How loot boxes became one of the most trending topics for discussion in the EU

Determining the legal status of loot boxes has recently become the most sensational topic of discussion. The essence of this question was to determine whether different types of loot boxes in video games have an element of “gambling” in different countries and, if so, to try to regulate them using existing gambling laws.

So, what is a loot box?

“Loot boxes” means in-game boxes with random game elements purchased for real money, the so-called game donation, or premium in-game currency purchased for real money. The idea is that initially, the player does not know precisely what he will receive as part of the purchase. He may receive a random in-game item, either relevant to the purchase amount or less or more.

Loot boxes can provide benefits or virtual items for use in the game. For example, these could be player avatar customization options, skins, or game-changing equipment such as weapons or armor. Unlike other in-game purchases, players do not know what they are purchasing; instead, they pay for a chance to receive some rare item, similar to a raffle or lottery.

The upshot is that loot boxes exhibit similarities to mechanisms known from traditional gambling and, therefore, remain the subject of increasing interest from regulators and consumer protection authorities.

How do the different legal systems of the European Union react to this type of in-game paid content?

Common features of European Union regulation

In Europe, gambling is regulated at a national level. As a result, there is a complete lack of uniformity in how loot boxes are managed across European countries.

In January 2023, the European Parliament adopted a report calling for harmonization of EU rules to provide better protection for players in the online video gaming sector. The report paid significant attention to loot boxes. The Parliament called on the European Commission to review how loot boxes are sold and to take the necessary steps to develop a common European approach to ensuring consumer protection. Parliament emphasized that consumers should be fully informed about the availability of in-game purchases, such as loot boxes and other randomized in-game purchases, and should be aware of their contents.

The influence of the Norwegian Consumer Council on the harmonization of rules governing loot boxes in the EU

In the report, the European Parliament cited a study published by the Norwegian Consumer Council regarding the ongoing impact of loot boxes on the gaming industry. As a result, a ban on paid loot boxes was proposed if other measures did not solve the problem.

The regulators’ main idea was to scrutinize loot boxes under a microscope, using existing gambling laws to classify them if there were similarities.

Belgium

Scenarios for regulating loot boxes were already in place in some jurisdictions even before the EU began discussing it. Belgium has taken a fairly strict approach. In 2018, the Belgian Gambling Commission published a report with the position that all loot boxes purchased with real money constitute gambling. The Gambling Commission concluded that paid loot boxes in the Overwatch, FIFA, and Counter-Strike games examined met the description of a game of chance, as all the constituent elements of gambling were present. Many companies have decided to remove loot boxes from their games or have refrained from publishing them.

Netherlands

Another country that has taken a stance against loot boxes is the Netherlands, whose Gambling Authority published a study in 2018 that found that 4 out of 10 loot boxes reviewed were against local gambling laws. According to the report, the contents of loot boxes can be sold outside of the game; thus, the items have a market value. Offering such content to the Netherlands constitutes gambling, subject to licensing. As a result, many companies have eliminated the ability to sell prizes from loot boxes.

Germany

The German Age Rating Commission (“USK”) has expanded its testing criteria. It will now include loot boxes, other in-game purchases, and online chat features under the “possible online risks” category when classifying a game. The new rules came into force on January 1, 2023. While loot boxes will not necessarily increase the age rating, USK age rating labels will include information about additional features such as loot boxes, online shopping, and online chat features.

Comprehensive bill proposed in Spain

On July 1, 2022, the Spanish government published a bill that aims to comprehensively regulate randomized reward mechanisms in video games, including loot boxes. The prohibitions and obligations provided for in the bill include the requirement to verify age, block access of minors to loot boxes, restrictions on advertising, conditions for the probability of participation and winning, post information about risks and safe use, introducing self-exclusion mechanisms that will allow users to temporarily suspend the use of loot boxes for a certain period, as well as mechanisms that will enable users to limit their spending.

Bill to regulate loot boxes as a form of gambling in Finland

In September 2022, a member of the Finnish Parliament proposed legislation to regulate loot boxes as a form of gambling. Thanks to amendments to the Lotteries Act, the legal definition of a lottery will include “virtually used profits.” Such a change would mean that loot boxes would be considered a form of gambling, even though the prizes have no cash value, cannot be sold or traded, and can only be used in-game. These characteristics of loot boxes prevent them from qualifying as gambling in most EU jurisdictions so that the new law could put Finland among the strictest EU member states on this issue.

Austrian court applies local gambling laws to loot boxes

Although local gambling laws in EU jurisdictions are well known, their provisions often leave room for broad interpretation by the courts. One example is in Austria, where FIFA players took the state to court over Ultimate Team card packs sold through the PlayStation Store. In February 2023, the court ruled that decks of cards constitute a game of chance subject to licensing obligations. The main reason for this decision was that players could sell cards on the secondary market and profit from it, which practically results in these virtual items having financial value.

Poland: Loot boxes are not covered by the Gambling Law

In turn, Polish gambling law does not recognize randomized reward mechanisms used in games. According to the government, virtual items do not constitute cash or physical prizes, and as a result, loot boxes should not fall within the definition of gambling. The mere presence of an element of chance does not mean that the game is automatically considered gambling.

As we can see, EU regulators are divided on whether to call loot boxes gambling or not. Some countries pay special attention to whether this phenomenon meets the definition of gambling. Others take a more comprehensive stance on consumer protection. Opinions also vary on whether loot boxes and the items inside them have monetary value, which is a necessary element of gambling, and whether loot boxes cause psychological harm similar to that caused by traditional gambling.

The examples above show that it comes to full regulation of loot boxes. The legal uncertainty surrounding this issue and the similarities to gambling have led to the need to provide better regulatory protection to prevent harmful impacts on consumers. However, any regulation must be preceded by careful analysis to ensure that legitimate random drawing models are not unfairly excluded. In any case, further development of this issue can be expected shortly.