Loot Boxes - Gaming Entertainment or a Gambling Hazard

Author: Matthew Haynes

There are many different elements of the increasingly lucrative gaming industry as it continues to move in an upward trajectory, though these have not been without their problems over the years.

Technology has moved the industry forward significantly over the last few years, especially as advancements in this realm have made it even more sophisticated, aimed at numerous verticals of gaming, which has moved it on considerably.

These have all helped to contribute to, essentially, an ever-growing eco-system that is steadily gaining momentum.

One of the components that have been increasingly in the news over the last few months is loot boxes and the effect these are starting to have on issues such as gambling addiction and, indeed, whether games that have these make them a form of gambling in certain jurisdictions.

As loot box games become a fundamental issue in certain countries around the world, below we have investigated what might be done to prevent possible dangers in the future.

What Is a Loot Box?

A loot box, in gaming terms, is classified as a type of monetisation that is prevalent in online games. Essentially, it is a way that game creators commercialise their product as they offer a base game for free and make it just enticing enough to make players want to buy in-game products to continue.

As such, it means that they can essentially purchase ‘bundles’, known as loot boxes and then ‘keys’, which enable them to redeem further in-game products that help to enhance a user’s experience, typically providing more excitement by the way of additional features. They usually appear as card packs, chests or crates.

They are recognised as ‘game of chance’ mechanisms, and the target market over the years has been identified as children; with this, as research suggests understood to be creating a problem.

While loot boxes are popular in many countries, they initially soared to popularity in Japan, which leads the world in these types of games, while they first appeared in 2004 and gained much traction in the years that followed.

How Much of a Growing Business Is This?

Games with loot boxes really started to come to the fore from 2010 onwards, when sites such as Facebook began to integrate these into their operating system as part of a ‘social gaming’ aspect, some would say as the predecessor of social casinos.

The idea was to hook people enough at the beginning so that they gradually became addicted and would then make in-game purchases via loot boxes. This also gained traction because the social element meant that there was a leader board so they could see where they were in comparison to the people that they were playing with.

Like the now popular casino gamification trends, it induced competition, especially among friends. The main difference being that in video games the main target was teenagers who would then realise that they could get ahead in the game when they made these purchases to improve their progress.

Today, this has grown into a multi-billion-dollar business, and it has come a long way since its early and experimental beginnings.

Indeed, it was recently revealed that the explosively popular game ‘Counterstrike’ generated nearly $1 billion from loot boxes alone last year.

Meanwhile, a gamer from New Zealand commented that he spent $16,000 on loot box games, including Counterstrike and due to the fact that he would only spend a few dollars at a time, he didn’t think of it as a big deal.

Jacques Strydom said on the matter: "If you put all that money aside in a bank account, I would have had about 16k now, that I could have put towards a home deposit or something."

The very fact that the average player of games that have loot boxes is an actual consumer suggests that this is a growing market. So much of a growing market, in fact, that many jurisdictions are identifying it as a form of gambling, which could cause major problems down the line. Something that numerous countries are beginning to take action on.

World Governments' Stance on Loot Boxes

As governments around the world have begun to realise the potential harm of loot boxes in games, they have slowly started to implement measures to help combat this.

Australia

In 2023, the Australian Government announced that it will move ahead with proposed changes to regulation for games with loot boxes. Such changes are set to be implemented from September 2024 in the hope that this will have the desired effect.

According to IGN, Australia is the country that is the home to the greatest number of gambling losses per capita - 40 percent higher than that of Singapore which is in second place.

Minister for Communications Michelle Rowland, revealed in a statement: “The Australian Government is determined to protect vulnerable Australians from gambling harms – including children who may be exposed to gambling through video games. These changes represent another step in our work to modernise the National Classification Scheme so that Australians can make better informed choices about what they – and those in their care – watch, read and play.”

As such, the minimum age proposal for loot box games is 18, in addition to more of a KYC (Know Your Customer) measure implemented to check player affordability.

Germany

In this instance, it has been revealed that age restrictions should be placed (for now at least) on certain types of loot box games, based on the possible risks that they pose and as a result, these have been placed in certain categories.

Netherlands

In the Netherlands, which despite having regulated online gambling in 2022, a ban was proposed for games with loot boxes; however, as yet, there is still much uncertainty surrounding this following the election of a new, far-right government. It could well be the case that the status quo for now at least in the country remains the same, though it is certainly worth keeping an eye on.

As yet, though, it remains to be seen about the level of awareness that some parents have about this and it could lead to the country demanding that developers create versions of the same games that do not have loot boxes in them.

Austria

There is no definable legislation about loot box games in Austria, however, a number of civil court decisions at a lower level have placed a lot of scrutiny on whether these should still be allowed to be available. Still, the judgements are in conflict because they have been decided by different courts and a consistent agreement has yet to be reached as to whether a ban should be implemented or not.

Belgium

Meanwhile, Belgium has implemented a blanket ban on games with loot boxes in them and, as a result, continues to enforce this due to the fact that the state of play indicates that the country has a unique definition of gambling law - there is no grey area.

United Kingdom

The UK is an interesting proposition because it was revealed by the UKGC (UK Gambling Commission) in a report that was published in October 2023 that the 2005 Gambling Act does not cover loot boxes. The jury is still out on what may be done to combat the dangers of these in the UK.

How Much of a Danger Are Loot Boxes to Minors?

For the last couple of decades, there has always been a debate that video games in their basic form are dangerous to minors for numerous reasons. One of these is the fact that they can be a warped interpretation of what the real world is like and can numb young minds, that are still in development mode.

For the last couple of decades, there has always been a debate that video games in their basic form are dangerous to minors for numerous reasons. One of these is the fact that they can be a warped interpretation of what the real world is like and can numb young minds, that are still in development mode.

As technology progressed, developers created social ‘free to play’ games whereby interested players could log in to the game of their choice and be incentivised by the sense of competition, which then led to the gradual integration of loot boxes.

Indeed, this has introduced numerous problems over the last few years among minors and helped to develop early and subconscious addiction. The fact that they can buy loot boxes, especially if they are playing on their parent’s device has led to multiple problems over the years.

The most innocent of minors, in some cases, do not realise they are doing anything wrong when they are prompted with the choice of buying a loot box, and this gets charged to the credit card that is on file with that particular device.

There have been cases in the UK where parents have been shocked to find out significant charges on their credit cards because their children have perhaps ‘unwittingly’ been coerced into buying these upgrades on the games that they are playing.

A report by the BBC in 2019 featured numerous instances of this happening, one in particular having taken place in Scotland, when a distressed mother found out her son had unknowingly done this.

Mother of two, Susan Taylor revealed: “My 16-year-old son spent nearly £2,000 of my money on EA's NBA basketball game. He used my bank card and I didn't realise until I had a payment declined. He accessed the app via Google Play. EA made no response to me and Google Play has a disclaimer about kids using parents' bank details without permission. My daughter had to use her university savings to pay the bill for this and it has caused huge damage to our family.”

Also, loot boxes being available to minors could also spark further problems in the long term. In this sense, it could lead to them being hooked on major gambling later down the line when they turn 18 (or the legal age of gambling in their country).

What Can Be Done to Prevent This in the Future?

While it does appear that governments around the world are gradually taking action by imposing laws to make loot boxes age-restricted, there are definitely more things that could be done until this happens.

Indeed, especially when it comes to raising the awareness of parents relating to the dangers of social games and the impact that this could have, not only on their children but also, in the very worst-case scenario, their own finances.

Although this has been in the news sporadically over the last few months, it could certainly be more widespread - even on social media, while developers of the games should perhaps clearly indicate that in-game purchases are possible prior to a player taking part.

Should legislation be passed, it is likely that the games will come with some sort of warning about the dangers of gambling and what it can do. Just like in the gambling industry, when brands engage in responsible gambling by recommending customers to not wager more than they can afford to lose.

In the long term, it may be that a separate and independent regulator will need to be established in countries that allow loot box games and even a considerable taxation placed on them - similar to the gambling industry, which may mean game developers become a lot more conservative with what they decide to offer.

Gamification is certainly on the rise, and, no doubt, this is something that may move loot box games even further ahead than what they are right now. One thing for sure is that many governments appear to be on the same page when it comes to the protection of children from the problems that can be caused by loot box games.