With a number of jurisdictions increasing regulatory scrutiny of in-game purchases, the Irish Department of Justice has indicated that the planned changes to Irish gambling legislation will not including regulating video game transactions or in-game purchases.
Not Just a Game
When, in late October 2018, the video game Red Dead Redemption 2 was released it made over €636m in its first three days of sale. Although the figure makes the game the largest media and entertainment launch of 2018, the record for largest of all time is still held by Grand Theft Auto V, made by the same studio, which grossed nearly €1 billion in its opening weekend before going on to become the highest grossing entertainment product of all time.
However while sales of games themselves have increased substantially, in-game transactions of downloadable content that players can unlock and access by paying in actual currency have also emerged as a billion euro industry. Generally speaking, while many virtual items are strictly cosmetic, not giving the player any advantage when it comes to gameplay, they are often sought out as a way to customise characters. For instance, in early November 2018 the National Football League in the United States announced a partnership with the video game Fortnite to allow the game’s 125 million players the opportunity to pay $15 to wear jerseys and team outfits for a limited time. Similarly the CEO of Take-Two, the company behind both the Grand Theft Auto and Red Dead Redemption franchises, confirmed in November 2017 that going forward the company will “aim to have recurrent consumer spending opportunities for every title that we put out” while Activision Blizzard, the company behind games such as Overwatch, Destiny and Call of Duty, posted profits of €6.28bn they also revealed that over €3.5bn of that came from in-game transactions alone.
Are Loot Boxes Gambling?
With in-game transactions now a dependable and popular revenue stream for the video game market, questions have emerged as to the extent such functionalities need to be regulated. In particular there has been a focus on in-game purchases of ‘loot boxes’, which are virtual treasure chests which players can buy with real currency without knowing what virtual items they will actually receive (the contents only being revealed once the loot box is paid for and opened). Fundamentally the focus on loot-boxes has been whether such practices can be considered gambling as they are potentially a game of chance for items of value, however limited.
Political and Legal Intervention
In April 2018, following an investigation by the country’s Gaming Commission, Koen Geens, Belgium’s Minister for Justice, announced that such loot boxes could be considered gambling with Belgian Law. “A dialogue with the sector is necessary” Geens said “it is often children who come into contact with such systems and we can not allow that”. Similarly in October 2017, Tracey Crouch, the UK Minister for Sport, said that a gambling licence would be required for any situation where “items obtained in a computer game can be traded or exchanged outside the game platform and where facilities for gambling with such items are offered to consumers located in Britain”. Conversely however the French gambling authority, following their own study into loot boxes in early 2018, stopped short of labelling them as gambling due to their perceived lack of real-life value of the items, but did call for a co-ordinated action plan to be drawn up to deal with the issue moving forward. Meanwhile the Entertainment Software Rating Board in the United States also rejected the idea as they reasoned players always received some form of reward no matter the outcome (and therefore couldn’t ‘lose’ in the traditional sense).
The lack of co-ordination between jurisdictions has created confusion however. Following the declaration that loot box systems were illegal under Belgium’s gambling laws, while some companies such as Blizzard, Valve and 2k Games used geo-location blocking technology to halt such in-game transactions for people in Belgium, Electronic Arts, the makers of the FIFA series (having previously said they did not consider loot-boxes gambling) refused to remove the functionality from FIFA 19 before it’s September 2018 launch. As a result, the company is now reportedly being investigated by the Belgian public prosecutor’s office following a referral from the Belgian Gaming Commission and may face court proceedings in 2019.
The Irish Approach
In Ireland the situation is less clear. In February 2018, as part of a major overhaul of gambling law that includes the creation of a new regulatory authority, the Gambling Control Bill 2018 was commenced in Dáil Éireann. At the time, Charles Flanagan, the Minister for Justice and Equality, when asked as to whether in-game transactions around loot boxes would be covered by the proposed new law, said “there is no element of gambling involved in such purchases. These purchases do not involve placing a bet or the taking of risk either on a party to party or exchange basis”. Echoing this position in late September 2018 was David Stanton, Minister for Equality, Immigration, and Integration, who addressed the Irish senate following Ireland signing a declaration from the Gaming Regulators European Forum. “If a game offers in-game purchases – be they loot boxes, skins, etc. – which are promoted to gamers as increasing their chances of success, such purchases are essentially a commercial or e-commerce activity” Staunton said, “this activity would fall within normal consumer law and does not have a role to regulate game developers on how their games work, nor in the offering of in-game purchases”. Interestingly the Gaming Regulators European Forum declaration itself that Staunton was referring to, while not having legal effect, had acknowledged loot boxes constituted a “blurring of lines between gaming and gambling”.
Pressing Start on Regulation
Although the statutory landscape is still at the ‘loading screen’ stage, it’s clear that as video game technology develops around in-game transactions, companies will be coming under increased regulatory scrutiny, particularly when it comes to loot boxes. What remains to be determined however is the degree of co-ordination that will be achieved between jurisdictions given many companies (and some legislatures) have indicated they do not consider the practices gambling (and therefore are shying away from a self-regulating model). When speaking in 2017 just as the initial investigations kicked off in Belgium, Geens referred to wanting to see a “European response” to in-game purchases in the future and the 2018 Gambling Regulators European Forum, which includes representatives from the Gambling Policy Division of Ireland’s department of Justice and Equality, recently called for “video game companies to work with their gambling regulators and take action now to address concerns.” Although in Ireland while the Gambling Control Bill is currently still before Dáil Éireann and the government statements indicate that the legislative overhaul of gambling in Ireland will not immediately be focusing on in-game transactions, it nevertheless appears to only be a matter of time before regulators ‘press start’ on a more comprehensive approach.
Contributed by: Alex Towers