By not providing prizes which are ‘money or money’s worth’, in-game Loot Boxes aren’t classified as gambling in the UK for the purposes of regulation.
By not providing prizes which are ‘money or money’s worth’, in-game Loot Boxes aren’t classified as gambling in the UK for the purposes of regulation.
The ongoing saga of loot boxes in videogames continues to rumble on in the fallout from Star Wars Battlefront II’s disastrous launch. Politicians around the world are now expressing their concern, in some cases flagging up the need for regulation, in others to simply wash their hands of responsibility. It’s under this lens that the UK Gambling Commission have published an opinion on this type of product, but those hoping for a clampdown will be disappointed.
The Gambling Commission was set up in 2005 as the regulator covering three key sectors: gambling through betting, gaming and participating in a lottery. Its responsibilities are set out by the Gambling Act 2005. In theory, any individual or business which sets up an opportunity to gamble in the UK would be covered by the Commission.
For many consumers gambling the act of buying a loot box with random contents, much of which could be effectively or actually worthless, pretty neatly falls under the definition of gambling. So, what’s preventing the regulatory bodies from stepping in? Simple really – that pesky definition as it applies to law; from the Gambling Act 2005:
3. Gambling
In this Act “gambling” means—
(a)gaming (within the meaning of section 6),
(b)betting (within the meaning of section 9), and
(c)participating in a lottery (within the meaning of section 14 and subject to section 15).
[..]
6. Gaming & game of chance
(1)In this Act “gaming” means playing a game of chance for a prize.
[..]
(5)In this Act “prize” in relation to gaming (except in the context of a gaming machine*)—
(a)means money or money’s worth, and
(b)includes both a prize provided by a person organising gaming and winnings of money staked.
* Ed’s Note: Gaming Machine in this context means machine you might find in an arcade or casino purpose-built for gambling
In this Act “gambling” means—
(a)gaming (within the meaning of section 6),
(b)betting (within the meaning of section 9), and
(c)participating in a lottery (within the meaning of section 14 and subject to section 15).
[..]
6. Gaming & game of chance
(1)In this Act “gaming” means playing a game of chance for a prize.
[..]
(5)In this Act “prize” in relation to gaming (except in the context of a gaming machine*)—
(a)means money or money’s worth, and
(b)includes both a prize provided by a person organising gaming and winnings of money staked.
* Ed’s Note: Gaming Machine in this context means machine you might find in an arcade or casino purpose-built for gambling
Under this definition, as it applied to gaming, a key criteria is whether or not the prize from the activity (i.e. opening a Loot Box) constitutes ‘means money or money’s worth’. It’s only under the definition of a lottery that a prize need not have explicit monetary value in order to be classed as gambling for the purposes of regulation. This is exactly the argument put forth by the Commission in its opinion:
The law sets a line between what is and is not gambling. As the regulator we patrol that line and where an activity crosses it and presents a risk to people, especially children, we have and will take robust action. Earlier this year we successfully brought the first criminal prosecution in this area in relation to Futgalaxy – a website for providing skins gambling to children (skins gambling is explained within the position paper).
A key factor in deciding if that line has been crossed is whether in-game items acquired ‘via a game of chance’ can be considered money or money’s worth. In practical terms this means that where in-game items obtained via loot boxes are confined for use within the game and cannot be cashed out it is unlikely to be caught as a licensable gambling activity. In those cases our legal powers would not allow us to step in.
A key factor in deciding if that line has been crossed is whether in-game items acquired ‘via a game of chance’ can be considered money or money’s worth. In practical terms this means that where in-game items obtained via loot boxes are confined for use within the game and cannot be cashed out it is unlikely to be caught as a licensable gambling activity. In those cases our legal powers would not allow us to step in.
The Commission shares the concerns of parents and other aggrieved stakeholders who worry that children in particular may be vulnerable to exploitative products such as these. Unfortunately it seems their hands are tied.
Falling under the regulatory auspices of the UK Gambling Commission would be a major blow to an industry which now generates most of their revenue from small-scale individual payments and DLC, including loot boxes, over boxed sales. For now however they remain shielded by this legal grey area, with little more than soft-touch guidelines from platform developers protecting consumer.
SOURCE: UK Gambling Commission Blog, UK Gambling Act 2005
