Video games are very lucrative, with the video gaming industry generating billions of dollars annually.1 One key characteristic of video games that allow for this success is their monetization potential. Video game monetization can range from the retail purchasing of the game to transactions that can occur within it, better known as “microtransactions”. Microtransactions enable the player to purchase specific features or game content that could be purely cosmetic, add in-game currency, or provide a tactical advantage to the gameplay.2
Loot boxes are a controversial form of microtransactions, allowing the player to purchase packs or “treasure chests” containing game content, usually with a real-world price tag.3 However, the “prizes” that players can receive from loot boxes tend to be randomized, resulting in players buying more loot boxes until they receive the content they were hoping to get. Several potential harms have been associated with loot boxes, such as potential mental health and financial issues and their close resemblance to gambling.4 Due to these issues, some countries have started regulating loot boxes, with some countries outright banning certain types of loot boxes.
Japan has imposed a ban on a certain type of loot box known as “kompu gacha”, which required players to win several specific prizes to combine them into or exchange them for a more valuable or rarer prize.5 The Netherlands and Belgium have both issued regulations under their gaming and betting laws, imposing fines, sales bans, and even criminal charges.6 China so far has imposed the most significant loot box regulations. They require that the probability of receiving the prizes in loot boxes be published, established daily purchase limits, and reward probability must gradually increase in the player’s favor as they purchase more loot boxes.7
Despite these countries’ attempts at regulating loot boxes, their efforts have not been as successful as one would hope. Some video game developers have decided that they would rather not release their video games in certain countries due to their restrictions on loot boxes.8 Other countries are struggling with compliance issues in the form of game developers skirting the law or flat-out ignoring it.9 Finally, some countries have decided not to regulate loot boxes, instead calling for the industry to regulate itself. The United Kingdom, whose game sector generated almost $3 billion for the UK economy in 2019, is one of the countries pushing for self-regulation for the industry.10
With the United Kingdom failing to implement stringent regulations on loot boxes, the need for the United States to step in and issue its own regulations becomes even more vital. Certain states have already attempted to implement regulations of their own; however, their efforts have ended in vain.11 A unified front is needed to tackle this issue. There has been an attempt at the federal level to propose some regulations against loot boxes. However, these efforts have also been unsuccessful.12 The United States should follow the path that has been created by these other countries and enact legislation to protect consumers from the exploitative practices that are associated with loot boxes.
1 Simon Read, Gaming is Booming and is Expected to Keep Growing. This Chart Tells You All You Need to Know, WORLD ECON. F. (July 28, 2022), https://www.weforum.org/agenda/2022/07/gaming-pandemic-lockdowns-pwc-growth/.
2 TOMÁS DE OLIVEIRA SERRA BETTENCOURT COUTINHO, THE MICROTRANSACTION BUSINESS MODEL: A STUDY ON MODERN VIDEOGAME MONETIZATION AND THE ECONOMIC SUSTAINABILITY OF MICROTRANSACTIONS (Instituto Universitario de Lisboa ed., 2021).
3 Derek Saul, ‘Exploits Kids For Profit’: Multibillion-Dollar Loot Box Industry Under Fire As Campaigners Urge Regulators To Investigate FIFA Video Game Maker, FORBES (June 2, 2022), https://www.forbes.com/sites/dereksaul/2022/06/02/exploits-kids-for-profit-multibillion-dollar-loot-box-industry-under-fire-as-campaigners-urge-regulators-to-investigate-fifa-video-game-maker/#:~:text=During%20the%202021%20fiscal%20year,of%20which%20came%20from%20FIFA.
4 Government Response to the Call for Evidence on Loot Boxes in Video Games, UNITED KINGDOM CONSULTATION (July 18, 2022), https://www.gov.uk/government/consultations/loot-boxes-in-video-games-call-for-evidence/outcome/government-response-to-the-call-for-evidence-on-loot-boxes-in-video-games.
5 Betable Blog, Why “Kompu Gacha” Was Banned, GAME DEV. (May 25, 2012), https://www.gamedeveloper.com/business/why-quot-kompu-gacha-quot-was-banned.
6 See Penalty Charges Electronic Arts Inc. and Electronic Arts Swiss Sàrl for Game Fifa, KANSSPELAUTORITEIT (Oct. 29, 2020), https://kansspelautoriteit.nl/nieuws/2020/oktober/lasten-dwangsom/; Research Report on Loot Boxes, Gaming Commi’n (April 2018), https://www.gamingcommission.be/sites/default/files/2021-08/onderzoeksrapport-loot-boxen-Engels-publicatie.pdf.
7 Henry Fong, Loot Box Design 2.0 – Complying with China’s New Rules, GAME DEV. (May 7, 2019), https://www.gamedeveloper.com/business/loot-box-design-2-0-complying-with-china-s-new-rules.
8 Nicole Carpenter, Diablo Immortal Won’t Launch in Netherlands and Belgium, Likely Due to Loot Box Laws, POLYGON (May 31, 2022, 5:49 PM),https://www.polygon.com/23149045/diablo-immortal-netherlands-belgium-loot-boxes.
9 See generally Leon Y. Xiao, Drafting Video Game Loot Box Regulation for Dummies: a Chinese Lesson, INFO. & COMMC’N TECH. LL, June 16, 2022.
10 Government Response to the Call for Evidence on Loot Boxes in Video Games, U.K. CONSULTATION (July 18, 2022), https://www.gov.uk/government/consultations/loot-boxes-in-video-games-call-for-evidence/outcome/government-response-to-the-call-for-evidence-on-loot-boxes-in-video-games.
11 See generally H.B. 2727, 29th Leg., Reg. Sess. (Haw. 2018); H.B. 4460, 19th Leg., Reg. Sess. (Minn. 2018); S.B. 6266, 65th Leg., Reg. Sess. (Wash. 2018).
12 S.1629 – A Bill to Regulate Certain Pay-to-Win microtransactions and sales of loot boxes in interactive digital entertainment products, and for other purposes, CONGRESS.GOV, https://www.congress.gov/bill/116th-congress/senate-bill/1629/text (last visited Oct. 30, 2022).