Loot Boxes and Gambling – The Full Story

Loot boxes have been around for a while now and they are a popular way for video game developers to either support their free-to-play and multiplayer games or simply gain some more cash from one of their titles. But while they are nothing new to the gaming industry, they have only recently been shunned by parents and gamers across the globe. How are loot boxes a gambling product and what you should know about them?
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If you are a gamer yourself, you are probably in on the big Star Wars Battlefront II controversy. The game was so packed with micro-transactions and loot boxes that not only did the industry voice its resentment, but it also made EA tone it down a bit and introduce some much-needed changes to its loot box system.

However, if you are not that much into video games, you might have missed that these randomised containers are a thing until EA launched its controversial title. So, let us start from the beginning, shall we?

What Are Loot Boxes – How Do They Work?

In video games, loot boxes are in-game containers that you can purchase with real money. Once you open them, you get a random in-game item as a reward. These can vary greatly in quality, quantity, and rarity, depending on the result of a random number generator. The whole thing is very similar to TCG booster packs and random rewards from packs of gum. So, technically, it’s all up to chance.

Some variations of this system actually award you the boxes for free, making you pay for a virtual key to open them instead. This iteration of the system has also proven quite profitable, because of people’s impulse to receive their “free” reward, hidden inside the virtual stash. However, the end result is the same – players get a randomised item that may or may not be worth the money they paid to get it.

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In some games, such as Valve’s cult titles Counter-Strike: Global Offensive and Dota 2, players can actually trade these random items on the Community Marketplace for credit they can later use to purchase other games and items on Valve’s digital distribution platform, Steam. Therefore, in these two games, as well as many others by various developers, these items are assigned a very real monetary value, based on a virtual economy.

Are Loot Boxes Gambling and Where Is the Problem?

If you have followed so far, this one should be pretty obvious. Yet, let us explain a bit more for those who were not paying attention.

Video games are played by children. Sure, there are PEGI ratings and a big portion of these games are labelled as 18+, yet children still play them for one reason or another. PEGI ratings are not what we’re going to talk about, though, because they hardly matter in this case. There are games with loot box systems that minors are allowed to play, and plenty of them, too.

Loot Boxes Slot Machine

So, the problem here is that minors could be spending real money to receive virtual rewards, based solely on chance. So, a lot of parents would argue that this is technically gambling. What’s more, there are a lot of websites out there that allow you to take those items you received and bet them with a chance of winning better items in return. So, how does this differ from betting your wedding ring on an unsanctioned roulette table in some dingy basement? The only difference, actually, is that you will not be getting any money from this, but some virtual items that are just as worthless in the real world as the ones you bet.

So, naturally, a lot of people around the world are concerned that the entirety of this ecosystem is basically a huge unsanctioned gambling network, that often happens to catch minors in its web, be it on purpose or not.

Now that we have established what the issue is, let us move on to how the UK government, and more specifically, the UK Gambling Commission, responded.

The UKGC’s Official Statement – Loot Boxes, Gambling and More

Here’s the short answer for those with little patience: the UKGC says that loot boxes are not gambling, but they wish they could say otherwise. However, it’s not up to them to decide. The laws that govern what is and is not gambling are passed by the Parliament. The Commission merely makes sure that they are followed.

If you are not in the mood for reading all 17 pages of the Commission’s position paper, you are in luck, because we have done the reading for you. It covers not just loot boxes but betting on eSports events as well, but we will mention that later. For now, let us stay on the dreaded stashes of randomised doom.

UK Gambling Commission

The Commission is obviously deeply troubled by how in-game items are often openly exchanged for money or items with monetary value in various unsanctioned websites. It has engaged in talks with game publishers, children-protection groups, and regulatory bodies in the UK in an attempt to put an end to that. However, as is evident by the many websites still allowing players to bet various in-game items, the problem still persists.

However, the UKGC has also decided that “where facilities for gambling are offered using such items, a license is required.” The Commission further states that there is no difference between betting with in-game items and doing so with casino chips, which sounds like a pretty solid argument to us.

That being said, in cases where loot boxes and the rewards they offer exist in a closed loop, the Commission cannot get involved. This means that when the in-game items and virtual currencies stay in the game and cannot be exchanged outside of it, they are part of the gameplay and cannot have monetary value. Long story short, you can still trade your World of Warcraft loot to other players, as long as they compensate you with in-game gold or items.

What About eSports Betting?

Don’t worry, you can still place a bet on your favourite eSports team, as long as you are of legal age and it is placed with a regulated sports betting website. When it comes to eSports, the UKGC is doing something that a lot of people still can’t bring themselves to do – it treats all competitions as regular sporting events, as long as they follow the definition of such.

Therefore, the best eSports betting sites and esports gambling, in general, are regulated the same way the Commission regulates football or basketball bets. Furthermore, it is up to consumers and gambling venues to make sure that they stay in line and uphold the good name of the sport.

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The differences would be that keeping the integrity of eSports competitions is a little trickier. Unlike with most conventional sports, electronic ones rely heavily on digital technology, which could easily be manipulated. Furthermore, there is no single governing body, be it a national or international one, which can say what is and isn’t allowed in eSports. Therefore, there is little the Commission can do right now, other than regulate bets post-factum and monitor events for any unfair practices. However, it promised to work with the big influencers in the industry to further improve the integrity of eSports and ensure a level playing field for all participants.

What Will Happen with Loot Boxes and Gambling Now?

The UKGC has promised to fight this “black market.” And knowing them, we’re sure they will do their best. They promised to focus on several audiences and key messages:

  • Unlicensed operators – the Commission will continue to fight those that offer gambling opportunities without a license. Especially if they knowingly offer their services to minors. In fact, the UKGC has already successfully prosecuted one such operator just under a year ago.
  • Video game publishers – the Commission said that it will work to support responsible publishers “in avoiding gambling-related controversy.” Whether or not this means that it will take legal action against companies that willingly allow their products to be misused by the illegal gambling networks was not specified.
  • Consumers – the Commission will do its best to discourage gambling activity through illegal means. In fact, it stated that “use of in-game item gambling websites may result in a restriction of your access to video game networks.” So, it would be best to keep those Counter-Strike skins to yourself, instead of betting them on some dodgy websites.
  • Children and parents – educating parents and the public in general on the risks and psychological repercussions of in-game item gambling and social casino games (those that only work with in-game currency) is key, according to the officials.
  • What Can I Do to Help?

    This is, really, the main question we should all be asking. If you want to get in on the fight against illegal betting venues, there are several things we would suggest doing.

    How Can I Help

    First of all, and we cannot stress this enough, do not take part in such activities. In many cases, these websites are illegal, so your bet is also not lawful. What’s more, these venues are not governed by any authority, so they are not obliged in any way to pay your winnings or return your original bet, no matter the circumstances. Also, we already established that the gaming account you used to gamble your items away could be suspended.

    Also, if you are a parent, sit down and talk to your children. Let them know that the game should remain just that and they have no business betting the items they won while playing. Not only is that illegal, but it’s also dangerous for their psychological well-being. So, protect them while you still can.

    Last, but not least, report any illegal betting sites you come across to the authorities. There are so many of them that they could easily go under the radar. And as gamers and citizens, it is our civic duty to help the authorities with protecting our society in any way we can.

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