Could Litigation Concerning Loot Boxes Eventually Affect the Way We Play Ultimate Team Modes?

In 2019, loot boxes faced heightened scrutiny as governments globally began to pay more attention. This scrutiny has led to numerous developments in various areas, including the introduction of new laws, court cases, and proposed bills. Below is an overview of how various regulatory bodies across the globe have addressed the rising issue of loot boxes in video games and the potential link they have to triggering gambling tendencies in consumers. Given that many of the concerns also list “problematic game designs”, which is open for interpretation, could this litigation one day also affect how modes like Ultimate Teams or MyFACTION are designed?

An Overview of Recent Developments and Recommendations

In 2020, a report from the EU Internal Market and Consumer Protection committee recommended addressing loot boxes through existing consumer protection laws targeting “problematic game designs.” The report warned that solely evaluating loot boxes against gambling criteria could create a disjointed market for video games in the EU.

Subsequently, various EU markets have adopted varying stances on the issue. For instance, loot boxes are classified as gambling and therefore require a license in some states like Belgium, the Netherlands, and Slovakia. In most EU member states, loot boxes are not legally defined as gambling, but some countries are considering implementing specialized regulations for loot boxes and enforcing rules similar to those for traditional gambling.

On January 18, 2023, a report titled “Consumer Protection in Online Video Games: A European Single Market Approach” was approved with the following key points:

1. The report acknowledges the existence of robust EU consumer laws that offer protection for consumers in video games. However, it stresses the importance of member states coordinating their approaches to prevent fragmentation of the single market.
2. It highlights the significance of safeguarding minors and children who are considered vulnerable in this context.
3. The report suggests utilizing industry-led initiatives like PEGI (Pan-European Game Information) to provide age recommendations for games and give parents crucial information before making a purchase. The 2023 Report reiterates some of the ideas presented in the 2020 Report, but does not suggest any new laws. Currently, game developers and publishers must take into account the individual loot box regulations of each member state.

Germany – Casinos ohne Oasis and Strict Regulations

The country has classified certain forms of loot boxes as gambling, similar to casinos ohne Oasis, and their implementation in video games is subject to German gambling laws. In 2020, the German Youth Protection Commission (KJM) issued guidelines classifying games with loot boxes as harmful to minors, and such games were required to comply with age restrictions and labeling requirements.

Moreover, in 2021, Germany introduced legislation that mandated age ratings for games with loot boxes. This meant that games containing randomized in-game purchases, including loot boxes, were required to display an age rating indicating the potential gambling-like elements.

Online gambling laws in Germany are regulated by the Interstate Treaty on Gambling (Glücksspielstaatsvertrag or GlüStV). These new laws prevent any casinos ohne Oasis from operating within Germany. The treaty was revised, and the new version came into effect on July 1, 2021. Here is a summary of key points:

1. Licensing System: The revised Interstate Treaty on Gambling introduced a new licensing system for online sports betting, virtual slot machines, and online poker. The licensing process allows for a limited number of operators to legally offer these services in Germany.
2. Transition Period: There is a transition period during which operators who were offering services in Germany before the new treaty came into force could continue to operate under certain conditions. These operators are required to comply with the new regulations and apply for a license during the transition.
3. Player Protection Measures: The new treaty emphasizes player protection measures, including a self-exclusion program called Oasis, limits on stakes and deposits, and a centralized registry to manage self-exclusion requests. Many casinos ohne Oasis (online casinos without the Oasis exclusion program) have popped up on the market as a result.
4. Advertising Restrictions: Stringent regulations are in place regarding the advertising of gambling services. Advertising is permitted, but it must adhere to strict guidelines to prevent targeting vulnerable individuals and minors.
5. Prohibition on Online Casinos ohne Oasis: The revised treaty maintains the general prohibition on any casino ohne Oasis or holding a German casino license. Only virtual slot machines, online poker, and sports betting are subject to the licensing system.
6. State Regulation: Each of the 16 German states has the authority to enforce and regulate the gambling laws within their territories. This creates a complex regulatory landscape as individual states may implement their own specific regulations within the framework of the Interstate Treaty.

As a result, many casinos without Oasis still operate within Germany’s borders as several online gamblers seek alternatives to these new strict regulations. It is yet to be seen if loot boxes will fully be restricted like a casino ohne Oasis, but the ball has already started rolling on the process and loot boxes are under the microscope for possible new regulations in the future.

The UK – Current Discussions on Loot Boxes and Gambling Regulations

In a brief overview of the discussions in the UK regarding loot boxes:

1. The House of Lords Select Committee suggested in the Summer of 2020 that loot boxes should fall under the jurisdiction of the UK’s Gambling Act.
2. On December 8, 2020, the UK Government requested evidence on loot boxes as part of its comprehensive review of the UK’s Gambling Act.
3. The Government’s official response to the evidence request was released in July 2022, indicating that they have decided not to change gambling regulations to include loot boxes after careful consideration.

The intention behind this decision was based on the fact that while loot boxes are similar to traditional gambling, the ability to convert rewards into real cash sets them apart. Typically, loot box rewards do not hold monetary value in the real world and are mainly used to enhance the gaming experience.

Although the UK Government did not change gambling regulations, it did express interest in seeing the industry improve self-regulation to better protect consumers. Proposed changes include requiring parental supervision for loot box purchases and providing all players with spending controls and transparent information, not just young people but adults too. The Department for Digital, Culture, Media and Sport has announced the formation of a technical working group to help develop solutions for reducing the harm caused by loot boxes.

The Netherlands and Austria – Legal Status of Loot Boxes

According to Dutch law, it is prohibited to offer a game of chance without the necessary permits. The Dutch Gaming Authority banned loot boxes in 2018 for violating gambling laws. A game of chance involves participants having a chance to win prizes based on luck. EA was fined for selling FIFA Ultimate Team Packs, which are considered loot boxes under Dutch law.

EA argued that since the in-game packs have no real-world value, they should not be considered gambling. The highest administrative court in the Netherlands ruled in EA’s favor, stating that the packs did not violate Dutch gambling laws. The court determined that loot boxes are not a separate game but rather an inseparable part of a game of skill, like FIFA Ultimate Team mode. The judgment suggests that most loot boxes in games do not breach Dutch gambling laws.

Despite this ruling, some platforms have removed services with loot box elements in the Netherlands. A motion has been filed by six political parties in the Netherlands to regulate loot boxes and consider legal measures for video games. In Austria, the district court of Hermagor found FIFA Ultimate Team packs to be illegal gambling, following a claim against Sony Interactive Entertainment Network Europe Ltd. The court argued that players could profit from selling these cards on a secondary market, giving them financial value. It remains to be seen whether Sony will appeal the decision and how this case will progress compared to the Dutch courts.

Belgium – Challenges in Enforcing the Country’s Ban on Paid Loot Boxes, and a Look at the Gaming Commission’s Regulations

Contrary to the UK and the Netherlands, Belgium’s Gaming Commission declared in 2018 that loot boxes purchased with real currency are considered gambling. Companies wanting to offer gambling services in Belgium must have a gambling license, but loot boxes are not eligible for licensing within the current regulations, making paid loot boxes illegal.

Despite the ban, enforcement has been lax, with a report showing that most top-grossing iPhone games in Belgium continued to sell loot boxes. Some companies have removed loot boxes from their Belgian games or chosen not to release games in Belgium, but dedicated players have found ways to access the games using VPNs.

The high percentage of games still selling loot boxes in Belgium indicates that the country’s efforts to address the issue have not been entirely effective. The Belgian Minister of Justice even admitted that the gambling regulator lacks the resources to enforce the ban, raising the question of whether an outright prohibition on loot boxes can achieve its desired outcomes.

Overall, the increased scrutiny on loot boxes in 2019 has shed much-needed light on the potentially harmful effects of these gaming mechanics. It has sparked important conversations and actions that may lead to more transparency and regulation in the gaming industry. As we move forward into 2023 and beyond, it is crucial for stakeholders to continue collaborating and advocating for responsible practices. By working together, we can create a safer and more enjoyable gaming environment for all. Let’s remain vigilant and proactive in addressing the issues surrounding loot boxes, so that players can feel confident and informed in their gaming experiences. Together, we can make a positive impact and ensure better outcomes for both consumers and the industry as a whole.

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