Loot boxes not yet gambling in the UK and limitations to eSports in Japan

Gaming loot boxes risk to be qualified as gambling in the UK and gambling regulations could apply to eSports in Japan

There is no enough evidence that video gaming loot boxes are gambling in the UK, but gambling rules might apply to eSports venues in Japan.

Video gaming loot boxes are not gambling in the UK

Speaking to the UK Parliament and, in particular, to the Digital, Culture, Media and Sport Committee, the UK’s Digital Minister suggested that more research was needed to link loot boxes to gambling and there is not enough evidence to suggest that loot boxes in video games constitute gambling.

In the UK, a research project into video gaming loot boxes which involved more than 7,000 gamers and as well lawmakers and regulators found “empirical evidence of a relationship between loot boxes use and problem gambling” and that the relationship “was neither small, nor trivial”.

However, the minister asserted: “I would contest the assumption that loot boxes are gambling and I don’t think that all the evidence that I’ve read from your committee’s hearings would support that assumption either“. And more on this matter: “Loot boxes are a means of people purchasing items, skins as they’re called, to enhance their gaming experience, not through an expectation of an additional financial reward and importantly they can’t be traded offline for money, so I think there are big differences and I don’t think really it is true to say that loot boxes are gambling.

As provided by Italian law, also the provision of facilities for gambling without a license is a criminal offense under the UK Gambling Act 2005. Moreover, gaming is defined in Sec. 6 Gambling Act 2005 as playing a game of chance for a prize. Therefore, a portion of the legal test under UK gambling law to include video gaming loot boxes in the gambling environmental is to assess if the prize which the player randomly receives is viewed as money recognition.

The Commission paper needs to be interpreted. However, because the video gaming industry is growing expeditiously and the climate on loot boxes could change due to the continuous public or political pressure.

On the topic above, you may find interesting my previous article “How loot boxes deal with regulations and limitations?“.

The Japanese Fueiho law impact on eSports

The law that regulates entertainment places in Japan, generally known as Fueiho, which aims at protecting public morality and moral surroundings may have an impact also in the eSports environment.

Under the Fueiho, “game centers” are defined as amusement arcades where the business owners equip the arcade with slot machines and/or TV games machines. Historically, such game centers have been used for gambling activities. It means that the organizer of an eSports competition event must obtain formal authorization from the Japanese Public Safety Commission and comply with different limitations in terms of business hours, limitations for minors, money winnings or rewarding for players, similar to those applicable in Italy for Italian betting shops.

However, according to a strict interpretation of the definition of game centers also eSports competition venues may be subject to the Fueiho since organizers of an eSport competition usually provide TV game machines or other entertainment facilities to guests allowing them to play.

According to the report on the country published by Masakatsu Nagashima, despite the threat of the Fueiho “eSports cafes have recently grown in number in Japan and competent authorities have not actually enforced the Fueiho rules on the eSports venues“. According to several commentators, the purpose of the regulation was to regulate gambling and “the application of the Fueiho to eSports competitions does not find the intended purposes of the law“.

While several legal issues on eSports remain unsolved worldwide, it is also important to monitor the potential applicability of country regulations since the risk would cause a chilling effect on eSports expansion for the markets, as it is happening for the regime of the eSports prize promotions in Italy.

For an outline of the main legal challenges of eSports, you may read my previous article “The rise of eSports and its legal challenges” as part of GamingLawPills.

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Vincenzo Giuffré

Lawyer at DLA Piper IPT Italy, Milan| Gambling and Gaming Sector| eSports, Media, Sports and Entertainment | Bocconi University | University of Minnesota - W. Mondale Law School | Visiting Student at National University of Singapore (NUS)

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