Loot Boxes Come Under Fire From Gambling Authorities

Dr. Aaron Drummond, a senior lecturer of Massey University School of Psychology says the governments across the world have started to explore the possibility of regulating the loot boxes.

In the new research that was published in Natural Human Behaviour, the gaming companies that give randomized rewards to attract more players and increase their competitive advantage can be regulated under the existing legislation for gambling.

A team of subject matter experts in psychology, economics, computer science and loot boxes led by Dr. Drummond is completing a paper titled ‘Why loot boxes could be regulated as gambling’

A loot box is a terminology used in video games which refers to the random gifts offered to players. These gifts can be used by players to change their game Avatar look, powerful weapons, and even additional lifelines.

The research team is analyzing if the goods offered in the loot box have real-world value and if these goods can be brought under the purview of the current gambling legislation.

Dr. Drummond says the virtual goods bought by players against real money have a value which is why they purchase it in the first place and hence it falls under the legal definition of gambling.

He believes that governments have already started taking notice of the loot box and the legislators should recognize its real-world value and start regulating.

“Whether loot boxes are a form of gambling has important ethical and regulatory implications,” he says

“A common argument against loot boxes has been that people can’t win anything of value from loot boxes. Our analysis shows that this isn’t true. Users spent over $1 Billion in the U.S. on virtual items in just three popular video games over the life of those games. These items are clearly worth real-world money to users and therefore could be regulated via existing gambling legislation.”

Dr.Drummond is not new to the gaming Industry research as he also co-leads the International Media Psychology Laboratory that research on cognition and behavioural impact games have on the players.

The research concluded that that gaming fulfills all the five psychological criteria to consider it as a type of gambling.

He also says that parents need to be aware of the close relationship between gaming and gambling.

“Ideally, games companies would self-regulate these mechanisms, but if they are not willing to do so, then existing gambling legislation may provide a plausible pathway for governments to ensure appropriate consumer protections such as age checks are in place.

Even earlier researches that were done on gaming had shown significant similarities between loot boxes and regular gambling activities.

“Existing gambling legislation usually requires three things, an entry cost or consideration, winnings based on chance, and a prize of value. Where loot boxes are purchasable for real currency and deliver rewards based on chance, the first two requirements are satisfied. What our analysis shows, for the first time, is that empirically, the items delivered by loot boxes have real-world value to players even when they cannot be cashed out into real-world currency.”

New Zealand and the United Kingdom regulators are currently investigating to verify the similarities between Loot boxes and gambling.

Dr. Drummond feels New Zealand can become the torchbearer in this space.

“We have more game developers per capita than any other country in the world. Understanding the psychological risks of mechanics such as loot boxes is essential to ensuring that the New Zealand game industry remains at the forefront of ethical and sustainable video game development.”

The research paper is available online at Nature Human Behaviour for public access. This research was funded by the Royal Society New Zealand Marsden Fast-Start Grant.