Global Loot Box Regulations 2023: An Update on Legislative Developments

The loot box landscape continues to evolve in 2023, with several countries implementing new regulations to address concerns over these in-game purchases. In recent years, the primary approach has been to determine whether loot boxes constitute 'gambling' under existing laws and, if so, to regulate them accordingly. However, countries are now exploring alternative options, such as enforcing consumer protection laws, requiring disclosure of specific information, and demanding action from age rating organizations. This article provides an update on the policies discussed in the 2022 Loot Box State of Play report and summarizes new developments. It highlights key takeaways from academic research on global loot box regulation, available in more detail here. For those interested in exploring the topic further, more technical and legal information, including source documents in their original language, can be found at the provided link. When referring to 'loot boxes,' this article broadly encompasses any in-game purchases with randomized elements that can be bought with real-world money or premium in-game currency. Essentially, players are uncertain about the outcome of their purchase. This definition includes social casino games, for example. Belgium has maintained its ban on loot boxes due to the country's uniquely broad definition of gambling law, which prohibits the sale of loot boxes to both children and adults. Although the regulator has not enforced the law due to resource constraints, companies like Roblox Corporation have taken steps to comply. Even without enforcement, companies are advised to adhere to the law, as major hardware platforms, storefronts, and publishers would naturally demand compliance. As discussed previously, the highest Dutch administrative court ruled that loot boxes cannot be regulated under gambling law. In response, policymakers have proposed changing the law to align with Belgium's stance, and the Dutch government confirmed in July 2023 that it was pursuing a loot box ban, with the intention of advocating for this at the EU level. However, with a new government being formed, the future of loot box regulation in the Netherlands remains uncertain. Several civil court decisions have examined whether loot boxes with transferable rewards, which possess real-world monetary value, constitute illegal gambling. If so, players would be entitled to refunds for their loot box purchases. In Austria, lower court judgments are not publicly available, but obtained copies of relevant decisions reveal conflicting outcomes due to different court rulings. Despite this, at least two cases have resulted in courts deciding that loot boxes with real-world monetary value constitute illegal gambling, warranting refunds. The defendant companies have chosen not to challenge these decisions, partly because they do not set binding precedents. Other judgments have reached contrasting conclusions, and litigation funders have expressed their willingness to support further cases, prompting companies to exercise caution when operating in Austria. In April 2021, Germany's Protection of Young Persons Act was amended to require the USK, the German age rating organization, to consider 'gambling-like mechanisms' when making age rating decisions. This change, effective from January 1, 2023, mandates that games with loot boxes display a warning label indicating 'In-game purchases + random items.' This amendment has led to practical differences, such as the FIFA video game series being rated USK 12 instead of USK 0. The author expresses concern that a football simulation game with no controversial elements, aside from loot boxes, is now deemed unsuitable for young people under 12 in Germany. This might lead parents to disregard age rating advice, and the author suggests that companies should be encouraged to produce loot box-free versions of games for young people instead of imposing a higher age rating. A similar approach based on age ratings has been adopted in Australia, with more stringent rules requiring games with loot boxes to be rated at least M and those with simulated gambling to be rated R 18+. Mainland China was the first to require companies to disclose the probability of obtaining rewards from loot boxes, starting from May 1, 2017. Industry stakeholders have since demanded similar disclosures elsewhere, making this requirement effectively a part of industry self-regulation in nearly all countries. Probability disclosures have become increasingly required by law, with Taiwan and South Korea implementing such requirements from January 1, 2023, and March 22, 2024, respectively. Taiwan also mandates a warning message stating that purchasing loot boxes does not guarantee specific rewards. Outside of Asia, the Dutch and Italian consumer protection agencies have argued that failing to disclose loot box probabilities is a misleading commercial practice under EU consumer protection law. Companies operating in the EU would be well-advised to make probability disclosures, as these are also required by industry self-regulation. The Dutch consumer protection agency has also suggested that in-game purchases, including loot boxes, should display prices in euros to clarify the real-world monetary cost. The UK advertising regulator has previously decided against this requirement. Another measure to provide players and parents with more information is the requirement for games with loot boxes to display a warning label stating 'In-game Purchases (Includes Random Items).' This is mandated internationally by major age rating organizations and platforms. The UK advertising regulator has determined that Hutch Games breached advertising rules by failing to disclose the presence of loot boxes on its game listings. Companies should ensure that all video game advertising provides the legally required information, and the author suggests that the legal position is similar in other EU countries. The UK Government has asked the main industry body, UKIE, to improve self-regulation of loot boxes. UKIE has published 11 principles, including requirements for probability disclosures, presence warnings, and selling loot boxes to under-18s only with parental consent. Many civil cases have been brought in relation to loot boxes in the US and Canada, with the author believing that most lack merit due to unsustainable arguments or omitted better arguments. However, Epic Games has settled claims in the US and Canada without admitting liability, suggesting that some companies may prefer to resolve the issue. Finally, the Spanish draft law, Finnish bill, and Illinois bill on loot boxes have stalled or died, while the Brazilian bill to ban loot boxes is progressing slowly through the legislative process. The author discloses their involvement in some of the enforcement actions discussed and advises companies to seek specialist legal advice, as loot box regulation is becoming increasingly complex and divergent across jurisdictions.