Loot Boxes: The Next Evolution Of Online Gambling?

Resources  /  Published 06 Aug 2021  /   / 

Since the mid-2010s, loot boxes have become an increasingly controversial topic within the video games industry and have been likened to gambling.

While the concept of selling in-game collectibles has been around awhile, the rise of monetised loot boxes within games such as FIFA and Fornite have proved immensely popular among players and highly lucrative for developers. However, criticism has also been levelled at loot boxes due to the negative and addictive effects they can have on players.

Here we take a closer look at loot boxes and how the video games industry and regulators are adapting to their rise in popularity.

What Are In-Game Loot Boxes?

Loot boxes are a randomised rewards system within online video games. These in-game boxes give players access to undisclosed digital items that often appear in the form of chests, crates, or packs of cards. For many years, loot drop systems were a common and free game mechanic within MMOs and MMORPGs. More recently, monetised loot boxes have become a popular, though often controversial, video game trend, especially within eSports and Battle Royale type games such as FIFA, Counter-Strike, and Fortnite.

There tends to be two broad types of loot. Cosmetic rewards give players the option to customise the appearance of their characters and weapons through unique ‘skins’. Other games, however, provide random loot which can hugely influence a player’s progress and skill ability within the game.

The latter approach, in particular, has led to a flurry of developers releasing free-to-play games which take advantage of microtransactions. The idea is that the developer provides the game for free online, whilst creating a viable revenue stream through in-game purchases. As players begin to invest themselves within a game, they can be enticed to make small, but regular, purchases on loot boxes to increase their chances of winning or progressing further.

It is always unclear what a player will unlock with any loot box purchase. The purchase is simply based on the hope of finding a rare item that isn’t possible to obtain in normal gameplay. As such, they have been likened to games of chance like roulette or video slots.

Loot Box Systems | Trifecta DirectoryWhy are Loot Boxes controversial?

The unpredictability of loot boxes has earned them both acclaim and criticism among players and the gaming industry. Although players always receive a virtual item when they purchase a loot box, the principle is comparable to that of games of chance due to the large random factor. Games of chance, however, are subject to very strict legal directives, and their access is not authorised to minors.

Some players are known to spend many hours and lots of money purchasing loot boxes in the hope of finding their desired item. As this mode is similar to how slot machines dole out prizes, loot boxes are considered part of the compulsion loop, which contributes towards video game addiction and is comparable to gambling addiction. Furthermore, some loot box drops are available on a limited-time basis, which further entices players to spend money to obtain loot boxes and not miss out. Many studies, including reports in Australia, New Zealand, and England have concluded that loot boxes are “structurally and psychologically akin to gambling.”

In Belgium and the Netherlands loot boxes within certain games are already considered illegal games of chance and have been banned. The designers of these games have had to eliminate loot boxes from their games or ensure better transparency. In the United States, a bill has also been introduced that deems loot boxes to be games of chance and motions have been made to ban loot box systems.

Loot Boxes and regulation

As loot boxes are continuously being linked to gambling-like addictions, more and more governments and authorities are calling for such in-game mechanics to be regulated. Regulation will help create a transparent set of rules which define how game developers can operate their loot box systems and provide this content to their player bases. This will not only protect players but also developers themselves from inadvertently providing illegal or unfair loot box systems.

In 2018, for example, the South Korean Fair Trade Commission fined three game developers because of their unfair loot-box implementation. One company, Nexon, was fined $882,000 for not informing its players of the correct odds of collecting certain items available within their loot boxes in its game Sudden Attack.

Furthermore, a large segment of the video game industry’s clientele is made up of minors, who are traditionally protected from the practices and risks associated with gambling (sports betting, restriction of access to casinos, etc.). In light of this, some countries have started looking into regulations to be adopted to regulate the use of “loot boxes” specifically among this demographic.

The UK’s Gambling Commission has taken a slightly more sober view of the issue, stating that “where [loot box] prizes are successfully restricted for use solely within the game, such in-game features would not be licensable gambling”. It is when in-game items can be converted into cash or traded for other items of value that “a licence is required in exactly the same manner as would be expected in circumstances where somebody uses or receives casino chips as a method of payment for gambling, which can later be exchanged for cash.”

The debate around regulation has already spurred some game developers to alter their loot box mechanics to eliminate some of the randomness and gambling attributes associated with them.

Whether widespread loot box regulation will come into full force is yet to be seen. For now, however, loot boxes have given both video game developers and online betting brands food for thought, with the opportunity to create new variations of monetised digital content that has the potential to attract new types of players.