the Committee has not misunderstood the law, this statement gives the impression that it would like it to be redrafted, so as to capture all games of chance where there is a payment to take part, regardless of the real-world value of the prize. However, the Committee is not calling for the definition of a game of chance to be amended, but rather for the Government to pass regulations, as it has authority to do under the Gambling Act, to specify that loot boxes are to be treated as games of chance. It seems that the Committee would like the Government to specify that any loot box purchased for real world money should be treated as a game of chance, but not a loot box which was free. This would create an awkward situation

where one type of game of chance is treated differently to other games of chance, which are still gambling even if they are free. There will inevitably be some protracted discussions as to whether particular free games should be classified as loot boxes (and thereby avoid classification as gambling) or should not. Accurately defining what is to constitute a “loot box” will be essential. A better approach to achieving the Committee’s aims might be for the Government to impose on the Commission a different interpretation of “money’s worth”, which would include loot box prizes even if they cannot be sold for cash. It makes sense that if something has value to the player then it should be deemed to be a “prize”, regardless of whether it can be sold on the open market, particularly if the item is one which players have the option to purchase for real money rather than taking a chance on a loot box.

The knock-on effect of this, however, would

be to bring a number of other games within the Commission’s regulatory remit, not just loot boxes. For example, rewards achieved through ordinary gameplay would be captured, in any circumstance where the game software included a random element and the rewards were also available for purchase by players. To bring all such games within the licence requirement (and consequentially require age verification to ensure only players over 18 can take part, even in a free to play version) would have a significant impact on the video games industry and on players.

Will the law be changed?

In its report, the Committee recommended that “the Government should bring forward regulations under section 6 of the Gambling Act 2005 in the next parliamentary session to specify that loot boxes are a game of chance.

If it determines not to regulate loot boxes under the Act at this time, the Government should produce a paper clearly stating the reasons why it does not consider loot boxes paid for with real-world currency to be a game of chance played for money’s worth.” Further, the Committee recommended that no loot boxes that contain an element of chance should be sold to children. Although there appears to be no specific evidence demonstrating harm being caused to children through purchasing loot boxes, the Committee recommended a precautionary approach of banning loot boxes for children until evidence proved they did not cause harm. It is, however, very difficult to prove a negative. If this recommendation is adopted by the Government, even if it decides not to regulate loot boxes as gambling, it would necessitate age verification checks on all loot box customers.

It is possible that the Government will choose simply to produce a paper reiterating the Commission’s position: that it does not consider loot boxes to be gambling where the prizes cannot be exchanged for real money. The Government’s decision on what approach to take is likely to involve consideration of the reasons we regulate gambling in the first place and whether those reasons apply to loot boxes. The policy reasons for regulating gambling are contained in the Gambling Act’s “licensing objectives”, the first of which is to protect children and vulnerable members of society. If the Government believes that young and vulnerable people are being harmed by loot boxes in the same way that they would be harmed by other gambling products, in particular through addictive behaviour causing them to spend beyond their means, it is likely to take action.

What would be the effect of classifying loot boxes as gambling?

The immediate effect is that companies offering games including loot boxes would need to obtain a remote gaming operating licence from the Commission. In Belgium, the classification of loot boxes as gambling did not result in a number of games companies obtaining gambling licences – instead the companies chose to remove paid-for loot boxes from their games when played by customers in that jurisdiction. That response may be repeated in Great Britain, however, in Belgium only a limited number of licences are available to offer games of chance, so the possibility to simply become licensed does not exist in the same way in that jurisdiction as it does in Great Britain.

Another option would be for games

providers to amend the mechanics of loot boxes to avoid being caught by the definition, or by any revised definition of a game of chance. In January 2019, Epic Games made changes so that where loot boxes in Fortnite are purchased with real money, their contents can be seen in advance. By taking a similar approach and removing the element of chance from a loot box purchase, other games companies could avoid the need to obtain a gambling licence. The process of applying for a licence in

Great Britain is not so difficult that a game publisher is likely to be put off applying if they needed to hold a licence, but the impact of obtaining a licence goes beyond the cost and administrative burden. The Commission’s Licence Conditions and Codes of Practice and Remote Technical Standards would apply to the product once licensed, along with the advertising codes of practice. Some notable

new requirements include:  Addition of self-exclusion processes;  Age verification before depositing funds, purchasing a loot box or opening any free

version of a loot box which is on offer;  Verification of customer’s name, address and date of birth before purchasing a loot

box;  Monitoring of loot box customers for signs

of problem gambling;  Carrying out interactions with customers

who are suffering harm or may be at risk;  No advertising of loot boxes to an audience

which includes 25% or more under 18s;  Payment of 21% remote gaming duty on revenues from loot boxes.

An important consideration is whether the whole game would be classified as gambling (and therefore subject to the above requirements), or just the loot box element. The implications of classifying a whole game as gambling because it incorporates a loot box would be far-reaching, and it is unlikely the Government would take such a step. Provided the loot box mechanic can realistically be described as separate from the underlying game, and it can require a customer to register, login and be subject to age and identity verification before purchasing the loot box, it should be capable of being regulated as an independent gambling product, with the game unaffected.

Out of the frying pan…

Where loot boxes are an integral part of the game, for example in FIFA Ultimate Team where they are key to building a decent football side, to remove loot boxes (or to restrict them to over

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