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Purchasable randomized rewards, commonly known as “loot boxes,” are a contentious topic in the video game industry. Although many argue that loot boxes resemble a form of unregulated gambling targeted at minors, the number of games containing loot boxes has continued to grow. Over the last two years alone, more than twenty major video game titles have contained loot boxes. Popular mobile games also frequently feature this rewards mechanism. The growing prevalence of loot boxes has many asking: should loot boxes be regulated?

A loot box is a consumable random rewards mechanism, often represented by a box, a treasure chest, or a spinning wheel. The easiest and most common way for players obtain a loot box is through an in-game purchase with real-world currency. Once a player has obtained a loot box, the player can open, or consume, the box and receive a random reward. Standard rewards include extra lives, power-ups, playable characters, character costumes, weapons, weapon skins, game modes, color schemes, and more. Although some rewards are rare or highly useful, many rewards provide little utility to players. Furthermore, the player’s odds of winning rare or powerful items, which can be extremely low, are often kept secret by the game developers.

The parallels between loot boxes and online gambling have led some consumers, parents, and policy makers to call for regulation. Both loot boxes and gambling require participants pay money to receive a reward of variable value based on chance. Moreover, loot boxes and gambling activities share many of the same addictive design features, such as a rewards reinforcement schedule and an illusion of player control. The addictive qualifies of loot boxes are especially concerning given that children have lower impulse control than adults, making them more vulnerable to gambling mechanisms and the behaviors developed through these mechanisms.

Nevertheless, game developers and other opponents of regulation contend that loot boxes are not gambling and thus should not be regulated. Those opposed to regulation note that real money cannot be won through loot boxes, that loot boxes are optional (and therefore not a core part of video games), and that some loot boxes can be obtained for free through normal game play. They also draw parallels between loot boxes and analog random rewards mechanism, such as collectible card packs and random toy dispenses, which are not regulated.

Numerous countries have recently acted to address the loot box problem. For example, in April Belgium and the Netherlands banned loot boxes as violations of their gambling laws. Additionally, China passed a law last year requiring developers to publish the reward probabilities for all loot boxes. There are also more than a dozen European countries actively considering regulatory action on loot boxes.

No U.S. jurisdiction is currently regulating loot boxes. Although Congress has not considered a national level response, state politicians in California, Hawaii, Indiana, Washington, and Minnesota are considering bills to address loot boxes. State efforts seem to have mostly stalled at this time. Nevertheless, at least some games are subject to transparency requirements in the U.S. For example, since 2017, Apple Inc. has required all games offered through its iOS App Store to disclose reward probabilities of loot boxes to players prior to purchase.

With so many jurisdictions considering regulation, the next year will be telling for the future of loot boxes. Even absence regulations, players may have other avenues, such as consumer protections laws, through which to seek legal recourse in situations with especially egregious loot box implementations.

Alex Prati

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