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Loot box consultation: is gambling regulation inevitable?

Posted on 24 September 2020

The Department for Digital, Culture, Media and Sport (DCMS) has launched a consultation on loot boxes in video games, to investigate:

  • The experience of video games players
  • The impact of loot boxes, including any evidence of potential harms
  • The size, scale and functioning of loot boxes and in-games purchases market in the UK; and
  • The impact of current voluntary and statutory protections such as spending and access controls, age ratings and labelling, and general consumer regulations applicable to the sector.

Loot boxes are in game containers which may be earned or purchased using real or virtual currency and which award players with a randomly generated in-game item, which is not known before the box is opened and which may be of purely cosmetic use or may be of functional benefit in gameplay. They are not present in all games, but they are a very significant driver of revenue in some of the most popular games in the UK market. However, there have in recent years been increasing concerns expressed about potential harms associated with video games, and in particular the chance-based mechanics which underpin loot boxes.

This consultation is therefore very significant, and will be of interest to the whole industry.

The consultation was heralded in the government's response to the DCMS Select Committee report on Immersive and Addictive Technologies and will be considered alongside the promised review of the Gambling Act 2005. The risk that loot boxes will be classified as a form of gambling is very real; see, for example, the recommendations of the Children's Commissioner and the House of Lords Select Committee. Indeed, the House of Lords Select Committee report recommended that government should classify loot boxes as gambling without awaiting the wider review of the Gambling Act. 

To classify loot boxes as gambling would be likely to significantly reduce their use in the UK market, as compliance with gambling regulatory obligations would prove extremely onerous. However, the government is determined to consider the evidence before taking any such steps, and its own evidence to the House of Lords Select Committee highlighted the importance of not burdening the games industry with unnecessary or disproportionate regulation.

This consultation is therefore a critical opportunity for the games industry to address the risk of disproportionate regulation by providing evidence of the suitability and effectiveness of existing protections (such a parental controls and age-ratings), general consumer protection regulations and the additional self-regulatory measures being taken by the industry, such as disclosure of rarity and probability rates for randomised paid-for items.

However, pressure is growing and there are many voices calling on government to adopt a precautionary approach. Avoiding a disproportionate regulatory burden will therefore require engagement. The trade association, UKIE, will continue to take a lead in this regard, but businesses within the games industry should actively consider contributing to the consultation.

The consultation closes on 22 November 2020. Meanwhile, the industry as a whole should keep an eye on the Gambling Act review when that begins. There is a risk of collateral damage to the wider games and esports industries from potential amendments to the definition of gambling.

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