UK is the latest country to call loot boxes gambling

In the U.K., Parliament recently called for loot boxes to be reclassified as gambling. This makes Britain the latest country to take a closer look at the practice with the intention of possibly regulating it.

The call was made as part of a new report by the House of Lords’ Select Committee on the Social and Economic Impact of the Gambling Industry. Here, the committee made 66 recommendations as to how consumers can be better protected from gambling-related harm.

Loot boxes were listed by the committee as among seven key recommendations that the government should act upon immediately.

“The liberalization of gambling by the Gambling Act 2005, the universal adoption of smartphones, and the exploitation of soft-touch regulation by gambling operators has created a perfect storm of addictive 24/7 gambling,” the committee wrote.

Loot boxes already under review in the U.K.

The new report isn’t the first time that loot boxes had been brought under the microscope by the British government. Last year, a committee for the Department of Digital, Culture, Media and Sport recommended that paid loot boxes should be regulated under the U.K.’s gambling laws. It made the recommendation after an extensive inquiry that looked into new addictive and immersive technologies.

This was followed, nine months later, by a call for evidence to find out whether or not loot boxes did constitute as gambling.

The new report includes a chapter dedicated entirely to loot boxes. Here, it addresses the earlier call for evidence, pointing out that research already exists that “proves that there is a connection, though not necessarily a casual link, between loot box spending and problem gambling.”

The committee also echoed an earlier report from the Children’s Commissioner, stating that “if a product looks like gambling and feels like gambling, it should be regulated as gambling.”

The report from the Children’s Commissioner not only recommended that loot boxes be regulated, but that sales on any non-cosmetic in-game items be banned.

Other countries have already classified loot boxes as gambling

The U.K. isn’t the first country to move to classify loot boxes as gambling. Even before the British government commissioned the report, a number of other countries had already moved to classify the practice as such.

In 2018, the Dutch Gaming Authority issued a legal opinion that games that sell loot boxes and permit the transfer of yielded items were illegal. The country followed this up with a call to other European Union countries to harmonize their rulings on loot boxes.

Even before the Netherlands made its call, Belgium’s own Gaming Commission released its own report, saying that the loot boxes systems in popular FIFA 18, Overwatch and Counter-Strike: Global Offensive where considered “games of chance” and subject to the country’s gambling laws.

Meanwhile, in Asia, countries have been just as swift to take action on loot box and random mechanics in games. As far back as 2012, Japan’s Consumer Affairs Agency banned the practice of “complete gacha,” a practice wherein a predetermined set of items gained from loot boxes would, once completed, combined into a more valuable item. This resulted in Japanese developers removing the practice from the games, though loot boxes and gacha are still legal.

In 2015, members of South Korea’s National Assembly proposed amendments to the country’s existing video game regulation that would require developers to disclose information on the probability of getting certain items in loot boxes. While the amendments did not pass, it eventually led to attempts by the South Korean industry to regulate itself. Current self-regulation now requires all games to clearly display the payout rates of items from loot boxes.

Perhaps the country whose rules may have the biggest impact on the industry is China. Revenue from the country’s video game market is expected to make up to $27 billion this year, with forecasts expecting that revenue to grow by 1.8 percent each year, up to 2025. As such, any move to legislate and ban loot boxes can greatly reduce the revenues of companies looking to tap into the Chinese market.

In 2017, China announced legislation that banned game publishers from directly selling virtual “lottery tickets,” of which loot boxes were included. This new ruling forced Blizzard entertainment to revamp how its hit hero shooter Overwatch handled loot boxes.

To get around the ban, Blizzard made it so that players could now only buy in-game currency. Loot boxes were instead given out as “gifts” whenever players bought said currency.

Blizzard’s use of a loophole shows how important loot boxes are to their bottom line. However, as more countries clamp down on the practice – and likely loopholes like Blizzard’s – many companies will likely have to find other ways to monetize their games.