Spanish regulator initiates consultation on whether loot boxes should be banned or classified as gambling products
The Dirección General de Ordenación del Juego (DGOJ), the Spanish gambling regulator, has launched a consultation regarding loot boxes. This consultation will decide whether loot boxes should be subject to new regulations, classifying it under gambling products or banned outright.
The cause for concern regarding these loot boxes is due to Spain's Gambling Act. Under the act gambling is described as involving payment for participation, chance in determining the result and a prize transferred to the winner.
Due to this, the DGOJ stated that loot boxes could easily be considered gambling, depending on whether the loot box purchase was an action distinct from purchase of the game, prize depending on chance or whether the prize could be exchanged for monetary value.
The DGOJ said:
“This legal definition, known and assimilated by all entities with activity related to gambling and betting, is also applicable to loot boxes. It is irrelevant if that reward is a cosmetic improvement in the video game or competitive advantage for the player who obtains it."
The loot box consultation will last until the end of this month.
Why are companies like EA Sports being treated differently from betting companies? Why is there hardly any pressure to ban loot boxes targeting the young?
In the early 2000s, micro-transactions and loot boxes were introduced into the gaming world. The method of loot boxes was popularised by the gacha mobile games – a Japanese game. This would give players the chance to win specific players by “pulling” the gacha in the similar way as a slot machine.
Fast forward to 2021, and loot boxes are seen in practically every video game or app, enticing gamers to spend their money for random rewards.
What are micro-transactions and loot boxes?
Micro-transactions are a form of revenue stream for games where a player is able to purchase virtual goods with a small fee - called micro-transactions.
Although these are usually found in free-to-play app games, this method has now trickled into the gaming industry via loot boxes.
Loot boxes are a form of micro-transactions where a player will first pay real money to acquire virtual coins and subsequently use those coins to purchase loot boxes. The boxes contain rewards that give the player a random reward, with no prior visibility whatsoever on what the reward will be. This is practically the same as slot games , based on just luck rather than skill.
The billion dollar Industry
One company that has come under scrutiny for their use of loot boxes is EA Sports with their FIFA, Madden and NHL franchises. They incorporated an “Ultimate Team” game mode which gives players the chance to play the game and, in return, gain virtual currency.
However, to entice players to spend more, EA Sports allow users to purchase virtual coins via real money. These are then used to buy loot boxes, making the process of acquiring a better team faster.
Statistics show that in 2019 alone, EA Sports made $2.8 billion from just micro-transactions, showcasing just how pivotal this type of business is for the company.
The main problem is that EA Sports’ games also target young children with the majority of their games with the “3+Age” notice on their game covers. There have been many reports of children emptying their parents’ credit cards for these loot boxes in search of a better reward.
The fact that a player is not in control of the reward (game of chance) and, more importantly, the way it exposes children to games of chance, is posing the question in the industry: Why are loot boxes not considered as another form of gambling?
Loot box regulation
Recently, there has been some progress on controlling the loot box phenomena and it seems that pressure is increasing.
Countries like Belgium and Holland have already taken a stand against companies like EA, with the Dutch regulator issuing a fine that could potentially reach €5million for its “FIFA Ultimate team packs”.
In 2018 Belgium took the decision to ban the purchasing of loot boxes with real money while 16 other jurisdictions (including the UK and USA) decided to carry out further research. However, there hasn't been any concrete action in these jurisdictions, yet.
In the case of the UK, the lack of action in this area is surprising particularly as the UK regulator is constantly trying to enforce responsible gambling on gaming companies by introducing new regulations.
However, action may be in the pipeline as the UK government, through the Department for Digital, Culture, Media and Sport has requested evidence proving that this function encourages gambling-style behaviours.
The Real Loot Box Industry
Many games have adopted the loot box function in search for added revenue. There are also many experts around the world who show concern regarding these micro-transactions since it can trigger a gambling problem from a young age.
A recent study conducted by David Zendle, Rachel Meyer and Harriet clearly shows a positive correlation between adolescent problem gambling and loot boxes, with results portraying that - the more a player buys loot boxes the more likely the player will develop a gambling problem.
With increasing pressure to control gambling and addictions, new rules on the use of loot boxes might be around the corner.
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