The Legal Questions Surrounding Betting on Video Games

The issue of loot boxes has raised a lot of questions about gambling in video games, with both European and American governments turning their attention towards gaming, and questioning whether betting on video games, and indeed betting within video games, is legal.

Gambling laws differ massively from country to country. In some parts of the world, betting on the outcome of eSports is perfectly legal and acceptable. You are betting on the outcome of a video game that is taking place in controlled circumstances, and therefore is no different to something like a football match. In other parts of the world, betting is frowned upon, and it doesn’t matter whether you’re betting on the outcome of a League of Legends match, a football match, or whether it will snow on Christmas day. The legal situation remains the same.

Betting on loot boxes, however, is a more complex issue. In December 2017, the Belgian Gambling Committee became the latest group to ponder the question of gambling within video games. Their stance was that loot boxes are indeed a form of gambling.

The RNG is Just A Digital Dice

Random number generators have been a part of games since computer games were first invented. If you have ever played a role playing game then you have felt the thrill of being at the mercy of the random number generator. The damage you take is likely affected by it, and the loot that you would get out of chests or from characters you fight may well have a randomly generated element too. The idea behind the RNG is that it gives you a chance to get some super-rare loot, but that it keeps the game balanced because most of the loot that you get will be average or sub-par, so your character does not become over-powered.

That’s all fine when the loot you’re picking up is based on the fruits of your efforts. If you have to work hard to earn a chance at good loot, then the game self-regulates. To get a very powerful character you will have to spend a lot of time playing. Loot boxes interfere with that equation.

The Pay To Win Controversy

Loot boxes are virtual boxes that players can buy – sometimes with huge amounts of real money, but increasingly with real world money. When you open the loot box you will most likely get something like “Four common items, one uncommon and an X percent chance at a rare item”.  Buying the odd loot box here and there could seem like a bit of fun. The reason that these loot boxes have made headlines, however, is that many video games are played by young children, and if a parent unwittingly leaves their card details connected to the Xbox Live, PlayStation Network / Google Play / other service account then the child could spend hundreds, or even thousands of dollars without the parent’s knowledge. In addition, there are many adults that have become compulsive microtransaction spenders.

A lootbox may cost just a couple of dollars, and it’s easy to fall into the trap of thinking “well, it was just a couple of dollars, and I didn’t get that Purple item I wanted, I’ll keep trying”, not realizing how much you have spent.

Many states and countries have started clamping down on betting both on and in video games. The problem with betting ON them is that they can often be hacked or fixed. The problem with betting IN them is that loot boxes are seen as a predatory practice. Indeed, Chris Lee, an Hawaiian state representative, is campaigning for legislation to ban minors from purchasing loot boxes.  In Australia, where gambling in general is regulated in quite specific ways (the country recently changed some rules to do with Poker machines, for example, to combat compulsive behavior), regulators for the state of Victory ruled that loot boxes are a form of gambling, and the state has started looking at ways to control them fairly.

A Hostile Reception from Gamers

Game developers face some difficult questions at the moment. Triple A titles cost millions to make, and game pricing is volatile. While brand new games are expensive, console games can be traded in and the aftermarket eats into developer profits. On the PC, where digital distribution is more common, developers don’t have to worry about trade ins so much, but bundle deals and aggressive sale pricing on digital distribution platforms can make it difficult for developers to make a profit.

It’s this race to the bottom with pricing that is causing developers to look for other ways to make money. Season passes and DLC are two things that are common – but loot boxes are another option and one that a lot of developers like because they allow them to get a small amount of money from some players, and a huge amount from a small percentage of players. The players that spend a lot of money on microtransactions are known in the industry as “whales” and they can be an incredibly profitable segment of the market. When these “whales” are spending money on cosmetic items, it’s a bit of fun and does no harm to the rest of the player base. When they are able to buy things that get an in-game advantage, it’s another matter, however, and one that a large portion of the player base rebels against.

Star Wars Battlefront II offered loot boxes as a way of unlocking characters and power ups – things that would take multiple days of playtime to unlock via more standard methods. This put players who could not spend money at a disadvantage, and since the players who were spending money were gambling (one player may unlock a character on their first try, another could spend tens or hundreds of dollars and not get the character they wanted), it’s easy to see why some considered it unfair. Electronic Arts backed down and changed the system, but not until the brand damage was already done.