GAMING
LOOT BOXES IN AUSTRALIA: GAMING OR GAMBLING? JAMIE NETTLETON, JOSEPH ABI-HANNA & ALEKSANDRA PASTERNACKI, ADDISONS GAMBLING LAW INTRODUCTION
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oot boxes are a common feature in video games. Any person who has played a video game online in the last decade is likely to have encountered a loot box in one guise or another. In essence, a loot box is a video game feature which enables players to earn randomised virtual items which can be used to enhance an individual’s game play or experience.1 This article will provide a legal insight into loot boxes. Globally, gambling regulators have reached divergent opinions on whether loot boxes fall within the scope of gambling. In 2018, the Australian Senate conducted an Inquiry on Gaming Micro-Transactions for Chance-Based Items (the Loot Box Inquiry). The single recommendation of the Loot Box Inquiry report (the Report) was that a comprehensive review of loot boxes in video games ought to be conducted.2 In its response to the Report earlier this year, the Australian Government did not consider it necessary to authorise a formal department review of loot boxes at a Federal level.3 This has left the future of loot box regulation in Australia in a state of uncertainty.
WHAT IS A LOOT BOX? The term loot box does not have a settled meaning. In fact, some academics have argued that “the term ‘loot box’ and the phenomena it covers are not sufficiently precise for academic use.”4 In the Report, the concept of “microtransactions” was preferred over the term loot boxes. Micro-transactions were defined as “any model that provides a consumer with the option of making small purchases within a game or other application.”5 Irrespective of terminology, certain elements underpin a loot box or a microtransaction. A player is required to advance
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something of value in the context of the game, such as game points earned through gameplay, or something of real-world value, such as money. Once this valuable thing is advanced, the game will generate randomly the chance to win (or earn) a virtual item for the player (a reward). Hence, a loot box is inherently a transaction, as the player expends something of value in exchange for the opportunity to receive something that may be of value. The virtual items found in loot boxes vary from game to game, however, they consist generally of items which can be used to enhance a player’s game play or cosmetic items, being items which do not affect game play but which affect the aesthetics or appearance of certain elements in the game. These cosmetic items are sometimes called “skins”. In some games, skins may be bought and sold on platforms hosted by third parties.
ARE LOOT BOXES GAMBLING? Under Australian Federal law, an activity may fall within the scope of gambling if it involves each of the following three elements: 1. Consideration – A person must provide something of real-world value to enter the activity; and 2. Prize – The player has the opportunity to win a prize of tangible value (i.e. money or money’s worth); and 3. Chance – The outcome of the activity involves an element of luck or “chance”.6 When a player uses real-world money to purchase, or to acquire an opportunity to purchase, a virtual item in a loot box, the player has provided something of value. If the virtual item can be exchanged for money or money’s worth, that virtual item may be considered a prize. As the virtual
items in the context of a loot box are randomly generated by the software of a game, it may be said that the randomness is akin to the notion of chance or luck. Therefore, an argument exists that these forms of loot boxes amount to gambling. Gambling regulators in certain overseas jurisdictions have applied their existing laws to the concept of loot boxes and have arrived at the conclusion that certain loot boxes constitute gambling, as each jurisdiction has a different legal definition of gambling. In 2017, New Zealand’s Department of Internal Affairs stated that loot boxes did not meet the legal definition of gambling.7 The French Gambling Authority, Autorité de régulation des jeux en ligne, took a similar approach to loot boxes.8 In 2018, regulators in Belgium,9 Denmark10 and the Netherlands11 determined that loot boxes involving the payment of real-world money satisfy the elements of gambling under their respective laws and, as such, are subject to the various prohibitions on gambling set out in those laws. More recently, a UK House of Commons committee recommended that the UK Government should regulate loot boxes that can be purchased with real-world money under the Gambling Act 2005 (UK).12
AUSTRALIA AND THE LOOT BOX INQUIRY Loot boxes have also been considered by the Australian Government and state and territory governments. Most notably, in 2013, former South Australian Senator Nick Xenophon introduced a Bill into the Australian Senate which sought to bring activities within games involving both the purchase of virtual items with realworld money and “gambling” with virtual items within the scope of the definition
