Are loot boxes part of the video game or illegal gambling?

Some lawmakers are concerned that children buying so-called loot-boxes with real money is akin to playing a slot machine.
Loot boxes, which allow video game players purchase in-game trinkets without knowing what they'll get, are being compared to slot-machine gambling. (Pixabay)

In a video game, a loot box or loot crate is a virtual container that players may purchase with in-game currency they've earned during game play. They don't know what it contains — it might be a new suit of armour, or a new paint job for a car.

In other words, it might be a very useful addition to your gaming arsenal. Or, it may be totally pointless. But you don't find out until you pay for it.

If you're only using in-game money to pay for it, then maybe that's not so bad. That's not always the case, though. Many games sell loot boxes for real money.

An increasing number of lawmakers have a problem with this, likening loot boxes to a form of gambling. "In many cases these are being marketed to and used by children, who are obviously particularly susceptible to being addicted to them," said New Hampshire Senator Maggie Hassan, addressing the U.S. Federal Trade Commission in mid-February.

Last week, in response, the body that regulates video games in the U.S., the Entertainment Software Rating Board, announced it would start placing warnings on the boxes of games that contain loot boxes.

In many cases these are being marketed to and used by children, who are obviously particularly susceptible to being addicted to them.- U.S. Senator Maggie Hassan

Chanel Larche doesn't think that a warning really goes far enough.
Chanel Larche, a PhD candidate in psychology and gambling addiction researcher. (University of Waterloo)

"I think that warnings can only go so far," she said. "There's a difficulty in regulating these features in video games right now because they are poorly understood from an empirical sense. We don't actually know whether these features are actually causing harm."

As a PhD candidate studying cognitive neuroscience, Larche examines how people react to online gambling, from slot machines to gaming on mobile devices. She's also spent time researching loot boxes and what psychological impacts they may have.

She says there are clearly ethical issues when it comes to loot boxes, which fall somewhere on the continuum between slot machines and buying collector cards featuring hockey players or Pokemon characters.

"A lot of anecdotal evidence suggests that some players will spend more than they can afford to lose, which is in itself an issue: you shouldn't feel like you're throwing money at this if you can't afford it."

Moreover, because so many of these games are played by minors, there are other factors to consider as well.

"There is a lot of evidence in the gambling literature that early exposure to gambling-themed games that involve money can increase the risk for developing problems later on," she said.

The issue of loot boxes highlights, as Chanel suggested, just how tricky regulating gaming, and so-called micro-transactions, can be.

Exposure to gambling-themed games that involve money can increase the risk for developing problems later on.- Chanel Larche

Some games, like Alto's Odyssey, charge a higher initial price, but, as the games co-creator, Eli Cymet, pointed out in an interview with Spark, it guarantees that there will be no in-game payments. Cymet believes that that's the most ethical way to engender responsible gaming.

That's not the case for the majority of free games, however. One analysis revealed that in 2016, in-game micro-transactions accounted for $19 billion US of revenue for free-to-play PC games — and that number doesn't include iPhone or Android games.

It's clear that many games, on both mobile and computer platforms, are designed to make money for the developers exclusively through in-game payments, and not all of them could be considered gambling.

And then there's the issue of parenting children who play these games. How does a parent say 'no' to a daughter who wants to to buy a better car in a mobile game when all her friends are getting one? It's a new frontier, which is backed up by evidence gathered in February by the ESRB itself.

In an online survey done last month, it found that 69 per cent of parents didn't know what a loot box was. And of the 31 per cent who claimed to understand the concept, less than a third were actually able to explain it.

But regulation requires nuance, Larche said, and simply making rules that apply to all video games is a blunt solution. "There's no clear legal taxonomy around games that blend chance based elements and skills-based elements together like these loot boxes."

So far, there is no proposed legislation in Canada to regulate the use of loot boxes. In the U.S., only the state of Hawaii has so far introduced legislation to address the issue specifically.


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