The discussion around loot boxes and their slow spread through the gaming industry has taken another twist with the introduction of two new bills in the state of Hawaii by lawmakers, in addition to a US senator’s querying the Federal Trade Commission (FTC) and the Entertainment Software Rating Board (ESRB) to probe the loot box problem and its relationship to gambling, as well as the Swedish government aiming for legislation governing the use of loot boxes in games to be developed and ratified by the end of January 2019. If you aren’t up to speed on loot boxes and how the rest of the world is reacting to them, follow me after the jump.

The state of Hawaii

Hawaii’s lawmakers took the first steps to publicly raise the profile of the loot box problem by having actual politicians stand up before the media and announce that they were launching an inquiry into the issue and pledged support for a bill that would classify loot boxes and other in-game mechanics that had an element of randomness and accepted player’s money in return for virtual goods.

The new bills come in two formats, one for the House Bill (which applies to the state) and one which applies to the Senate (which may be applicable in other states on a federal level, after passing through the House of Representatives and the President’s office). They are House Bills 2686 and 2727, and Senate Bill 3024 and 3025 respectively. Both bills address loot boxes as a mechanism where players can use real money to purchase an in-game box of random items.

The first bill aims to prohibit the sale of video games with loot boxes to players under the age of 21 years. In Hawaii, gambling centers and casinos are prohibited. The bill plans to add a new section to Hawaii’s Revised Statute. It reads as follows:

(a)  It shall be unlawful for any retailer to sell to any person under twenty-one years of age a video game that contains a system of further purchasing:

     (1)  A randomized reward or rewards; or

     (2)  A virtual item which can be redeemed to directly or indirectly receive a randomized reward or rewards.

The second is a much longer amendment to the Revised Statute that adds the following new laws:

(a)  Video game publishers that distribute video games that contain a system of further purchasing:

     (1)  A randomized reward or rewards; or

     (2)  A consumable virtual item that can be redeemed and directly or indirectly converted to a randomized reward or rewards,

shall prominently disclose and publish to the consumer the probability rates of receiving each type of randomized reward or rewards at the time of purchase and at the time any mechanism to receive a randomized reward or rewards is activated so as to meaningfully inform the consumer’s decision prior to the purchase or activation of any mechanism to receive a randomized reward or rewards.

     (b)  The department of commerce and consumer affairs, in consultation with the office of enterprise technology services, is authorized to audit the code of video games sold in this State and subject to this section to ensure that the probability rates for receiving each type of randomized reward or rewards are calculated correctly and working properly.  The department may contract with a third party to provide additional assistance as needed.  The department shall not publicly disclose proprietary information beyond that which is necessary to fulfill the intent of this section.

The second part of this amendment requires that game publishers prominently display labels that warns that the game contains gambling activities which may be harmful or addictive, and forbids the addition of loot boxes or other such gambling mechanics after the title’s launch. If the publisher wishes to do so, they need to resubmit the game for certification.

Hawaii’s proposed laws are less demanding than expected, and mimic the rules set on cigarette companies to prominently display warning labels about the dangers of smoking. It’s interesting that China was ahead of the rest of the world when it ordered that Blizzard Entertainment reveal the probability rates for obtaining items in Overwatch’s loot boxes, and Bluehole was ordered to do the same for Player Unknown’s Battlegrounds via Tencent in China. The maths behind these things is quite mind-blowing – players have less than a 1% chance of scoring any of the rare biker items in PUBG’s new Biker Box. You could open 100 Biker boxes and not get a single rare item.

However, Blizzard worked around the need to reveal their drop rates by using in-game currency to purchase loot boxes, bypassing China’s restrictions, and throwing in a few free loot boxes in to make the deal sweeter.

The state of New Hampshire

Senator Maggie Hassan from the US state of New Hampshire wrote an open letter this past week to the ESRB, demanding a review of loot box policies as they stood at the time with both organisations, and questioned the potential harm they had on children, young adults, and people with impulse control problems.

The prevalence of in-game micro-transactions, often referred to as ‘loot boxes,’ raises several concerns surrounding the use of psychological principles and enticing mechanics that closely mirror those often found in casinos and games of chance. The potential for harm is real. Recently the World Health Organization classified “gaming disorder” as a unique condition in its recent draft revision of the 11th International Classification of Diseases. While there is robust debate over whether loot boxes should be considered gambling, the fact that they are both expensive habits and use similar psychological principles suggest loot boxes should be treated with extra scrutiny. At minimum, the rating system should denote when loot boxes are utilized in physical copies of electronic games.

To that end, I respectfully urge the ESRB to review the completeness of the board’s ratings process and policies as they relate to loot boxes, and to take into account the potential harm these types of micro-transactions may have on children. I also urge the board to examine whether the design and marketing approach to loot boxes in games geared toward children is being conducted in an ethical and transparent way that adequately protects the developing minds of young children from predatory practices.

Further, I urge the ESRB to consider working with the relevant stakeholders – including parents – to collect and publish data on how developers are using loot boxes, how widespread their use is, and how much money players spend on them.

That same day, Hassan questioned new potential nominees for the board of the FTC, and asked if they understood the issues behind the loot box controversy, and whether or not the issue deserved attention from the FTC. All four nominees agreed that it was worthy of an investigation. While the ESRB is a self-regulatory body run by representatives in the gaming industry, the FTC is a government wing with vastly superior powers.

The ESRB’s response to Hassan’s letter noted that the board would “continue to make enhancements to ensure parents continue to be well-informed”, adding that the ESRB would “continue to provide information about additional tools, including parental control guides, that help parents set spending and time limits and block potentially inappropriate games based on the ESRB-assigned age rating”.

But it’s important to note that both the ESRB and the Entertainment Software Association (ESA) have said in the past that loot box mechanisms weren’t a problem. The ESRB has indicated in the past that it didn’t think the issue warranted an update to their ratings system, and the ESA says that loot boxes are “a voluntary feature” that may enhance the in-game experience.

It’s also worth noting that the ESRB was formed in response to a 1994 congressional hearing in the US over violent video games and their impact on consumers. Unwilling to let government manage them directly, game publishers and studios formed the ESRB to self-regulate the industry, and it’s since been brought before the FTC twice on matters relating to the content in video games.

Sweden

Two months after Belgium decided to start an investigation into the loot box controversy, Sweden’s government has now pledged to draw up legislation to regulate the practice. This is significant because, as a member of the EU, Sweden could take local laws and submit them to the EU for consideration, with the goal of getting the EU to adopt the same laws across continental Europe.

Sweden’s minister of civil affairs Ardalan Shekarabi has stated that government is “working to regain control of the gaming market as soon as possible and ensure that Swedish consumer protection rules apply to all actors involved in gaming”. Shekarabi added that he “would like to start by asking our authorities and experts to look at this. Obviously, there are many people stuck in a game abuse and also end up in this kind of gambling and lose money on it”.

Sweden’s laws currently consider games of chance to be different to actual gambling because the items you win from them have no real-world value. Shekarabi’s goal is to instead reclassify loot boxes as a form of a lottery.

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