Do Video Game Companies Need to Be Regulated?

How much regulation goes on for video game companies? Beyond age restrictions and complying with shop rules if they’re on a platform like Steam, there’s not a whole lot when it comes to consumer protection.

In the US, there are some laws like the legislation on video game violence, but the furore at the moment is surrounding one issue in particular: loot boxes.

Loot boxes: the basics

As per the Federal Trade Commission’s description, “Loot boxes are in-game rewards that contain a random assortment of virtual items (loot) to assist a player advance in the online game or to customize his or her game avatar.”

Heavyweight game titles such as FIFA, League of Legends, Counter Strike: Global Offensive all have loot boxes as part of their additional purchase options.

Every kid wants those elusive loot boxes

Why are loot boxes a hot topic at the moment?

There is now legislation in countries like Belgium and the Netherlands that have banned the use of loot boxes in games. There is currently proposed legislation on the table to do the same in the United States.

Why? Because what’s in loot boxes sounds an awful lot like gambling. This is particularly an issue when you consider that many players aren’t of betting age. You grab a loot box, for real money, and you don’t know what the outcome will be. It’s like playing the slot machines and hoping for a win.

Over in the UK, Neil McArthur, the chief executive of the Gambling Commission, has specifically stated that loot boxes fall outside of current gambling law, as there is “no formal way of monetizing the contents” of the packs.

But that doesn’t mean that it’s not gambling. We’re sure that a lot of people playing these games could suggest a price point for the contents of each of the items in a loot box. You can literally purchase straight add-ons at a specific price point for many games.

Loot boxes, like other forms of gambling, come with odds of unlocking specific items. For example, Chinese gambling regulations made Overwatch make public their loot box item odds back in 2017. The disclosure came that the chances of obtaining an Epic item were one in every 5.5 loot boxes and Legendary items in every 13.5 loot boxes. Each loot box was guaranteed to contain at least one Rare item. At the time, you could purchase two loot boxes for $1.99 – but of course just because the odds of getting a Legendary item stand at one in every 13.5 boxes doesn’t mean this will be the case, it’s just the average. You could go through a hundred boxes and not find one.

Plenty of games have already pulled loot boxes from their stores, with all the issues surrounding them. Fortnite is one major name that pulled loot boxes, particularly in response from a lawsuit accusing the company behind the game of “predatory behavior.” It makes sense that many companies would prefer to avoid controversy, particularly as it pertains to the intersection of children and gambling.

So, do loot boxes really need to be regulated?

There is no easy answer to this question, video game companies are becoming much more like gambling companies and as such will need to apply for a license.

It makes sense when you think of loot boxes as a gateway to real gambling. We prevent underage children from gambling as it can have serious consequences like addiction and losing everything, much like alcohol or cigarettes can have destructive consequences, which is why they are age restricted.

We should welcome clear legislation on the issue, whether it be an all-out ban on loot boxes, or simply treating them as a gambling product. This could involve licensing for video game companies to be a provider of gambling services, which would involve things like age restrictions, etc. Or it could go the way of Belgium and the Netherlands and be scrapped as a game feature all together – but this may upset fans of the game who like using the feature and do so responsibly.

It’s a very interesting topic that, if US regulation passes, will have a significant impact in the industry.