanimously adopted – at times even by the same studios and publishers. The direct post-launch income created by the sale of loot boxes is enough for developers including EA and the creators of the popular Counter Strike: Global Offensive games to continue with their loot box system even in the face of national bans, fines and, although often appealed with some success, initially negative judicial treatment.

It is important to note that it is not just the presence of in-game loot boxes which can land developers in hot water, but also the advertising around the games which contain them. A recent BBC investigation discovered that regulations imposed by the Advertising Standards Authority, requiring disclosure of loot boxes in a game’s advertising, are widely ignored across mobile games, with around 90% of game adverts failing to disclose the presence of in-game loot boxes.[8] Whatever discretion there may be currently, industry failures to self-regulate and abide by advertising regulations are likely to lead to increased negative publicity around the issue and may invite stricter enforcement action in the future.

All that to say, developers should exercise caution when looking to incorporate loot boxes and similar mystery prize schemes into their titles as the consequences of a misstep can be risky – whether in the form of legal intervention or extreme negative publicity.

 

[1] 2.2 (92) Government response to the call for evidence on loot boxes in video games – GOV.UK (www.gov.uk)

[2] Loot boxes within video games (gamblingcommission.gov.uk)

[3] 5.2 Government response to the call for evidence on loot boxes in video games – GOV.UK (www.gov.uk)

[4] FIFA 22 loot boxes no longer regarded as gambling in the Netherlands as ban overturned, Roelien van Neck (twobirds.com)

[5] Austria | The End of Loot Boxes? (taylorwessing.com)

[6] Fortnite boss says game loot boxes ’cause harm’ – BBC News

[7] Call of Duty Players Spend More In-Game After Season Pass and Loot Boxes Removed – IGN

[8] Top-selling mobile games breaking rules on loot boxes – BBC News

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