Video Game or Casino? an International Examination of Loot Boxes and Gambling Regulations

• Jurisdiction: United States,Federal
• Citation: Vol. 3 No. 1
• Publication year: 2023
• topic: Consumer Law

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Darius C. Gambino ^*

Abstract: Video games are ubiquitous and wildly popular. They can be played alone, in competition against other gamers, and on teams. Users can access them via dedicated consoles, personal computers, and—contributing to their ubiquity—on smartphones and tablets. The industry generates nearly $100 billion in the United States alone and continues to grow. In addition to selling hardware and subscriptions, a great deal of revenue is derived from players paying for various types of upgrades. Some of these are seen as necessary to win, and some winnings come in the form of "loot boxes," a virtual item that can be redeemed for other virtual items, like a new look for your avatar or a new virtual weapon. If you must pay to win, is that gambling? If so, shouldn't it be regulated as such? And even though the average gamer is said to be 35 years old, the popularity of games among children and teenagers is well known. In this article the author explores the history of loot boxes, their impact on gaming culture, and the prospects for their global regulation.

While the concept of wagering on a randomized outcome (i.e., gambling) has been part of popular culture for some time, it has only recently made its way into video games. Yes, video slot machines and similar electronic betting devices have existed in casinos since the 1970s, but access to those machines is typically regulated by law. In the United States, for example, one must be at least 18 years of age to enter a gambling establishment; in most U.S. states the gambling age is 21.

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Video games, on the other hand, are in virtually every home in some form or another, whether it be via console, smartphone, or personal computer. To date, and with exception of online casino games, access to most video games has not been strictly limited by age or other criteria. ¹ That, however, may be changing. In this article we will explore the history of loot boxes, their impact on gaming culture, and the prospects for their global regulation.

The History of Loot Boxes

Loot boxes or loot crates began to emerge in video games in the early 2000s. Loot drops were introduced at bit earlier. Beginning in the late 1990s, games like Diablo (Blizzard Entertainment) began to introduce the concept of dropping "loot" (i.e., treasure) for players who had defeated a particular enemy within the game. ² These drops were free, and awarded simply for playing the game. Loot drops often included things like better equipment for your characters and more experience points for leveling up your characters.

The concept of monetizing loot drops likely began in Japan, with games like MapleStory (Nexon), Zhengtu Online (Zhengtu Network), and Puzzles & Dragons (GungHo Online Entertainment). ³ The basis for the idea was rooted in Japanese "gachapon" machines—vending machines that dispensed random capsule toys. Zhengtu Online or "ZT Online," for example, was a free-to-play computer game released in 2007 that utilized loot boxes as a monetization system. The huge success of ZT Online effectively legitimized loot boxes as a revenue stream for video game developers. In the years that followed, more and more free-to-play games began to emerge on computer and mobile phone platforms.

One of the first console games to utilize loot boxes was Electronic Arts' (EAs') soccer simulation game, FIFA '09. This game presented loot boxes in the form of "card packs" that the player could purchase to create a team—essentially a virtual pack of baseball cards (but in this case, soccer cards). These card packs could be purchased with in-game currency earned through playing the game, or through real money via "microtransactions" (i.e., individualized purchases made inside the game or through the console

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"store"). This model eventually morphed into the "FIFA Ultimate Team" game mode, and today virtually all popular sports games have an "Ultimate Team" mode. Loot boxes began to show up in first-person shooting games (i.e., "shooters") around this time as well, including in games like Counter-Strike: Global Offensive (Valve Corporation), Call of Duty: Advanced Warfare (Activision), and Overwatch (Blizzard Entertainment).

The public backlash to loot boxes began around 2017, when EA came under fire for loot boxes within the tactical shooter game Star Wars Battlefront II. The concern there was that loot boxes were required to win the game—this monetization tactic became known as "pay to win," and was the subject of harsh criticism by gamers, and examinations by governments around the world. It was at this point that loot boxes started to draw comparisons to gambling, and calls for regulation became more and more vociferous.

Loot Boxes in Video Games

In order to really understand the concern with loot boxes, we first need to look at how they have been implemented in specific games. Below we examine their implementation in sports games (NBA 2K), "looter shooters" (Fortnite), and first-person tactical shooters (Overwatch, Star Wars Battlefront). Loot boxes have also been implemented in various other types of games, including card battle games (Hearthstone, Gwent: The Witcher Card Game) and multiplayer online battle arena (MOBA) games (DOTA 2, League of Legends, Heroes of the Storm).

NBA 2K

Following EA' success with "FIFA Ultimate Team" in 2009, 2K Games/Take-Two Interactive introduced the "MyTeam" game mode to the basketball simulation game NBA 2K13 in October 2012. Much like FIFA Ultimate Team, MyTeam was built as a digital card collecting mode. NBA 2K13 was available on the PlayStation 3, Xbox 360, and the Nintendo Wii, along with computers and mobile devices. Prior to that (in August 2010), EAs' popular football franchise

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introduced "Madden Ultimate Team" in Madden 11, which took the FIFA Ultimate Team experience into the realm of American football. And in March 2012, Sony released MLB 12 The Show, the first version of that franchise to include "Diamond Dynasty," a pack-focused gameplay mode. ⁴ So, by 2012, loot boxes were beginning to become the standard in sports games.

In the current version of NBA 2K (NBA 2K22), players compete both against each other online, and against the game, in the MyTeam game mode. Players start with one or more free "card packs" that contain relatively modest cards. Cards are graded on a scale that increases from Gold all the way up to Dark Matter (in between are Emerald, Sapphire, Ruby, Amethyst, Diamond, Pink Diamond, and Galaxy Opal). In most cases, NBA bench players are graded Gold, stars are graded Emerald, Sapphire, or Ruby; the other tiers are mostly reserved for historic or Hall of Fame-level payers (think Allen Iverson). Loot boxes in the form of card packs may be purchased using either earned in-game currency (MyTeam Points) or actual currency that is converted to in-game currency called Virtual Currency (VC). To keep things simple, the more packs you buy, the better your team will be. ⁵

In early versions of MyTeam, there was no way of knowing the odds of pulling a Galaxy Opal Kobe Bryant from a card pack versus pulling an Emerald Ja Morant. Perhaps in response to criticism and growing governmental concerns, card packs now include an odds listing (added in NBA 2K21), which tells the player exactly the odds of pulling each tier of card (i.e., 5% chance of Pink Diamond card per pack). The MyTeam mode is also a card-collecting game, and there are additional cards awarded for completing specific sets of cards. For example, a Pink Diamond Larry Bird card may be awarded to the player for completing a set of seven Boston Celtics cards of varying value from Emerald up to Diamond. These sets often require players to buy multiple card packs to complete them. These types of "set completion" goals within video games were banned in Japan in 2012, as violating consumer protection laws; the Japanese call this "kompu gacha" (meaning "complete set"). ⁶ While MyTeam is not necessarily a pay-to-win game mode, the randomized nature of the card packs, their cost, and the set completion

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goals have raised some concerns that the system includes aspects of gambling.

Fortnite

The "looter shooter" game genre has exploded in the past 10 years, and games like Fortnite (Epic Games) and Counter Strike: Global Offensive (Valve Corporation) were key to that success. In this type of game, the player is "dropped" into a relatively confined space, and must eliminate all the other players to emerge victorious. Along the way, players can search for and collect beneficial items within the virtual environment (i.e., "looting"). For example, in the player versus player mode of Fortnite called "Battle Royale," players are dropped from the sky onto an island with various buildings, vehicles, and geographic features. The navigable terrain of the island shrinks as the game goes on, forcing players more and more to the center. Along the way, players can investigate and try to find better weapons, health boosts, and "Loot Llamas," which are loot boxes awarded simply for playing the game. In the Battle Royale mode, Loot Llamas run around the environment and can be chased and even destroyed for loot, such as health boosts and ammunition; they do not, however, provide anything that improves character performance (such as weapons or abilities). Alternatively, in the player versus environment mode of Fortnite called "Save The World," Loot Llamas can be purchased using in-game currency (called "V-Bucks"), or real money, and contain randomized character and weapon upgrades. ⁷ Fortnite is a free-to-play game, but players are encouraged to purchase "Season Passes" to automatically unlock various cosmetic items, including "skins" (different looks for your player) and "emotes" (in-game dances that your player can perform on command). Season Passes are one of the primary economic drivers for the game; loot boxes play a much smaller role in the overall monetization scheme. However...