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Loot boxes are ‘not gambling’ says UK authority – here’s why that’s a problem

(Image credit: Blizzard)

It’s hard to even utter the term ‘loot boxes’ without accompanying the words with a despairing sigh. It’s the plague of gaming industry conversations, a topic which never seems to die - but it’s also a topic that shouldn’t die. Not yet. 

The UK Gambling Commission recently reiterated its view that loot boxes are “not gambling” and once again the conversation has sparked about whether that is, in fact, the case. 

We’ve been going round and round in the loot box debate for years now, applauding the government bodies who choose to crack down on the mechanic and assessing each new game on whether its developer has dared to include them.

What is a loot box?

A loot box (or loot crate) is an in-game feature that sees players spending real-world money to open an item with further randomized items inside. Essentially you spend real world money to open the box (or pay for a key to open it, among other variations) without knowing what its contents are - they could be good or they could be bad. 

But, who is actually responsible for regulating loot boxes? The majority of fingers point to each country’s specific governing body. And, for the most part, these bodies have been doing their job. Belgium and the Netherlands have ruled loot boxes are gambling, with publishers facing jail time unless they remove the mechanic. Meanwhile, in China and South Korea, developers must disclose the probability of receiving rewards in loot boxes. 

But, this is just a small portion of the globe and not every country’s relevant governing body is going to deem the issue something worth investigating. Some which have conducted independent investigations, like Poland, Australia, France and the US, have either come to the conclusion that the mechanic doesn’t constitute gambling or have chosen not to investigate the issue further despite recommendations to do so - we’re looking at you Australia. 

However, at least the investigations are taking place. Even if they’re (arguably) not resulting in the outcome players are looking for. Despite the ESRB claiming loot boxes are not gambling in the US, some states are looking into their own legislation to crack down on the issue.

That’s what makes the UK Gambling Commission’s recent comments on loot boxes so frustrating as both someone who works in the games industry and as a player - it’s not doing enough.

Here’s the problem

FIFA Ultimate Packs count as loot boxes.

FIFA Ultimate Packs count as loot boxes. (Image credit: EA)

Speaking at the Department for Culture, Media and Sport select committee (via the BBC), UK Gambling Commission chief executive Neil McArthur admitted that the commission has "significant concerns" about children playing videogames in which there are elements of expenditure and chance.

However, McArthur went on the state that legislation still dictates that loot boxes are still “not gambling”. 

"There are other examples of things that look and feel like gambling that legislation tells you are not - [such as] some prize competitions but because they have free play or free entry they are not gambling... but they are a lot like a lottery,” McArthur said.

Here’s where frustrations arise. In 2017, the UK Gambling Commission published a position paper on ‘virtual currencies, esports and social casino gaming’. In that paper, it states that virtual items (like those won in loot boxes) are “prizes”. 

"There are other examples of things that look and feel like gambling that legislation tells you are not - [such as] some prize competitions but because they have free play or free entry they are not gambling... but they are a lot like a lottery."

Neil McArthur - UK Gambling Commission

"Where prizes are successfully restricted for use solely within the game, such in-game features would not be licensable gambling,” the paper reads. However, the paper continues to state that:

“In our view, the ability to convert in-game items into cash, or to trade them (for other items of value), means they attain a real world value and become articles of money or money’s worth. Where facilities for gambling are offered using such items, a licence is required in exactly the same manner as would be expected in circumstances where somebody uses or receives casino chips as a method of payment for gambling, which can later be exchanged for cash.”

Now, those familiar with gaming will know that there are plenty of third party sites offering you to trade virtual items for cash. Steam, for example, lets you trade in virtual items for Steam Wallet funds, which can then be used to buy more games. 

The point is, the UK Gambling Commission is backtracking. It now claims that you need to be able to officially trade these items for real-life value. 

The issue with loot boxes

loot box

Loot boxes take a variety of forms. (Image credit: NetherRealm Studios)

Are loot boxes actually all that bad, though? The main problem with loot boxes is the fact they are akin to gambling. There’s plenty of research that proves that loot boxes share the same psychological and structural features of gambling - loot boxes tap into our psychological need for reward. 

As just one example, loot boxes harness B.F. Skinner’s variable ratio schedule, a reward system typically used by casinos which sees someone being rewarded at random intervals. You never know when you’re going to be rewarded but the rush you get from the times that you do keeps you coming back for more. Regardless of your views on gambling, it is something that the majority of governments deem needs regulated. 

A bigger problem arises when you take into consideration how many children play videogames. A study by the UK Gambling Commission found that 31% of the 2,865 16-18 year olds polled had opened a videogame loot box, while 3% had bet with in-game items. 

Pair that with the Australian study that deemed loot boxes were gambling and that “particular demographic groups were especially vulnerable to the risks posed by loot boxes, including children, people with impulse control issues and people with mental health issues” and there’s definitely an issue at hand. I’m sure the mother of the child who spent £550 on FIFA Ultimate Packs is inclined to agree with us...

He says, she says

That's right... even Candy Crush is guilty.

That's right... even Candy Crush is guilty. (Image credit: King)

How do you solve a problem like loot boxes? According to the UK Gambling Commission, you leave it up to those who are actually making money from the mechanic. Solid plan

The commission encourages the gaming industry to self-regulate. In the previously mentioned paper, the body stated that it would “liaise with games publishers and/or network operators who may unintentionally be enabling the criminal activity."

So, two years later? What does that liaising look like? 

"The Gambling Commission has stood over the naughty developers, wagging its finger and saying 'don’t do that again' and expect them to listen."

"We have said [to the videogames industry], 'it's not enough to say we don't want this happening'," UK Gambling Commission programme director Brad Enright explained."We've been robust and said, 'we can see you have T&Cs, what are you doing to apply them?'”

Essentially, the Gambling Commission has stood over the naughty developers, wagging its finger and saying “don’t do that again”, expecting them to listen. 

It’s also choosing to focus on the symptoms of the problem rather than the disease itself, shutting down skin betting sites rather than regulating a practice which research has proven has psychological links to gambling. It must be painful with all those splinters from sitting on the fence.

It’s not all doom and gloom

At least Gears 5 won't have loot boxes...

At least Gears 5 won't have loot boxes... (Image credit: The Coalition)

Despite the UK Gambling Commission doing little in the way of battling the issue, developers do seem to be implementing less loot box mechanics: The Coalition recently announced Gears 5 won’t have season passes or loot boxes

But this positive change doesn’t seem to be a result of governing bodies – but rather player feedback. There’s clear disdain in the gaming community concerning loot boxes or pay-to-win features in games, with forums such as Reddit littered with debates about the practice. 

However it’s happening, we’re just glad it is. But, it seems about time the UK Gambling Commission, and complacent governing bodies, need to draw a line and stick to its guns because there’s always going to be another loot box debate.