By Omar Imtiaz, GW Law 3L, (Contributing Research, Joseph La Vine)
In the past few years there has been growing scrutiny, especially internationally, on the legality of loot boxes which are prominent on mobile, computer, and console games. Loot boxes are essentially booster packs that can be obtained through comprehensive in-game feats or instantly by purchase. Usually, the contents of any given loot box are unknown but the best loot crates, which are also extremely rare, contain legendary characters, special items, or powerful weapons depending on the game. Disappointed players can, of course, try their luck again by purchasing more loot boxes in the hopes of finding greater treasures. It is exactly this incentive that has attracted the attention of courts, regulators, and litigants, both internationally and more recently within the United States.
Regulators in a handful of nations, including Belgium, Japan, China, and the Netherlands, have labeled loot boxes as a form of gambling, and thus illegal without a license. Loot boxes that do not display the crates’ contents before purchase are illegal in Belgium and the Netherlands, as a form of gambling. In the United States, there is so far no official federal or state legislation declaring loot boxes as illegal gambling. However, developers should remain vigilant for any action taken by state and federal legislatures or by the Federal Trade Commission (FTC).
To predict how American regulators might choose to pursue this issue, it is useful to look at measures other countries have taken. Ultimately though, the biggest immediate concern for video game companies in the United States will likely come from private lawsuits.
Belgium
Belgium has been on the forefront among European countries to regulate loot crates. In April of 2018, the Belgian Gaming Commission declared loot boxes illegal for violating the country’s gambling laws. This statement was the result of an investigation by the Commission on four popular games at the time: FIFA 18, Overwatch, Counter-Strike: Global Offensive, and Star Wars Battlefront II.
Koen Geens, Belgium’s Minister of Justice at the time, described loot boxes as a mix of gaming with gambling which was “dangerous for mental health”, especially in the case of children. Developers were liable to fines as high as €800,000 and prison sentences of up to five years if purchasable loot boxes were not removed. The law was met with a high degree of compliance and support both by the general public and by gamers. Loot crates in Belgian games can now only be unlocked through in-game achievements.
The Netherlands
The Netherlands Gaming Authority also declared that loot boxes are a form of gambling, and consequently illegal without a license. The agency ruled that FIFA’s Ultimate Team, a game mode in which gamers build their own teams with the additional possibility of unlocking the best soccer players through game packs, was a form of gambling and fined Electronic Arts as well as its Swiss subsidiary €250,000 each for every week that loot boxes remained in the game.
Electronic Arts appealed against the Gaming Authority’s interpretation of the Dutch Betting and Gaming Act. The company was unsuccessful as the District Court of The Hague certified that the Gaming Authority correctly identified loot boxes as “games of chance” making them fall within the purview of national gambling laws. Videogame creators in the Netherlands have found creative solutions to comply with the new law. For example, loot boxes in the game Dota 2 in the Netherlands now display all the items contained in any given box, removing the element of uncertainty. So far, the Netherlands Gaming Authority has considered this practice permissible.
The United States
Regulators in the United States have not been as aggressive as some of their European counterparts. So far, loot boxes are legal in the United States, despite some movement in a handful of state legislatures, a bill labeled “The Protecting Children from Abusive Games Act” sitting idle in Congress, and a cursory examination of the issue by the FTC. For video game companies in the United States, private lawsuits could present a more pressing concern.
One such example is a lawsuit filed in the Northern District of California. Plaintiff Kevin Ramirez asserts that FIFA’s Ultimate Team violates California gambling law due to its use of loot boxes to unlock the top soccer stars. The plaintiff, who represents a potential class of over a hundred individuals and is trying to claim $5 million in damages, asserts that Electronic Arts “relies on creative addictive behaviors in consumers to generate huge revenues” and that “Buying the packs are nothing more than a gambling bet.” It will be fascinating to observe how this case develops and whether a favorable result for the plaintiff encourages more litigants.
California’s definition of gambling defines an illegal gambling device as “a machine, aperture, or device; something of value is given to play; and the player may receive something of value by element of chance.” Given the fact that superstar Lionel Messi’s ultimate team card can be worth around $40, the plaintiff might just have a shot in the random lottery known as the American jury.
In sum, it might behoove the game companies to keep an eye on what is happening in Europe when making their best predictions on how American regulators will draft their gambling laws as well as how the Judiciary hearings will aid in shaping their views.
