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UK Gambling Commission: Loot Boxes are Not a “Licensable Gambling Activity”

Yesterday the UK Gambling Commission determined that loot boxes “where in-game items obtained via loot boxes are confined for use within the game and cannot be cashed out” are not a “licensable gambling activity”.

This means that the UK Gambling Commission has joined the ESRB in stating, for a completely separate reason, that loot boxes are not gambling. The ESRB’s reason (paraphrased) is that the player always receives in-game content regardless of whether it’s the thing they wanted.

I think the UK’s reasoning leaves too big of a hole and allows for someone to then push for pokemon, yugioh, baseball, magic the gathering, and so on, cards to be technically gambling, right? I mean, those items definitely have real world monetary value and can definitely be sold separately at a higher monetary value than the “gamble” placed on a $5 booster pack. But that really gets to the crux of this argument. It’s the spirit of the law that matters, not the letter of the law. And the spirit of the law in this case isn’t going to condemn pokemon and MTG to be gambling, just like it won’t win against loot boxes.

I find the entire situation fascinating because it’s putting gaming business models under a microscope. I like watching all sides squirm and present arguments. Regardless of what side you fall on the debate, it’s a great discussion.

 

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  • Caldazar says:

    I feel like you are misrepresenting the UK stance.
    Reading their article to me feels like they explicitly don’t state if it is gambling or not, and actually state the practice is concerning. What they do state is that because you can’t cash it in it does not fall under their legal jurisdiction to regulate, hence the not licensable gambling part.

    ESRB just plainly says it is not gambling.

    Those two things are massively different and not the same conclusion at all.

    PS: About the TCG: Their article only states one of multiple factors they use to determine what is licensable gambling. TCG’s will not apply due to another factor that is not listed in this particular article. That does not mean a hole is left, just that the existence of the hole can not be determined from this one article.

    • Keen says:

      @Caldazar: Right, that’s passing the buck. It’s basically saying, “As the rules are written now, it’s not an activity we can classify as a licensable gambling activity”. What they want to do is pass the reason for their inability to classify it as gambling on to the next guy (in this case, Parliament?).

      Re: TCG: My point with TCG is to address a hole in an argument, not a hole in a law or regulation. The hole is left by people who would tick all the boxes for one thing to be classified as gambling, but then choose to not tick those boxes with a similar item/practice would otherwise tick those same boxes.

      • Caldazar says:

        If it is not their jurisdiction, they are quite correct in passing the buck.

      • Keen says:

        As the current laws are written, it’s outside the scope. That’s clear enough, and since changing laws would likely open up more issues, I bet it won’t. So them passing the buck is what many of these commissions do — “it is what it is.”

  • Bhagpuss says:

    I just commented on Tobold’s blog on this topic without having read your post and I’ll repeat something I said there: loot boxes are the equivalent of buying a pig in a poke, an expression that dates back to the 16th Century. It’s a blind purchase, a lucky dip,. You don’t know exactly what you’ll get but you know you’ll get something. Indeed, in most cases, you know the full range of possibilities so it’s not even possible to say that your choice is perforce uninformed.

    “Gambling” is a useless word for this discussion, though. It has far too many meanings, some of them, like the ones used by legislators and regulators, highly specific and technical, others much looser and poetic. Language is like that, the English language, reputedly, especially so. As long as everyone insists on calling loot boxes “gambling” they will be “gambling” in the terms of the debate so unfortunately we’ll all have to accommodate the paradoxes.

    As for the ESRB, Caldazar is correct. I listened to a radio interview with an ESRB spokesman about a week ago; he made the point that they would LIKE to be able to act against loot boxes because they recognize and are concerned about the danger they represent to children and vulnerable adults, but as their terms of operation and the law are currently configured they are not able to. It was clear from the interview I heard that what the ESRB would like, and may lobby for, is a change in the law to enable them to act on loot boxes.

    I think that, as Tobold pointed out, the implications for other parts of the economy should virtual items attain legal standing as things owned by the purchaser rather than services provided by the supplier (as they currently are) are so immense that we won’t – can’t – see loot boxes and their contents brought under the terms of existing legislation. Of course, there could be new legislation specifically for loot boxes but it would be very surprising if there was the will for that in national legislatures. After all, it’s only video games.

    • Keen says:

      People wanting them classified as “gambling” are referring to the non-useless word that would classify them as a regulated activity in many country states. And that’s why this entire issue is so fascinating. To make a change to loot boxes would require broader ramifications and change.

  • Misaligned says:

    Call me old fashioned but I think loot boxes and cash shops are garbage and wish they would disappear from gaming completely. While we’re at it, let’s get rid of F2P, day 0 DLC and pre-order bonuses.

  • Danath says:

    I thought I would share some brief insight on this.

    While the commission does not say it is NOT gambling (they acknowledge it meets the definition of gambling), in order to be regulated by the agency there needs to be an option to ‘cash out’ for it to actually be regulated by the agency.

    This is the real problem, and its also why things like trading card games or other games that involve you gambling for non cash items haven’t been regulated. Trying to reclassify lootboxes actually affects a very large industry of gambling for other items that would pour a whole lot of dollars into opposing it.

    In Japan this is typically how some of the pachinko machines work. You play for toys, and down the street you can exchange the toys for cash. You are not ‘legally’ gambling because there is not an official option to cash out, but there is a way to ‘cash out’ that is ‘unrelated’ to the gambling machine therefore meaning it can’t be regulated.

    CS GO for example, you gamble for weapons that have no inherent cash out value, but they are GIVEN a value by the surrounding community and other gambling that ‘gamble’ the weapons and pay out. As the actual gambling for the weapon occurs with Valve and Valve is unaffiliated with the actual monetary transactions on the weapons, the cash out is considered to be not the proceeds of gambling.

    This would take some major work and willpower for politicians to actually close these kinds of loopholes, and thats what makes the lootbox a government body issue for now until they do something that would give these commissions the authority to actually regulate it.

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