Loot boxes have long been considered a scourge of gaming. Pay your money, get your spin on the wheel and hope for the best, usually without the desired results. That especially shiny skin you've been pining for will DEFINITELY turn up on the next spin, I'm sure of it. Just another £1 to open another crate and I'm sure it'll be in there this time.
The concern of just how close these activities fall to traditional gambling has prompted a high level of backlash. From the recent Middle Earth: Shadow Of War concerns about crates being continually foisted upon you to Counter Strike: Global Offensive scandals created by gambling skins for ever higher prizes, the issue is far from hidden. However, UK gambling laws present a clear line on the sand that is continually danced back and forth over.
A petition recently surfaced which I signed, calling on an adaptation of gambling laws to cover loot boxes, which you can find here: https://petition.parliament.uk/petitions/201300. Due to the petition passing the 10,000 signature mark, the government were pushed to respond. You can find the full statement by following the link to the petition but there is a definite set of circumstances laid out under which the current setup falls foul.
"Where the facility exists for players of video games to purchase a key to unlock a bundle containing an unknown quantity and value of in-game items as a prize, and where there are readily accessible opportunities to cash in or exchange those awarded in-game items for money or money’s worth, then these elements of the game are likely to be considered licensable gambling activities."
The key phrase here is 'where there are readily accessible opportunities to cash in or exchange those awarded in-game items for money or money's worth'. Anyone who has taken a look at a game key selling site will no doubt be familiar with the ease with which you can sell these items. Companies such as G2A and Kinguin prominently offer options to sell your CS:GO skins for cash. These are certainly 'readily accessible opportunities' and easily allow for gambling of money to obtain items to cash out through various services.
Currently, there are no requirements for gambling licensing where the items are impossible to 'cash out', so for example Overwatch loot boxes are not effected by this rule. They are a closed system and impossible to remove items out of in any way beyond entirely selling your Blizzard account. While the ethics of loot boxes as a whole are entirely questionable, this type of in-game gambling is entirely legal under UK law.
Back to the instances where you are able to cash out, it seems they also fall foul of another issue surrounding the way these gambling opportunities are presented. Again, this quote comes directly from the government response on the issue:
"Consumers are also protected by the Consumer Protection from Unfair Trading Regulations 2008. This includes a requirement on businesses not to subject anyone to misleading or aggressive marketing practices, or, for example, direct exhortation to buy products, such as games content, including in-game purchases such as loot boxes."
Direct exhortation is a bit of an iffy thing to pin down, but it effectively means 'commanding or strongly urging rather than offering the opportunity to buy'. This puts the circumstances around loot boxes offerings very much under suspicion. What constitutes a strong urging? Does the fact that Rocket League drops crates into your lap which can only be opened by paying money count? I'd consider having a locked chest literally foisted at you as causing a strong urge to open it up. That plays directly into human nature and curiosity.
Conversations about the issue have already taken place in the UK as of March 2017, and they have some interesting points raised against whether loot boxes constitute gambling. There's a huge take away to be found within the document available to be found here. Let's start by taking a look at point 3.8.
"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 exchangedfor cash."
This statement comes directly after a couple more surrounding the ease of circumvention of systems in order to convert in-game items into cash:
"In spite of the policy and intent to avoid in-game items attaining a real world value, the video game industry has acknowledged that users of their game networks are ‘occasionally’ exploiting their open nature to offer players opportunities to buy and sell ingame items.
Based on open source research, the volume, variety and sophistication of websites advertising opportunities to exchange in-game items for cash, indicates that to term such circumvention of regulation as ‘occasional’ risks understating the extent of this issue."
This appears to be a clear ruling that the risk of turning in-game items into cash is more than negligible, and it is this step that turns these actions into licensable gambling activity. To my knowledge, no game that is not strictly a gambling service has a license from the Gambling Commission to operate their loot box systems, despite this outline.
Another mention of this likely requiring a license comes from section 3.17 of the document:
"By way of example, one commonly used method for players to acquire in-game items is through the purchase of keys from the games publisher to unlock ‘crates’, ‘cases’ or ‘bundles’ which contain an unknown quantity and value of in-game items as a prize. The payment of a stake (key) for the opportunity to win a prize (in-game items) determined (or presented as determined) at random bears a close resemblance, for instance, to the playing of a gaming machine. Where there are readily accessible opportunities to cash in or exchange those awarded in-game items for money or money’s worth those elements of the game are likely to be considered licensable gambling activities."
This sounds quite succint and clear cut to me. This commonly utilised method of acquiring in-game items is paired with readily accessible methods of withdrawal. I am more than usually certain if you quizzed those that play games of this kind about whether they were aware of options to 'cash out', there would be a high level of knowledge on the subject.
It seems clear that these activities fall foul of gambling regulation but are not currently being actioned. This is despite 7 months passing since the Gambling Commission published the paper linked above outlining their concerns and this came a further 6 months after they first started looking into the issue. Their lack of action is concerning and is something we will be contacting them to better understand the reasoning behind.
Furthermore, there are definitely some loot box setups that fall within the law, however, they operate in such a similar way to gambling that it's almost impossible to tell them apart. The only differentiation is ability to withdraw the goods into cash. The argument here should be "If it is considered gambling for me to pay to win a physical car, why should the same not be said for a virtual car"? While the virtual car can't be sold at the local dealer, it still holds a monetary value. The rarity of the item and likelyhood of winning it provide an inherit value to the in-game item. This shouldn't be ignored regardless of how 'closed loop' the system is.
So, what would be the best course of action? Firstly, if you are based in the UK, please ensure to sign the petition linked at the top. Reaching 100,000 signatures will result in a government debate on the subject which should hopefully unearth a lot of these currently glossed over issue. If you are outside of the UK, look into options from your local representatives to bring these systems into the limelight.
The main problems here are the ready ability for children to become involved in gambling activities (the minimum PEGI age attracted by including gambling elements such as these is 12+, not 18) along with the lack of regulation to ensure gambling is conducted fairly and openly. For example, gambling laws clearly state that the odds of winning a prize must be clearly displayed when gambling, this is currently not done commonly.