US and European regulators join forces to address loot box worries [Update]

Fifteen EU-based regulators plus Washington State pen joint declaration while Australian based study likens loot boxes to gambling, not baseball cards

Update (09/19/2018): We've updated our story to include statements from Purewal and Partners and Affect Group.

As the legalities surrounding loot boxes continues, in addition to last week’s news that EA could face legal issues for ignoring a ruling by the Belgian government to remove the Ultimate Team portion from FIFA 18, a group of gambling regulators have joined together to pen a letter addressing them.

Fifteen EU gambling regulators from the UK, Ireland, France, Austria, Poland, Latvia, the Czech Republic, Spain, the Isle of Man, Malta, Portugal, Jersey, Norway, and the Netherlands plus US representation from the Washington State Gambling Regulator published the letter, noting their concerns with the business model.

In addition to the loot box problem, the missive addresses how it will take on websites that let players either gamble or sell in-game items like skins or weapons with real-world money. CS:GO Lounge and Dota 2 Lounge are good examples of why the letter was drafted. These sites allowed players to gamble on a stash of in-game items. These features were discontinued following a crackdown by Valve.

“We have joined forces to call on video games companies to address the clear public concern around the risks gambling and some video games can pose to children,” said the CEO of the UK Gambling Commission, Neil McArthur, who was also the body’s signatory on the letter.

“We encourage video games companies to work with their gambling regulators and take action now to address those concerns to make sure that consumers, and particularly children, are protected.”

It's unclear as to what the signatories are working towards as a whole, however. GameDaily talked with Peter Lewin from Purewal and Partners to get his perspective. "It's not clear what the actual scope what they're looking into," Lewin told me over the phone. "So, the UK Gambling Commission's presser was very much focused on third-party gambling sites like GS:GO skin betting. But the joint presser signed by all the different countries put loot boxes on the same tier as third-party gambling sites. I don't know what anyone's looking into yet exactly."

In the letter, discussed at the Gambling Regulators European Forum, all signatories confirmed that they are “committed to the objectives of their public policies with regard to consumer protection, prevention of problem gambling and ensuring the safety of underage persons,” adding that it was “increasingly concerned” with the growing blurred lines between loot boxes and gambling.

“Concerns in this area have manifested themselves in controversies relating to skin betting, loot boxes, social casino gaming and the use of gambling themed content within video games available to children.

“Regulators identify in such emerging gaming products and services similar characteristics to those that led our respective legal frameworks and authorities to provide for the regulation of online gambling. Each gambling regulator will of course reserve the right to use instruments of enforcement given by its national gambling regulatory framework. We will also work closely with our consumer protection enforcement authorities.”

The signatories said they expect the letter “will initiate a constructive dialogue” between the regulators and “responsible game developers.”

Lewin provided additonal context around gambling laws in Europe versus the United States. "... the range of attitudes towards gambling is humongous between these different countries," Lewin commented. "Some of them say, 'yeah, it's allowed, but you've got to licence it', some of them say, 'you can't gamble at all', some of them say, 'you can gamble, but it's going to be taxed'. That's why I think we're not going to see a simple set of yes or no, loot boxes are allowed at the end of this. I think it's going to be a data sharing exercise inviting people to the table, inviting the industry to the table and at the end of it, we're going to have this piecemeal country by country approach still."

According to VentureBeat, a study conducted by the Australian Parliament’s Environment and Communications References Committee showed that there were links between loot box spending and problematic gambling. The population sample size was 7500 people.

“The more severe a gamers’ problem gambling was, the more likely they were to spend large amounts of money on loot boxes. These results strongly support claims that loot boxes are psychologically akin to gambling,” said the report, conducted by Dr. David Zendle and Dr. Paul Cairns.

In a statement, the pair added loot boxes could potentially act as an introduction to gambling or take advantage of gambling disorders. They note that the industry tends to brush off loot boxes as similar to harmless products like baseball cards, football/soccer stickers, and products along those lines.

“Industry statements typically disassociate loot boxes from gambling,” they said. “They instead highlight similarities between loot boxes and harmless products like trading cards or Kinder Surprise eggs. … By contrast, researchers argue that loot boxes share so many formal similarities with other forms of gambling that they meet the ‘psychological criteria’ to be considered gambling themselves. These results support the position of academics who claim that loot boxes are psychologically akin to gambling.”

They continued: “This is what one would expect if loot boxes psychologically constituted a form of gambling. It is not what one would expect if loot boxes were, instead, psychologically comparable to baseball cards.”

The Netherlands has also enacted its own ban on loot boxes as of this past summer. However, despite shutting off the Auction House feature and making necessary tweaks to NBA 2K to comply with the Dutch Betting and Gaming Act, 2K has asked players to contact their local politician to voice their opinion.

Nick Johnson, an accountant from Affect Group, talked to GameDaily about the potential costs of compliance across multiple countries just in the EU.

"It's impossible to say how much the compliance cost will be to the games industry," Johnson said over the phone. "If there's a broad brush strokes by the government and by the lobbying in the industry saying you can't produce anything that can conceivably be manipulated and sold on by a third-party, that's going to mean any game made in that industry is going to be less attractive than one made outside it where they are freer to have more interaction with the user and make it more exciting for the user.

"So it's going to be a cost in terms of the amount of games that are made and the success of those games that are made if the legislation imposed by the government is duly restrictive."

Countries will likely continue to tighten and introduce laws around the way loot boxes are implemented (or not). The pressure from regulators to keep publishers in check is a mixed bag. It presents unique opportunities for lawmakers and gamemakers to sit at the same table and determine the future of blind draws and loot boxes in games, but the path forward is muddy and full of thorns.

Johnny Cullen is a freelance writer who has written for the likes of Eurogamer, VG247, Official PlayStation Magazine UK and so many more since 2009. Come talk his ear off about The Last of Us or Metal Gear Solid 3 being the best games ever on Twitter @JohnnyCullen.