Loot Boxes: Gaming or Gambling?

Just as the growth of fantasy sports, sweepstakes and online poker were curtailed by the reach of gambling laws, the latest trends in the $138 billion video gaming industry are attracting an increasing level of unsolicited attention from gambling regulators across the globe.  Much of this attention is focused on “loot boxes”.

As reported by the New Yorker,

“A loot box is like an in-game lottery ticket: for a small fee, involving real money, a player can purchase an assortment of items that promise to enhance the game experience.”

For example, one popular game gives its 40 million players two options for obtaining a loot box of game enhancements, such as a new “Skin” or “Victory Pose”.  First, players can obtain a loot box at no cost by reaching the next game level.  Alternatively, at any point, players can purchase a loot box for about a dollar.  In one version of this game, the possibility of a loot box containing the most desired enhancements is only slightly better than the odds of being dealt a blackjack from a deck of cards.

It is in this context that gambling regulators from sixteen different jurisdictions issued a Joint Declaration reflecting their common concerns related to the “blurring of lines” between these video gaming trends and gambling.  Each signatory will analyze such trends, including loot boxes, within the purview of their respective legal authority to ensure consumer protection, prevention of problem gambling and the safety of underage persons.

Despite the Joint Declaration, a determination of which side of the blurred line a particular video game falls is far from uniform.  Generally, gambling is defined as exchanging consideration for the chance to win a prize.  However, the meaning of these three prerequisites (consideration, chance, and prize) varies so greatly across jurisdictions that this general definition is just the beginning of the legal analysis being performed by the joint declaration signatories and many other gaming regulators across the globe.

Whether the video gaming industry can avoid the regulatory barriers and oversight that befell previously emerging games will be determined on a jurisdiction by jurisdiction basis.