Loot boxes – a treasure trove of gambling regulatory issues
In this article we take a look at the impact of publications from the Dutch and Belgian authorities in relation to loot boxes in computer games.
The popular FIFA computer game published by Electronic Arts (EA) is one example of a game which might face enforcement actions of the Dutch Gaming Authority as well as Belgian authorities due to its use of loot boxes. Many computer games use so called loot boxes which are in-game virtual treasure chests containing a random and unknown selection of virtual items. In the FIFA Ultimate Game modus players can buy packages that provide them with a number of in-game footballers that players can add to their FIFA Ultimate Team squad.
The Dutch Gaming Authority conducted a study into loot boxes in computer games and published its conclusion on 19 April 2018. The Gaming Authority found that loot boxes in certain situations fall under the definition of a game of chance in Article 1 of the Dutch Betting and Gaming Act (WOK). According to the WOK, an activity is a game of chance if a prize can be won, and the participants cannot influence who the winner is. Offering a game of chance without a government permit is not allowed and might result in administrative fines up to €830,000.
According to the Gaming Authority, a loot box is considered a game of chance if (i) the content of the loot boxes is determined by chance and (ii) the object or property obtained by the loot box can be transferred. The Gaming Authority does not distinguish between transferability inside the game or transferability outside the game (i.e. through a platform of a third party). This means that, strictly speaking, a government permit is required for any computer game that offers a loot box of which the content is determined by chance and of which such content is transferable.
In addition, the Gaming Authority concluded that there is a possible link between loot boxes and gambling addiction. The Gaming Authority advised the providers of these games to remove the addiction-sensitive elements ('near-profit' effects, visual effects, and the possibility of opening loot boxes in quick succession) from the games, and to take all measures to protect vulnerable groups, such as underage players and players with gambling addiction.
The Gaming Authority stated that publishers of computer games have until 20 June 2018 to comply before the Authority begins enforcing this decision although it is still not clear how the Authority will intervene in the case of non-compliance. What is clear is that the stakes for game publishers such as EA are high, since loot boxes and similar elements are likely responsible for generating a substantial turnover. Moreover, the Gaming Authority has issued a direct warning and threat of enforcement.
In its research report of April 2018, the Belgian Gaming Commission (BGC) reached a conclusion similar to, or that reaches even further than, that of the Dutch Gaming Authority. Referring to “FIFA 18” as one of the games that it examined, the BGC concluded that paid-for loot boxes – i.e. loot boxes purchased through real money or in-game currency, but not through game-play currency – meet the requirements set out in the Belgian Gambling Act (BGA) to be qualified as games of chance.
According to Article 2, 1°, of the BGA, games of chance are defined as requiring (a) a game, (b) a stake, (c) a gain/loss and (d) a factor of chance (albeit ancillary). Most of the debate about the applicability of the BGA to paying loot boxes centers on the requirement of the presence of a gain/loss. The conclusion reached by the BGA is based on a very broad interpretation of such requirement, under which the possibility of a gain and the possibility of a loss are purely alternative conditions: it is sufficient that the player has the possibility either to make a gain or to lose his stake. This view is however not supported by all legal commentators nor by previous case-law decisions which rather considered that these conditions are cumulative or, at least, alternative in one way only (i.e. there must be a possibility of a gain, whereas the sole possibility of losing the stake does not suffice).
If the position of the BGC is followed, offering paid for loot boxes in Belgium constitutes a criminal offence which might be sanctioned, at least in theory, by (i) imprisonment for a period of between 6 months and 5 years and/or (ii) a fine of between 800 € and 800,000. That said, as indicated in a press statement dated 28 April 2018, the Ministry for Justice (Koen Geens) seems to be willing to set up a dialogue with game developers, platforms and licensors in order to ensure proper regulation of loot boxes. Moreover, the BGC has recently declared that a more substantial review and update of the current version of the BGA may need to be considered but it is currently unclear whether this could also include a rethinking of the aforementioned position.