Betting on Loot Boxes: Is Regulation a Winning Play? [POLICYbrief] - YouTube

Super Colonial Revolution.

Loot boxes are items you encounter in a video game that you don't know exactly what you're

going to get.

And there are two basic types.

Number one are the cosmetic-only type of loot box where you get something that doesn't necessarily

help you win the game, but it's something that changes the way your character looks.

And then another type of loot box is the kind of helps you win a game or it gives you an

advantage during the game play.

When policymakers recently have taken a look at loot boxes, what they're looking at are

loot boxes that actually cost monetary value.

One of the questions policymakers are grappling with right now is whether or not loot boxes

are considered gambling.

Also, one of the main policy justifications for regulating loot boxes is the impact it

has on kids and the ability for kids to spend money on something they don't necessarily

know what they're getting into.

The question for regulators and for policymakers in general has to be whether government intervention

is going to cost society more than not intervening and letting the market take care of the perceived

negative externality.

There are a few different types of regulations that have been proposed for loot boxes.

The most common one, I would say, and what you see in a few different state legislatures,

is a straight ban on loot boxes in games for kids that are under either 21 or 18.

Belgium and the Netherlands have actually considered loot boxes to be gambling, and

therefore have banned the use of loot boxes.

FIFA 18, for example, had some loot boxes, and you can't buy those in the Netherlands

and in Belgium.

In the United States, the definition of gambling appears in state law, mostly.

Federal law bans illegal gambling, which it defines as gambling that is illegal in state

law.

The definition of gambling tends to be that, number one, when a person wagers something

of value, two, on the outcome of an event over which, three, the individual has no control.

And number four, and perhaps most importantly, with the agreement and the understanding that

they will either receive something of value or other people will receive something of

value as a result of that outcome.

Loot boxes have entertainment value.

What they don't have within the game is monetary value that can be spent in the real world.

And so that's where I think critics of loot boxes and proponents of loot boxes tend to

disagree.

So under current law, loot boxes are not considered gambling.

There are attempts now to start regulating loot boxes as if they're gambling.

Policymakers have grappled with whether or not children are being protected adequately.

The bill Senator Hawley introduced would banned loot boxes that are sold to children under

the age of 18.

It does that by amending the Federal Trade Commission Act.

And so what Senator Hawley is trying to do with this legislation is to declare that the

sale of loot boxes to kids who are under 18 is necessarily a deceptive act or practice,

or an unfair act or practice.

And that the Federal Trade Commission then has to promulgate regulations kind of defining

the limits of that ban.

One of the things policymakers have to decide is whether the private sector is addressing

the problem adequately, or if they need to step in.

And we've seen this with the ESRB, where the ESRB is a private sector entity that rates

games so that parents know what ages the game content is appropriate for them.

So that's why we have seen the big gaming platforms like Xbox and Nintendo require the

developers on the platform to disclose the chance somebody has to win.

But also, the ESRB has stepped up and said, "One of the labels that you're going to have

to have on your game if you have loot boxes, is an indicator that says, 'This game does

contain loot boxes that cost money.'"

The loot box issue recalls a lot of different policy debates that we've seen in the past,

where policymakers are trying to decide where the province of parents, where the province

of family decision making, ends, and where the state needs to step in.