The Future of Loot Boxes in Video Games
Since the start of the COVID-19 pandemic, spending on digital video games has dramatically increased.[1] A major contributing factor was the increased amounts of time everyone had to spend indoors, so playing video games was a great way to stay in touch with friends.[2]
There are two main ways that people generally spend money on video games: buying the actual game and paying for in-game content.[3] In-game content includes both predetermined items (such as more levels to complete) or loot boxes, which contain randomized items a player has no control over.[4] The contents of these boxes could be something valuable in the game, or it may not.[5]
Loot boxes have come under legal scrutiny in the past as many critics say they are akin to gambling, given the randomness of what is contained in the box.[6] As gambling is a heavily regulated industry, the lack of regulation surrounding these boxes is a major cause of concern.[7] Additionally, a large amount of the video game player base is under the age of 18, essentially allowing underage players to gamble for in-game content.[8]
In the United States, loot boxes over the last decade or so have generally been treated as legal.[9]Federal and state laws define gambling as an activity that risks something of value upon an outcome subject to chance in exchange for a thing of value.[10] In deciding whether or not loot boxes come under this definition, the court in Taylor v. Apple held that loot boxes are not a form of gambling.[11] In Taylor, the court reasoned that neither the loot boxes nor the items obtained from them are things of value because they can only be used in-game.[12] Players are unable to cash out and convert any items back into real-world value by any official means, making loot boxes not come within federal and state laws of gambling.[13]
However, issues still run rampant with forms of loot boxes in many video games. For example, a child spent over $3,000 on a form of loot boxes called “packs” in the popular video game FIFA (now called EA FC).[14] The money was spent without the knowledge of the child’s mother, who said that EA, the company behind FIFA, was “making an awful lot of money out of the misfortune of other people and I think they make it too easy.”[15]
With such an increase in player base over the last few years, a few recent cases in the United States have brought the legality of loot boxes back into the limelight. In 2021, Epic Games was named in a proposed class action over their practice of selling loot llamas in their popular game Fortnite.[16] While courts have previously found the practice to be lawful, Epic took no chances. Epic decided to settle the case and provide the equivalent of $10 in-game currency to any player who had purchased one of these loot boxes.[17] For reference, Fortnite’s player count in 2021 was over 270 million with 25 million daily players.[18] The case marks a potential turn in legal cases surrounding loot boxes, as Epic was willing to pay millions of dollars rather than play it out in court.
The tide also seems to be shifting in European countries on loot boxes. An Austrian court in February of 2023 ruled that FIFA packs (a form of loot box) are “illegal gambling,” beginning a wave of similar and class actions suits across the country.[19] While Austria has very strict gambling laws which differ from the United States, Richard Eibl, the managing director of a company that specializes in bringing class actions, called the ruling “a wake-up call for the entire video game industry.”[20] In addition, a July 2020 House of Lords committee on gambling harm called for loot boxes to be brought within the scope of the United Kingdom’s Gambling Act of 2005, which covers online gambling and new generation gaming machines.[21]
Moving forward, video games developers should be aware of the various avenues in which the legality of loot box systems may be challenged and be wary given the recent settlement by Epic Games. If loot boxes were deemed illegal or were heavily regulated by the United States government, the gaming industry could change drastically. In 2021 alone, EA made over $1.6 billion in revenue from their Ultimate Team game mode in the form of loot boxes, with a large portion coming from the United States.[22] As such, developers must now make the tough decision to include loot boxes or not.
Footnotes
