Loot boxes and social gaming not challenged as gambling internationally

Gambling regulators decided not to take a joint initiative against digital entertainment akin to gambling

Gambling regulators took a stance on look boxes and social gaming, which should end their international fight against them for the time being.

The declaration on concerns between gaming and gambling

The blurring lines between some features of video games such as skin betting, loot boxes, social casino gaming, and the use of gambling themed content within video games available to children have been under the radar of regulators during the last years. And such concerns led, for instance, the major video gaming console manufacturers to commit to disclose information about the odds of obtaining the rare items discoverable on the loot boxes offered through games.

In parallel, in September 2019, the Gaming Regulators European Forum (GREF) which is an association of currently 19 gambling regulators had published a joint “Declaration of gambling regulators on their concerns related to the blurring of lines between gambling and gaming” whereby they committed to working together in order to analyze the characteristics of video games and social gaming in order to assess whether they can be qualified as gambling.

The outcome of the review of loot boxes and social gaming by GREF

Following the declaration mentioned above, GREF now published a report where they held that

whether these activities ultimately trigger the implementation of gambling regulation, would depend on each national gambling definition“.

So far, only The Netherlands and Belgium have taken the view that loot boxes are gambling, effectively outlawing them in their countries. The UK Gambling Commission has repeatedly said it does not believe that the language of the UK Gambling Act covers loot boxes. And this position was even confirmed by the UK’s Digital Minister.

This conclusion was predictable, given the considerable inconsistency between gambling laws internationally. Even within the European Union, there is no harmonization in the gambling license regime. And the qualification of loot boxes and social gaming as gambling also depends on criminal laws where the international inconsistency is even higher.

The call of gambling regulators for higher transparency

Apart from the conclusion mentioned above, the Gaming Regulators European Forum also stressed the need for a higher level of transparency for such types of video gaming features that can be considered similar to gambling.

And indeed, the potential misleading of consumers is, in some cases, an Achilles’ heel of loot boxes and social gaming products. Players are sometimes not adequately informed of the percentage of winnings and of the need to perform payments to progress within the game.

Indeed, this aspect was challenged in the past to video game publishers and console manufacturers in Italy with reference to loot boxes. Regulations on unfair commercial practices and misleading advertising can lead to fines up to € 5 million per breach in Italy, and therefore, they represent a considerable deterrent against potential misleading conducts.

There is a substantial effort by the video gaming industry to provide the highest level of transparency to players on to-be-paid features, and hopefully, regulators and publishers will find sooner rather than later a good compromise.

On the topic above, you may find interesting the following articles “How loot boxes deal with regulations and limitations?” and “eSports tournaments limited by Italian prize promotion and gambling rules?“.

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Giulio Coraggio

I am the head of the Italian Technology sector and the global head of the IoT and Gaming and Gambling groups at the world-leading law firm DLA Piper. IoT and artificial intelligence influencer and FinTech and blockchain expert, finding solutions to what's next for our clients' success.

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