European Gaming Regulators Issue Joint Letter on Loot Boxes
The Washington State Gambling Commission released a joint declaration stating they would work together with gaming regulators in 15 European countries to police video game loot box gambling in their jurisdictions. The fifteen European gaming commissions included regulators from the United Kingdom, France, Spain, and The Netherlands.
The joint loot box letter voices the 16 regulators’ concerns over video game publishers’ loot box policies in general.
The missive also warned about gaming websites like Steam allowing third-party skin-gambling or loot-gambling sites to operate using in-game upgrades they publish.
The letter comes on the heels of last week’s warning by the Belgium gaming regulator to Entertainment Arts (EA) that it could face fines if it does not remove the Ultimate Team portion from FIFA 18 and FIFA 19. The FIFA Ultimate Team web app is a much-anticipated part of EA’s Association football game, because it features top players from the English Premier League like Eden Hazard, Andriy Yarmolenko, and Granit Xhaka, as well as players from La Liga, Serie A, and Bundesliga.
How Loot Boxes Became Controversial
For years, video game publishers have monetized loot boxes, also known as booster packs or loot crates, which give players in-game upgrades to their skills or equipment. Loot boxes can be attained through hours of gameplay, but in-game purchases allow players with cash to buy the upgrades. Grinders have complained about paid loot boxes hurting game balance, but the practice itself is seen as legitimate in the video game industry.
Regulators and public officials became interested after a few high-profile cases pointed out the randomization aspect of loot boxes. Instead of getting a set advantage when buying a booster pack, many games provide random upgrades. Critics have pointed to random paid loot boxes as a form of gambling.
Those same critics point out that underage players buy a large bulk of the upgrades, which they equate to underage gambling. Defenders of the practice say prizes of random value have been marketed to children for generations, such as in baseball card packs and other trading cards.
Third-Party Skin-Gambling Sites
The letter from the European and Washington state regulators pointed out a less defensible form of loot box trade: the third-party skin-gambling and loot-gambling sites. The regulators singled out CS:GO Lounge and Dota 2 Lounge as good examples of why new policies are needed.
CSGO Lounge and Dota 2 Lounge (Dota2 pictured above) are owned by third-party operators, who create a website where loot and skins from booster packs can be wagered against other players. The site organizers build a platform for 50/50 bets on a piece of loot and get paid for hosting the event. Several third-party skin-gambling sites became famous for their YouTube channels or their Twitch feeds, until the Valve cracked down on the practice by removing such features.
Neil McArthur on the Risks to Children
Neil McArthur, the chairman of the UK Gambling Commission, said of the joint declaration, “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.”
The UK Gambling Commission chairman, whose organization was one of the 15 European regulators to sign the declaration, added, “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.”
The full list of signatories includes regulators from the following countries:
- United Kingdom
- Isle of Man
- The Netherlands
- The Czech Republic
- Washington State (USA)
The signal is that video game publishers which rely on in-game purchases of loot boxes need to find a new system for monetizing their booster packs without flouting EU, UK, and US law. Gaming websites and gaming associations praised Epic Games’ system for handling loot boxes in its popular Fortnite game, so other systems do exist.
In related news, an Australian loot box study compared paid booster packs with randomized prizes to gambling – not baseball cards. Meanwhile, Purewal and Partners, a prominent law firm for video game companies, released their assessment of the news.
Loot Boxes or Third-Party Gambling Sites?
Peter Lewin from Purewal and Partners — a law firm which represents video game, digital entertainment, video streaming, and tech companies — characterized the joint declaration as a UK-initiated public relations move. He added, “It’s not clear what the actual scope what they’re looking into. 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.”
It is hard to obscure the similarities between video game loot boxes and baseball cards. At least since the Baby Boomers were young, American children bought things of value which were randomized. Children in the 1950s did not have a public forum to sell Mickey Mantle, Willie Mays, and Duke Snyder cards, but it is hard to argue video game publishers invented the concept. The Internet is a game changer in how easy it is to turn booster packs into gambling items, so video game publishers have to respond to governmental oversight quickly and effectively.
Quote from 16 Regulators’ Joint Declaration
In a time when regulators are starting to form international coalitions, that point is being driven home. The letter signed by the 16 regulators spoke directly to concerns about the potential for underage gambling, or video game publishers creating the habits which might lead to problem gambling later in life.
The letter stated, “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.”