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UK LEGAL COMMENT


UK loot box ban will it happen and if so, how?


Northridge Law partner Melanie Ellis looks at a highly contentious issue: loot boxes in gaming and their potential ban.


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oot boxes are a gambling product, according to a report published by the DCMS Select Committee (the “Committee”) on 12 September 2019. Following an inquiry by the group of


MPs, which involved obtaining evidence from games publishers, gamers, academics and the British Gambling Commission (the “Commission”), the Committee recommended that the Government pass regulations to ensure that loot boxes are licensed and regulated as gambling products. What would implementing this recommendation involve, and how is it likely to be implemented by the Government?


The current legal position


The term loot boxes encompasses a range of products within video games which allow players to receive in-game items, with some element of randomness involved in the selection of which item the player will receive. The Gambling Act 2005 regulates “gaming” along with betting and lotteries, but “gaming” does not encompass all games, only those that involve both an element of chance and a prize. Notably, a game does not need to involve the payment of a stake or entry fee to constitute gambling in Great Britain. The Commission’s view remains that loot boxes do not fall within the legal definition of gaming, unless the prize on offer can be exchanged for real money. A prize is defined by the 2005 Act as


“money or money’s worth”. In the absence of a legal definition of “money’s worth”, in his evidence to the Committee the Commission’s CEO Neil McArthur referenced the Concise Oxford Dictionary’s definition, “equivalent to money”, which was also the definition adopted in the case of Gideons International Service


36 OCTOBER 2019


Mark (1991). Although this case related to a trademark dispute, it is useful in that the court distinguished between a monetary reward, which would constitute money’s worth, and a “spiritual or emotional reward”, which would not as it was not material. In March 2017 the Commission laid out its


views on loot boxes in its position paper on virtual currencies, eSports and social casino gaming, explaining that the Commission would only consider a prize to be “money’s worth” if it can be turned into real currency i.e. there is a marketplace for the item, either within the game itself or elsewhere. Although the Commission’s Brad Enright, in his evidence to the Committee, accepted that the combination of expenditure, a chance-based mechanic and children playing the game “poses significant concerns”, he stated that the Commission is “constrained by what we can do by the current legislation”. The Commission will currently only intervene where loot box items are being sold for real money and the game publisher has not taken adequate steps to prevent that happening. Kerry Hopkins, CEO of Electronic Arts, told the Committee that the company had 24/7


monitoring and bans thousands of players each year for violating its rules regarding selling in game items outside the game environment. The Commission has so far considered these steps sufficient to rule out the need to take action against EA or other game publishers. Real world trading of loot box prizes does continue to take place, but for the Commission to take action every time loot box items are sold, despite the games publisher’s best efforts, would impose a high burden of strict liability on those publishers as well as create a lot of work for the Commission’s enforcement team.


What change is proposed?


The Committee appears to have either reached a different interpretation of the law to the Commission, or thinks that the law should be changed. It considers “loot boxes that can be bought with real-world money and do not reveal their contents in advance to be games of chance played for money’s worth”. As already mentioned, the payment of real-world money for the chance to take part does not form part of the definition of a game of chance in the Gambling Act 2005. Assuming


kukiladrondeguevara/Adobe Stock


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