Loot Box Advertising Controversy: Should They Be More Regulated Like Gambling?

Loot boxes are in-game features that allow players to purchase random virtual items, similar to a game of chance. The contents of a loot box can vary, from basic customization options for a player’s avatar to in-game gear like armor or skins. These items involve an element of chance, similar to a mystery box, where players do not know what they will receive until the purchase is completed.

Loot boxes have been a topic of controversy, with some believing they are a form of gambling. The belief is that loot boxes are available for purchase with real money, suggesting they should be subject to gambling regulations. There are strong arguments on both sides; however, it is generally agreed that loot boxes are exploitative and warrant increased regulation despite not always meeting the criteria for gambling under the law.

The Debate: Should Loot Boxes Be Regulated Like Gambling?

Different jurisdictions have differing stances on the legality and oversight of loot boxes. For instance, Belgium has deemed loot boxes a form of gambling and banned them. Australia, on the other hand, does not consider loot boxes to meet legal gambling standards.  

The main argument for regulating loot boxes as a form of gambling is their requirement for players to spend real money on a virtual reward, essentially engaging in a game of chance. For example, one side compares loot boxes to gambling at online casinos that provide a variety of casino games of chance like roulette and slots, where bettors wager with real money. 

However, most parts of the online gambling industry are regulated, including Pay N Play Casino sites, which offer players a fast, convenient, and secure online gambling experience by eliminating the need for traditional verification and account registration processes. These casinos comply with KYC regulations to ensure fairness and transparency, which is not yet the case for loot boxes in most regions. The gaming industry, on the other hand, argues that loot boxes are similar to collectible cards rather than traditional gambling.

Regulators are grappling with how to regulate loot boxes since they don’t fit the legal definition of gambling. Some have called for regulations specifically targeting loot boxes, citing the potential harms similar to unbalanced gambling, while others call for loot boxes to be regulated under consumer protection laws. The lack of transparent regulations has led to conflicting enforcement and ongoing debates. Many believe there should be stricter regulations in place because of the consequences, regardless if they don’t fit into the definition of gambling.

The Role of the Advertising Standards Authority (ASA) in Loot Box Regulation

The Advertising Standards Authority (ASA) has defined loot boxes as in-game purchases containing an element of chance, where consumers are unaware of its contents until the transaction is finalized. The ASA has expressed the need for transparent information regarding the inclusion of loot boxes in video games. The ASA has provided guidance regarding in-game transactions and purchases like loot boxes, stating that these items are “material information” and should be disclosed to all consumers. 

The ASA has upheld complaints against gaming companies for not revealing the existence of loot boxes in their promotions. Gaming companies like Jagex, Miniclip, and EA, were found to have breached the CAP Code by not clearly stating the existence of loot boxes in their paid promotions on platforms like Facebook. Additionally, the ASA banned mobile gaming listings for failing to disclose loot box information, highlighting how crucial this information is for consumers to decide whether or not to download the game.

The ASA’s position on loot boxes mirrors its dedication to ensuring that advertising is clear, honest, and not out to deceive consumers. By demanding the disclosure of loot boxes in advertising, the ASA seeks to safeguard consumers and vulnerable groups from potential risks linked to these in-game purchases.

ASA Rulings and Guidance on Loot Boxes

The ASA’s Committee of Advertising Practice (CAP) Guidance states that advertisements should clearly disclose that the game contains in-game purchases and loot boxes. CAP guidance on loot boxes includes:

• Disclosure requirements: Advertisers must disclose in-game purchases, including loot boxes, in all advertisements. This disclosure should be easily accessible and not obscured or omitted from advertising content.

• Pricing and transparency: All games using virtual currencies that can be purchased with real money must clearly reveal the virtual currency’s real-world monetary value. For instance, online gambling platforms like crypto casinos are required to limit high-risk gambling. Their websites must clearly state deposit limits, withdrawal policies, and signage to support balanced gambling activities.

• Pressure tactics: The ASA has rules against using tactics to pressure players to make in-game purchases, such as short retry times and prompts to buy virtual currency for example.

• Random-chance purchases: Advertisements should not directly imply nor suggest that the next in-game purchase could potentially have a rare or specific item in a game of chance.

• Transition period and enforcement: The ASA guidelines quote dealing with complaints regarding in-game content in an informal manner for six months and three months for other advertisements to give the industry time to implement and follow the new CAP guidelines.

• Scope and limitations: The guidelines will apply to all forms of advertising for in-game purchases within a game and on other platforms. Interestingly, the ASA acknowledges that it cannot determine whether loot boxes are considered gambling as it feels that this decision is the responsibility of the Gambling Commission.

Failure to disclose the presence of loot boxes in advertisements could result in:

• Breaches of the CAP Code: The ASA will uphold complaints against gaming companies that do not provide clarity at the point of purchase.

• Required changes to advertising content: Any upheld complaint will require changes to advertising content. A violation like this requires companies to change the ads, redesign graphics, and relaunch campaigns that could be expensive for the business to redo.

• Additional regulatory action: Repeated breaches of advertising rules could lead to further regulatory action or sanctions by the ASA to enforce compliance within the industry.

International Perspectives on Loot Box Regulation

The UK Gambling Commission stated that loot boxes do not meet the criteria for gambling under the Gambling Act 2005, and cannot use its regulatory authority to address regulatory concerns. However, some parliamentary lawmakers called on the Gambling Commission to cover loot boxes as they raised concerns about video gaming and online gambling are becoming similar.

Germany and Australia both agree that games containing loot boxes should have a mandatory age rating, instead of banning them outright. Belgium and the Netherlands have classified loot boxes as a form of gambling, with Belgium banning them and the Dutch government proposing changing the law to ban them. 

Regulating loot boxes instead of banning them could address concerns about their resemblance to gambling. This would require balancing consumer protection laws, and best practices regarding advertising loot boxes, while protecting players and allowing for innovation in the gaming industry.