Loot boxes in games have come increasing scrutiny as a possible gambling product in Europe
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UK Gambling Commission Issues Loot Boxes Warning

Loot boxes
The UK Gambling Commission has stated that it believes the issue of loot boxes has highlighted the degree to which the lines between gambling and games are increasingly blurred and added that the public concerns over the issue may trump questions about legal definitions.

In a statement released on Friday, the Commission responded to the heightened interest in the issue of loot boxes and whether they constituted gambling.

In recent weeks questions have been asked in the UK parliament regarding loot box activity and the participation of children. The issue has also been the subject of discussion elsewhere in Europe with both the Belgian Gambling Commission and its Dutch counterpart separately making public their concerns.

The UKGC has addressed esports and skin betting on several occasions. It also published a position paper earlier this year that stated that when it came to the issue of in-game items, if their exchange was contained within the game and the proceeds could not be cashed out at any point, then it could not be considered a licensable activity.

Where the UKGC stands

In the new statement, Tim Miller, executive director at the commission, said that the body’s starting point was that it was up to the government of the day to determine what did or did not constitute gambling.

“The law sets a line between what is and is not gambling,” he said. “As the regulator we patrol that line and where an activity crosses it and presents a risk to people, especially children, we have and will take robust action.”

Some aspects of gaming activity are in danger of breaching the boundaries, he suggested.

“We are concerned with the growth in examples where the line between video gaming and gambling is becoming increasingly blurred.”

The UKGC advice, March 2017

Here’s what the UKGC said earlier this year on the subject:

  • Where in-game items or currencies which can be won, traded or sold can be converted into cash or exchanged for items of value, under gambling legislation they are considered money or money’s worth.
  • Whether participation in a video game for a prize requires a gambling licence will be determined by reference to a number of factors including how the outcome is determined and how the facilities for participation are arranged.
  • We will focus on those activities which blur the lines between video/social games and gambling and present a risk to the licensing objectives. In particular, we will prioritise those made available to children, those involving expenditure and those presented as gambling or associated with traditional gambling. (emphasis added)

Updating the policy

“Many parents are not interested in whether an activity meets a legal definition of ‘gambling’,” Miller added. “Their main concern is whether there is a product out there that could present a risk to their children.”

Suggesting the publishers should be ready to step in where there are public concerns, he added that even where a product failed to meet the gambling test but could still be seen to be causing harm to children, then parents would “undoubtedly expect proper protections to be put in place by those that create, sell and regulate those products.”

He also suggested the UKGC might take a more active role.

“We have a long track record in keeping children safe and we are keen to share our experiences and expertise with others that have a similar responsibility,” he said. “Whether gambling or not, we all have a responsibility to keep children and young people safe.”

Perception = reality for loot boxes

Gaming law expert Jas Purewal, founder of law firm Purewal & Partners, said that perception factors were as valid as other legal and policy considerations.

“The perception factor is the one that has most enraged some elements of the gamer community – a concern that loot boxes in some way are an unfair way for publishers to make money at the consumer’s expense,” he said.

Noting the recent regulatory noises, Purewal pointed out there is a danger that regulators could “react too strongly to those topical issues,” in which case the games industry should respond. He noted, though, that to date the Belgian fears had come merely from a press comment and that no formal position had been either adopted or any strategy fully laid out.

A higher priority?

“In regulatory terms, the topic of loot boxes would become a higher priority issue if there were specific adverse decisions made in some of the major games jurisdictions in the EU or North America and/or if it escalated to the European Commission,” he added.

“There is no clear evidence that this is happening, will happen or is needed. However, were there to be an escalation somehow and if major gambling regulators took a hard-line stance against games mechanics which have passing similarities to gambling mechanics, then in theory it could raise serious legal and business issues for the games industry given the considerable popularity of – and consumer demand for – different ways of enjoying and paying for games content.”

He suggested that the publishers should be wary of deploying loot boxes in the future while also being mindful of not allowing the concept to be demonized or incorrect assumptions being made.

“Industry associations have a policy advocacy role to play with regulators,” he concluded. “The games and wider press also have a role to play in tackling these issues seriously and not just reporting each development without investigation.”

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Scott Longley
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Scott Longley has been a journalist since the early noughties covering personal finance, sport and gambling. He has worked for a number of publications including Investor’s Week, Bloomberg Money, Football First, eGaming Review and Gambling Compliance. He now runs his own editorial consultancy Clear Concise Media and writes for a number of online and print titles.