The thorny question of whether video game loot boxes are a form of gambling is back in the spotlight, after a recent warning from Claire Murdoch, NHS mental health director. Murdoch said that loot boxes – virtual boxes containing in-game prizes like new characters and weapons, which can be bought using real-world money – are “setting kids up for addiction by teaching them to gamble”

This has come just six months after the Gambling Commission’s chief executive, Neil McArthur, told the Department for Culture, Media and Sport select committee that loot boxes don’t technically qualify as gambling under current legislation. The reasoning behind this is that the prizes contained inside boxes don’t have any official monetary value.

“The Gambling Act tells us that gambling means playing a game of chance for a prize,” McArthur explained to MPs. He added that the “the prize must mean something that is equivalent to money” in order for it to be considered gambling.

However, there’s an argument – implied by Murdoch – that the very fact players spend money on randomized, unpredictable prizes should be enough for loot boxes to be regarded as gambling, even if the prizes themselves are confined to the virtual world of the game. The fact that virtual prizes are often bought and sold for real money on unregulated third-party websites, a process known as skin gambling, is another issue.

So, while official figures have shown that gambling participation is actually falling amongst 11-16 year-olds, this data may not be showing the complete picture, because it’s not taking the phenomenon of loot boxes into account. And news reports have certainly highlighted the massive amounts of money being spent by young people on virtual prizes – a case in point being a story by the BBC in 2019 about four children who spent almost £550 in three weeks on player packs in the hit football game, Fifa. These “Ultimate Team” packs work like loot boxes, as Fifa users won’t know which players are in which packs until they buy them.

“You pay £40 for the game, which is a lot of money in itself, but then the only way to get a great team is essentially by gambling,” their father told the BBC. “They spent £550 and they still never got their favourite player, Lionel Messi.”

The rise of loot boxes

Loot boxes go back many years, coming to prominence in the mid-Noughties when games developers in Japan and China saw paid-for prizes as a way to capitalise on gamers who would often play pirated versions of the games at home or in Internet cafes. As games market analyst Daniel Ahmad put it, piracy was “huge back in the day, and the way around that was just releasing games for free, and then putting in content that people wanted to buy.”

A trailblazing example of this strategy was the free-to-play ZT Online, a massively multiplayer online roleplaying game (MMORPG) which was released in China in the mid-Noughties. Entering its sprawling world, players could progress more quickly and get their hands on better gear by purchasing “treasure chests” which, when opened, would yield potential prizes which would spin and then slowly come to a stop on what you’d won – just like a slot machine. As one player put it at the time, “during her craziest period she was like a gambler in a casino.”

The business model was rapidly adopted by games developers in the West. The ability to buy player packs in Fifa was an early example of major software companies getting in on the action. Since then, loot boxes have been a prominent element of blockbuster games like Counter-Strike: Global Offensive (CS:GO), Overwatch and Call of Duty: Black Ops 4. 

Are loot boxes a form of gambling?

The similarities between loot boxes and gambling have caused them to become a highly topical and controverisal issue regularly debated by politicians. For example, 

Conservative peer Lord Chadlington has spoken out about loot boxes being a form of gambling, saying: “because you don’t know in many cases when you go into the loot box what you’re going to get, and if you use money this creates the risk feeling.” 

This “risk feeling” is at the core of the exhilaration provided by gambling. In the words of gambling researcher Dr Luke Clark, “We know that the dopamine system, which is targeted by drugs of abuse, is also very interested in unpredictable rewards. Dopamine cells are most active when there is maximum uncertainty, and the dopamine system responds more to an uncertain reward than the same reward delivered on a predictable basis.”

Some countries have designated loot boxes as a form of gambling and come down hard on the gaming industry. For example, in 2018, the Belgium Gaming Commission deemed loot boxes to be “in violation of gambling legislation” and ruled that loot boxes that could be purchased with real money had to be removed from video games. As far Belgian officials were concerned, the key issue was that players were spending money on a game of chance – that alone was enough to constitute gambling in their view. 

Others disagree. In 2019, the counter-argument was put forward by Margot James – then the UK Minister for Digital and Creative Industries – who said that “I don’t think really it is true to say loot boxes are gambling”, emphasising the lack of an “expectation of an additional financial reward”.

Some companies are now taking action themselves. Epic Games, the creators of Fortnite, have changed the game’s loot boxes to let players see what they contain before buying them – removing that controversial element of chance. EA, meanwhile, has introduced “pack probability” scoring for Fifa Ultimate Team player packs, letting users know the chances of receiving top-rated players in packs before they purchase them.

What’s certain is that the spotlight upon loot boxes is not going to fade anytime soon. With charities, regulators and politicians pushing for tighter regulation and gaming companies themselves taking action, we could well see more changes to the loot box landscape in the near future.