Precious and Worthless: A Comparative Perspective on Loot Boxes and Gambling

Minnesota Journal of Law, Science & Technology Minnesota Journal of Law, Science & Technology

Volume 20 Issue 1 Article 5

3-7-2019

Precious and Worthless: A Comparative Perspective on Loot Precious and Worthless: A Comparative Perspective on Loot

Boxes and Gambling Boxes and Gambling

Andrew Vahid Moshirnia

Chicago-Kent College of Law

Follow this and additional works at: https://scholarship.law.umn.edu/mjlst

Part of the Entertainment, Arts, and Sports Law Commons, Gaming Law Commons, and the Science

and Technology Law Commons

Recommended Citation Recommended Citation

Andrew V. Moshirnia,

Precious and Worthless: A Comparative Perspective on Loot Boxes and Gambling

20 MINN. J.L. SCI. & TECH. 77 (2018).

Available at: https://scholarship.law.umn.edu/mjlst/vol20/iss1/5

The Minnesota Journal of Law, Science & Technology

is published by the

University of Minnesota Libraries Publishing.

Precious and Worthless: A Comparative

Perspective on Loot Boxes and Gambling

Andrew V. Moshirnia*

Abstract

Odds-based microtransactions in video games, or “loot

boxes,” offer users a chance to get special game items for actual

money (i.e., legal tender), as opposed to acquiring this “loot”

through in-game achievements. This feature provides revenue

for game developers and allows users to acquire items that

would otherwise require hours of gameplay. But loot boxes

threaten to degrade game design and foist addictive mechanics

on vulnerable users. Loot-box purchasers, much like

pathological gamblers placing a wager, report an initial rush

when opening a loot box and then a wave of regret and shame.

This problem is especially acute in underage consumers who

spend thousands of dollars to gain a desired item. Governments

are aware of this disturbing trend and are attempting to

regulate or outright ban the practice.

Present attempts to constrain game developers are

predicated on a finding that selling random virtual items is in

fact gambling. That approach is flawed. Loot boxes are unlikely

to meet the legal requirements of gambling on account of two

factors: users are guaranteed to receive at least one item and all

items offered have no tangible value. Moreover, prohibiting the

practice may encourage political actors to further censor video

games, a popular scapegoat following school shootings and other

tragic events. While loot boxes may not constitute gambling, the

troublingly opaque nature of loot box odds warrants

* Andrew V. Moshirnia received his J.D. from Harvard Law School,

where he served as Forum Chair of the Harvard Law Review and received his

Ph.D. from the University of Kansas. He is currently a Senior Lecturer at

Monash Business School, Monash University. He would like to thank Ashley

Chung, Aaron Dozeman, and Rachel Capata for their valuable assistance.

78 MINN. J.L. SCI. & TECH. [Vol. 20:

intervention. Accordingly, this Essay offers a novel dual-pronged

transparency-based solution that avoids an outright ban on the

activity. First, the odds of obtaining specific loot should be

disclosed to consumers. Second, regulators should require game

developers to rate such games as appropriate for adults, not

children.

Introduction……………………………………………………….. 79

I. Loot Boxes—Background………………………………... 82

A. Game Design and Motivating Forces…………….. 83

B. Loot Boxes as Skinner Boxes………………………. 85

C. Gamer Response……………………………………... 90

D. Industry Response and Case Studies…………….. 91

1. “Pay-To-Win” Comes to Full-Price Games…... 91

2. Electronic Arts …………………………………... 92

3. Apple………………………………………………. 94

4. The ESA ………………………………………….. 95

5. ESRB ……………………………………………… 96

II. State Actor Response…………………………………….. 97

A. U.S. State Legislation………………………………. 99

1. Hawaii ……………………………………………. 99

2. Washington ……………………………………… 101

B. U.S. Federal Government………………………….. 102

C. China…………………………………………………... 103

D. Japan………............................................................ 103

E. Belgium and Germany……………………………… 104

F. New Zealand …………………………………………. 105

G. Australia………………………………………………. 105

H. UK……………………………………………………… 106

III. Proposal: Transparency Through Granular Odds

Disclosure and Rating Labeling………………………... 107

A. Prong 1: Odds for All Items Offered……………... 107

B. Prong 2: Pressure ESRB to Label Loot Box

Content as Mature…………………………………... 108

C. Advantages of Proposal…………………………….. 109

1. Increasing Consumer Information……………. 109

2. Educational Opportunity………………………. 110

3. Avoiding an Outright Ban……………………… 111

IV. Criticisms and Areas for Further Study……………… 112

V. Conclusion…………………………………………………. 113

2019] PRECIOUS AND WORTHLESS 79

INTRODUCTION

Video games have often revolved around the collection of

seemingly randomly appearing treasure. Slay the dragon and it

may drop a useful item, or “loot.” In these gaming ecosystems,

players often slay reappearing enemies (“grinding” or “farming”)

in the hope that they will stumble upon an upgraded weapon or

piece of armor.

However, developers have created shortcuts to

avoid the tedium of grinding by allowing game players to

purchase the best items with real money.

In-game purchases,

so-called “microtransactions,” represent a vital revenue stream

to game publishers in the face of stagnant game pricing.

Yet,

player frustration with microtransactions is well documented.

In-game items held behind a paywall may disturb competitive

balance, creating a “pay-to-win” game.

Moreover, game

. See Patrick Klepek, I Hate Grinding, But I Can’t Stop in ‘Monster

Hunter: World’, VICE WAYPOINT (Feb. 15, 2018, 10:00 AM),

https://waypoint.vice.com/en_us/article/d3wywa/i-hate-grinding-but-i-cant-

stop-in-monster-hunter-world (describing grinding as addictive and meaningful

and noting “I’m here for the loot drops, buddy!”); TheHotterPotato, It Takes 40

Hours to Unlock a Hero. Spreadsheet and Galactic Assault Statistics, REDDIT

(Nov. 10, 2017, 10:09:13 PM),

https://www.reddit.com/r/StarWarsBattlefront/comments/7c6bjm/it_takes_40_

hours_to_unlock_a_hero_spreadsheet/ (documenting a spreadsheet of how long

grinding takes to unlock rewards in a game).

. See generally In-game Purchases, INTERACTIVE SOFTWARE FED’N OF

EUR., https://www.isfe.eu/objectives/public-policy/in-game-purchases (last

visited Jan. 16, 2019).

. See Prateek Agarwal, Economics of Microtransactions in Video Games,

INTELLIGENT ECONOMIST (Dec. 20, 2017),

https://www.intelligenteconomist.com/economics-of-microtransactions/

(explaining that microtransaction is a monetary solution for developers to “the

hesitancy from consumers to spend money in the App Store”).

. See Trevor Ruben, Why Microtransaction and Loot Boxes Are

Destroying Games, VARIETY (Oct. 13, 2017),

https://variety.com/2017/gaming/news/loot-boxes-destroying-games-

1203048432/ (“Microtransactions hurt the entire industry by bending to

breakage the one thing that every market needs: honest, comparative judgment

between products.”).

. See Carter Dotson, Why Pay-to-Win is a Flawed Concept,

TOUCHARCADE (Feb. 25, 2016), http://toucharcade.com/2016/02/25/why-pay-to-

win-is-a-flawed-concept-the-carter-crater/ (outlining the pay-to-win concept

and characterizing most modern games with the mechanic as “pay-to-compete”).

80 MINN. J.L. SCI. & TECH. [Vol. 20:

designers may deliberately create tedious gameplay mechanics

in order to incentivize shortcut purchases.

Direct sales of in-game items are not the only way to

accomplish after-sale revenue from in-game play. Adding

another level of gaming and chance, developers may sell “loot

boxes,” which contain a smattering of random items.

Users

purchase the loot box, which often guarantees a certain level of

rare items, hoping to gain a desired item, game feature, or player

costume.

Despite the poor reception of the mechanic from

consumers,

loot boxes continue to proliferate, in part because

they generate large amounts of profit from a comparatively

small user base.

Users, usually below the age of eighteen,

. See Pete Davison, Dungeon Keeper: A Symptom of a Wider Problem, US

GAMER (Feb. 3, 2014), https://www.usgamer.net/articles/dungeon-keeper-a-

symptom-of-a-wider-problem (noting unfortunate game design of Dungeon

Keeper, a game widely ridiculed for its debasement of the original Dungeon

Keeper game and inclusion of microtransactions) ; see also Agarwal, supra note

3 (“Game studios are now purposefully designing bad systems and mechanics,

hoping that people will be willing to pay to get past the poorly-made parts of the

service.”).

. See Jason M. Bailey, A Video Game ‘Loot Box’ Offers Coveted Rewards,

but Is It Gambling?, N.Y. TIMES (Apr. 24, 2018),

https://www.nytimes.com/2018/04/24/business/loot-boxes-video-games.html

(describing that a player spent $300 on Overwatch loot boxes after playing the

game for more than 800 hours and that another player spent $900 on items that

are only available for a limited time).

. Virtual items that change the appearance of in-game avatars, weapons,

and equipment are commonly referred to as skins. See Desirée Martinelli, Skin

Gambling: Have We Found the Millennial Goldmine or Imminent Trouble?, 21

GAMING L. R. 557, 558 (2017).

. See Joel Hruska, Most Gamers Hate Buying Loot Boxes, So Why Are

Games Using Them?, EXTREMETECH (Oct. 13, 2017, 1:02 PM),

https://www.extremetech.com/gaming/257387-gamers-hate-buying-loot-boxes-

games-using.

. See Agarwal, supra note 3 (finding that only 0.15 percent of mobile

gamers account for 50 percent of all in-game revenue); Paul Tassi, In Pursuit of

‘Hearthstone’ Whales, Blizzard Will Drain the Ocean, FORBES (Nov. 10, 2017),

https://www.forbes.com/sites/insertcoin/2017/11/10/in-pursuit-of-hearthstone-

whales-blizzard-will-drain-the-ocean/#2088aba13b5a (noting the extreme

lengths developers will go to recruit whales).

. The targeting of children for in-app purchases is a well-documented

practice. See, e.g., Marisa Meyer et al., Advertising in Young Children’s Apps,

40 J. DEVELOPMENTAL & BEHAV. PEDIATRICS 32 (2019).

2019] PRECIOUS AND WORTHLESS 81

have described themselves as addicted to loot boxes, spending

thousands of dollars in the pursuit of better items.

The legal difficulty of this game design arises from the fact

that while loot boxes seem to offer gambling mechanics to

vulnerable underage users, the practice of selling loot boxes does

. See Kellen Beck, After Spending $10,000 on Microtransactions, a

Gambling Addicted Teen Speaks Out, MASHABLE (Dec. 1, 2017),

https://mashable.com/2017/12/01/19-gaming-gambling-addict/#u5qDpBsONkq

(reporting that receipts from 2015 and 2016 showed a 19-year old “spent around

$10,000 on video game content, ranging from $0.99 to $100 on games like Clash

of Kings, Counter-Strike: Global Offensive, Hobbit: Kingdom of Middle-earth,

Pokémon Go, and more”); Ellen McGrody, For Many Players, Lootboxes Are a

Crisis That’s Already Here, VICE WAYPOINT (Jan. 30, 2018, 1:08 PM),

https://waypoint.vice.com/en_us/article/kznmwa/for-many-players-lootboxes-

are-a-crisis-thats-already-here (recounting stories of addicts, including

individuals who considered suicide: “I ended up calling a suicide hotline that

night. I felt distraught, pathetic, that I had just blown so much money on

nothing but virtual jewels. I felt like I deserved to die for letting it get so bad

and for wasting this much money.”); see also Jamal4137, Personal Experiences

With Loot Box Addiction, REDDIT (Nov. 15, 2017, 1:50:54 PM),

https://www.reddit.com/r/truegaming/comments/7d6oif/personal_experiences_

with_loot_box_addiction/ (prompting multiple users to confess to spending

thousands on microtransactions, with one user noting “[t]hankfully this loot box

craze started well after I learned my lesson about the dangers of turning real

life currency into in-game items”); Nothing024, A Whale of a Tale, REDDIT (Dec.

13, 2017, 3:14:31 PM),

https://www.reddit.com/r/FFBraveExvius/comments/7jmezv/a_whale_of_a_tale

(“I became a gambling addict over a game where there is no return, no reward,

for spending my money. I Flushed $16,000 down the toilet over a game.”).

82 MINN. J.L. SCI. & TECH. [Vol. 20:

not squarely fit within today’s gambling laws.

Although users

can gain virtual “loot,” they do not gain cash or tangible prizes.

This essay is the first to document the current loot-box trend

in video games and suggest a transparency-based solution using

existing infrastructure. Part I provides specific case studies of

the current loot-box trend. Part II notes the domestic and

international responses to that trend. Part III proposes a

domestic, transparency-focused solution based on odds

disclosure and the existing rating system that the

Entertainment Software Rating Board (ESRB) adopted in a bid

to evade greater regulation. Part IV highlights difficulties

attendant to an industry-based solution and areas for further

study.

I. LOOT BOXES—BACKGROUND

While loot boxes have existed for many years, the general

public may be unaware of the mechanisms and prevalence of this

gameplay practice.

This section provides an overview of the

market forces that allowed the practice to spread, the

psychological and market research attendant to various

gambling-like loot box mechanics, the reactions of the game-

. Existing gaming laws are a poor fit for loot boxes in that game designers

may argue that won items are “virtual items” without any tangible worth. See

also MODEL ANTI-GAMBLING ACT § 2 cmt. at 12 (NAT’L CONFERENCE OF

COMM’RS ON UNIF. STATE LAWS 1952), http://www.gambling-law-us.com/State-

Laws/Anti-Gambling_Act.pdf (explaining that the word winning always implies

a game or wager, and is intended to include the direct favorable outcome of a

play or bet). Compare Mason v. Mach. Zone, Inc., 851 F.3d 315, 319 (4th Cir.

2017) (holding that virtual items were not money and were not redeemable for

money), and Soto v. Sky Union, 159 F. Supp. 3d 871 (N.D. Ill. 2016) (agreeing

with game developers that virtual skins do not constitute money or another

thing of value under various state anti-gambling statutes), with Phillips v.

Double Down Interactive, LLC, 173 F. Supp. 3d 731, 739–40 (N.D. Ill. 2016)

(holding that game developers were not winners because they did not directly

participate in games and thus the plaintiffs cannot recover their losses). But cf.

Kater v. Churchill Downs, Inc., 886 F.3d 784, 787 (9th Cir. 2018) (holding that

virtual chips used to play games and rewarded for winning games in virtual

casino qualified as a “thing of value” under Washington law).

. See Martinelli, supra note 8, at 564 (finding that “the prizes and tokens

in the games did not have any tangible worth, leading to the conclusion that

‘virtual gaming operators with virtual prizes are legal’”).

. See Bailey, supra note 7 (“Loot boxes have been prevalent for at least a

decade, mostly in free games, but the Battlefront controversy was ‘the first real

big punch in the gut.’”).

2019] PRECIOUS AND WORTHLESS 83

playing public, industry case studies, and the response of major

industry actors.

A. GAME DESIGN AND MOTIVATING FORCES

The rise of microtransactions in full price games has been

ascribed to the development of microtransactions in mobile

games,

as well as to the stagnant pricing in the video game

market generally.

Freemium gaming, in which users may download free-to-

play games that offer other purchasable content, has been

primarily focused on mobile devices.

Mobile app games

generate $34.8 billion USD worldwide.

While a full review of

the development of freemium games is outside the scope of this

essay, it is important to realize that the practice is ubiquitous.

At the time of this writing, 149 of the top 150 grossing iPhone

games are free to install (with Minecraft, at the fifty-fourth

position, representing the sole exception).

The important figure

here is “install-to-purchase” percentage which measures the

percentage of users who actually spend after installing the

game.

Industry publications point to rates that vary from a

high of 12.02 percent for card game players to a low of 3.52

percent for action adventure game players.

As the great majority of users will not be in-app purchasers,

the goal is to recruit “whales”—the high-spending minority of

. See Mike Williams, The Harsh History of Gaming Microtransactions:

From Horse Armor to Loot Boxes, US GAMER (Oct. 11, 2017),

https://www.usgamer.net/articles/the-history-of-gaming-microtransactions-

from-horse-armor-to-loot-boxes (“Major developers and publishers have adopted

the [loot box] model before and since [the release and success of Overwatch in

2016].”).

. See Agarwal, supra note 3, and accompanying text.

. See Will Fulton, Freemium Game Developer Reveals the Dirty Truths

Behind In-App Purchases, DIGITAL TRENDS (Sept. 18, 2015, 4:10 PM),

https://www.digitaltrends.com/gaming/freemium-games-exposed/.

. See LIFTOFF, MOBILE GAMING APPS REPORT 4 (2017),

https://cdn2.hubspot.net/hubfs/434414/Reports/2017%20Gaming%20Report/Lif

toff_Mobile_Gaming_Apps_Report.pdf.

. See Top Grossing iPhone—Games, THINK GAMING,

https://thinkgaming.com/app-sales-data/?page=1 (last visited Nov. 12, 2018).

. See LIFTOFF, supra note 19, at 5 (highlighting that the overall install-

to-purchase rate for gaming apps is higher than average when compared to

other app categories).

. See id. at 19.

84 MINN. J.L. SCI. & TECH. [Vol. 20:

users that generate the bulk of profit in these games.

The

Electronic Entertainment Design and Research group estimates

that heavy users (defined as “[w]hale[s who] spent over $100 in

the past year”) in the North American market make up only 7

percent of mobile game players but represent 55 percent of

revenue.

As one developer put it, “[e]ach time, every new

project became less and less about how we can do cool things,

and more about how we can track and target users to get the

most whales possible, boost chart position and retain users to

shove as many ads on them as possible.”

Though the cost of development of AAA titles for both

consoles and personal computers has skyrocketed,

the

maximum sticker price for a game remains approximately $60

USD.

Video game budgets have grown from around two million

dollars in 1995 to more than fifty million dollars in 2014.

. See Fulton, supra note 18.

. EEDAR, DECONSTRUCTING MOBILE & TABLET GAMING 19 (2016),

http://www.eedar.com/sites/default/files/EEDAR%20-

Mobile%20Report%202016%20-%20Whitepaper.pdf (“Despite their small

player base (which has grown somewhat—from 5% in 2015—but remains low

at 7%), Heavy Payers continue to contribute over half of the mobile gaming

revenue (55%).”).

. Eli Hodapp, “We Own You”—Confessions of an Anonymous Free to Play

Producer, TOUCHARCADE (Sept. 16, 2015), http://toucharcade.com/2015/09/16/

we-own-you-confessions-of-a-free-to-play-producer/.

. See Kshosfy, As Mobile Games Rise, Studios Fear for Blockbusters’

Future, WIRED (Feb. 15, 2011), https://www.wired.com/2011/02/dice-

blockbuster-games/.

. See Erik Kain, Video Games Should Be More Expensive, FORBES (Apr.

24, 2015), https://www.forbes.com/sites/erikkain/2015/04/24/video-games-

should-be-more-expensive/#de30e306eb9c; see also Kyle Orland & Jonathan

Gitlin, Why Retail Console Games Have Never Been Cheaper, Historically, ARS

TECHNICA (June 30, 2013), https://arstechnica.com/gaming/2013/06/why-retail-

console-games-have-never-been-cheaper-historically/ (“The real price of a new,

mass market, disc-based console game has . . . topped out around $60 in today’s

dollars . . . .”).

. See Superannuation, How Much Does It Cost To Make A Big Video

Game?, KOTAKU (Jan. 15, 2014) https://kotaku.com/how-much-does-it-cost-to-

make-a-big-video-game-1501413649 (finding that the average budget of a AAA

game for “the generation of games following [the] Xbox 360 and Playstation 3

would be $60 million”); see also Kyle Orland, DICE 2011: Mark Cerny on the

Death of the $50 Million Game, GAMASUTRA (Feb. 10, 2011),

https://www.gamasutra.com/view/news/123416/DICE_2011_Mark_Cerny_On_

The_Death_Of_The_50_Million_Game.php (finding that some games will have

budgets exceeding $50 million).

2019] PRECIOUS AND WORTHLESS 85

Microtransactions, therefore, offer another way for developers to

make up the difference, although commentators argue that an

increase in baseline game prices will not disrupt profitable loot

box mechanics.

B. LOOT BOXES AS SKINNER BOXES—PSYCHOLOGICAL

RESEARCH

The law has long recognized the particular vulnerability of

children to gambling,

due in part to a lower ability to make

reasoned decisions and poor impulse control.

Studies on

adolescent gambling estimate that approximately 4 percent to 8

percent of adolescents are pathological gamblers.

In contrast,

the rate of pathological gambling in adults hovers around 1

percent.

Treatment for gambling addiction is typically cognitive-

behavioral therapy.

Pathological gamblers tend to engage in

numerous fallacies when gambling, including the notion that

they are “due” after a series of losses, that “near-misses” indicate

that success is imminent, and that various superstitions will

. See Paul Tassi, Why $80 to $100 Video Games Aren’t the Answer to Loot

Boxes, FORBES (Nov. 28, 2017), https://www.forbes.com/sites/insertcoin/2017/

11/28/why-80-100-video-games-arent-the-answer-to-loot-boxes/#83ca5cf4d829

(“[T]here’s little guarantee that even if prices did go up, that benevolent

publishers would all get together and banish microtransactions from games.”).

. See generally NAT’L RESEARCH COUNCIL, PATHOLOGICAL GAMBLING: A

CRITICAL REVIEW, 283–84 (1999) (listing the age restrictions on gambling by

state).

. See Anne Gaboury & Robert Ladouceur, Evaluation of a Prevention

Program for Pathological Gambling Among Adolescents. 14 J. PRIMARY

PREVENTION 21, 22 (1993) (discussing adolescent gamblers as having a “failure

to resist impulses to gamble”).

. See id. (discussing data showing that 5.7 percent of adolescents are

pathological gamblers); see also Lucia Sideli et al., Pathological Gambling in

Adolescence: A Narrative Review, 6 MEDITERRANEAN J. CLINICAL PSYCHOL. 3

(2018).

. See Christine Reilly, The Prevalence of Gambling Disorders in the

United States: Three Decades of Evidence, in 3 GAMBLING & THE PUB. HEALTH,

PART 1 at 3–6 (2009).

. See Timothy W. Fong, More Adolescents Are Gambling—with

Addiction, 5 CURRENT PSYCHIATRY 59, 64 (2006) (“Cognitive behavioral

therapy… can be successful for highly motivated gamblers . . . .”); Timothy W.

Fong, Pathological Gambling in Adolescents: No Longer Child’s Play, 29

ADOLESCENT PSYCHIATRY 119, 113 (2006) (“The most researched form of

individual therapy for pathological gambling is cognitive-behavioral therapy.”).

86 MINN. J.L. SCI. & TECH. [Vol. 20:

bring about success.

Therapy is designed to help gamblers

recognize these thoughts and address them.

In addition,

mathematics courses may help students make better-informed

decisions about gambling.

The ill effects of pathological gambling may be compounded

by compulsive game playing. The prevalence of unhealthy

gaming has led the World Health Organization to draft a

proposed disorder for inclusion in the International

Classification of Diseases (ICD) “gaming disorder,”

with a

related entry for “hazardous gaming”:

Hazardous gaming refers to a pattern of gaming, either online or offline

that appreciably increases the risk of harmful physical or mental

health consequences to the individual or to others around this

individual. The increased risk may be from the frequency of gaming,

from the amount of time spent on these activities, from the neglect of

other activities and priorities, from risky behaviours associated with

gaming or its context, from the adverse consequences of gaming, or

from the combination of these. The pattern of gaming is often persists

[sic] in spite of awareness of increased risk of harm to the individual or

to others.

While the ICD entries on “hazardous gaming” and “gaming

disorder” are not authored specifically to address loot boxes,

their inclusion may provide additional support for state actors

attempting to change the current loot box regime.

This avenue

. See generally Carrie A. Leonard, Robert J Williams & John Vokey,

Gambling Fallacies: What are They and How are They Best Measured, 6 J.

ADDICTION RES. & THERAPY 256 (2015); see also NAT’L RESEARCH COUNCIL,

supra note 30, at 241 (“People generally have a strong need to impose order or

meaning on random processes . . . contribut[ing] to the gambler’s fallacy . . . .”).

. See Fong, More Adolescents Are Gambling—with Addiction, supra note

34, at 133 (“CBT for pathological gamblers has been shown effective in reducing

the number of cognitive distortions and subsequent gambling behaviors.”).

. See Richard A Labrie, Facing the Odds: The Mathematics of Gambling

and Other Risks, CAMBRIDGE HEALTH ALLIANCE: DIVISION ON ADDICTION,

http://www.divisiononaddiction.org/curr/facing_the_odds.htm (last updated

Feb. 24, 2015) (arguing that increasing interest in mathematics can reduce the

likelihood of addictive behaviors among adolescents).

. WORLD HEALTH ORG., INTERNATIONAL STATISTICAL CLASSIFICATION

OF DISEASES AND RELATED HEALTH PROBLEMS 6C51 (11th ed. 2018).

. Id. at QE22.

. Indeed, U.S. Senator Maggie Hassan cited the World Health

Organization’s “gaming disorder” classification in arguing that the ESRB

should reexamine the effect of loot boxes on children. See Paul Tassi, US

Senator Confronts The ESRB Over Loot Box Classification and Addiction,

FORBES (Feb. 15, 2018), https://www.forbes.com/sites/insertcoin/2018/02/15/us-

2019] PRECIOUS AND WORTHLESS 87

of attack may be especially effective because loot box developers

are specifically targeting and manipulating cognitive behaviors

of vulnerable purchasers who may already demonstrate an

unhealthy relationship to gaming.

In psychological terms, loot boxes can be thought of as

“Skinner boxes.” B.F. Skinner, a famous behaviorist concerned

with operant conditioning, noted that the doling out of rewards

on a random schedule attendant to an action recruited repeated

attempts of that action.

The uncertain but tantalizingly close

reward enlists constant attempts.

Developers employ a number of techniques to increase the

allure of loot boxes. Several games use prize-wheel spinners,

triggering near-miss reactions as the desired item was just out

of reach.

This is not unlike a gambler being triggered by a slot

machine that almost hit the jackpot.

Near-misses also

encourage gamblers to believe they are due for a big win,

part by firing reinforcement centers in the brain that make the

failure feel a little like success.

Music and graphic cues

senator-confronts-the-esrb-over-loot-box-classification-and-

addiction/#17f257d55a97.

. See Heather Alexandra, Loot Boxes Are Designed to Exploit Us, KOTAKU

AU (Oct. 16, 2017, 9:00 AM), https://www.kotaku.com.au/2017/10/loot-boxes-

are-designed-to-exploit-us/ (“[T]he only reason the loot box exists is to prey on

the economically vulnerable.”).

. B.F. SKINNER, SCIENCE AND HUMAN BEHAVIOR 65 (1953) (“In operant

conditioning we ‘strengthen’ [a class of responses] in the sense of making a

response more probable or, in actual fact, more frequent.”).

. See id. at 100 (“If we reinforce behavior at regular intervals, an

organism such as a rat or pigeon will adjust with a nearly constant rate of

responding.”).

. See Peter Bright, Op-Ed: Game Companies Need to Cut the Crap—Loot

Boxes Are Obviously Gambling, ARS TECHNICA (May 28, 2018, 9:00 AM),

https://arstechnica.com/gaming/2018/05/op-ed-game-companies-need-to-cut-

the-crap-loot-boxes-are-obviously-gambling/ (discussing the use of near misses

and spinning wheels in loot box animations to encourage further spending).

. See Luke Clark et al., Gambling Near-Misses Enhance Motivation to

Gamble and Recruit Win-Related Brain Circuitry, 61 NEURON 481, 484 (2009)

(describing experiments comparing “two types of nonwin outcome: near-misses,

where the slot machine reel stopped one position from the chosen icon, and full-

misses, where the outcome was not proximal to a win”).

. See Denis Côté et al., Near Wins Prolong Gambling on a Video Lottery

Terminal, 19 J. GAMBLING STUD. 433, 437 (2003) (“[N]ear wins can increase

persistence to gamble.”).

. See Clark, supra note 45, at 486–87 (noting that near-misses may

trigger the “mesolimbic reward system” and that “[g]ambling near-misses were

88 MINN. J.L. SCI. & TECH. [Vol. 20:

heighten tension and create a ritual that entices repeat

purchases.

“When you start opening a loot box, we want to

build anticipation,” according to an Overwatch developer.

“We

do this in a lot of ways—animations, camera work, spinning

plates, and sounds. We even build a little anticipation with the

glow that emits from a loot box’s cracks before you open it.”

The

ritual also provides game players with the opportunity to engage

in superstition, ascribing meaning to random deviations in

opening animations or combinations.

Loot box purchasers, much like a pathological gambler

placing a wager, report an initial rush when opening a loot box

and then a wave of regret and shame.

This aftershock can be

so extreme as to trigger self-harm.

Users may seek out this

stimulus by proxy, watching videos of other users unbox bulk

purchases. Indeed, compilations of loot box opening are

frequently posted on YouTube,

with some videos receiving

associated with significant recruitment of brain win-related circuitry and acted

to increase the desire to gamble when the subject had personal control over

selecting the gamble”).

. Examples of these animations may be viewed on YouTube. See, e.g.,

ScrewKiller, 7 Top Loot Box Game Opening Animation, YOUTUBE (Nov. 26,

2017), https://www.youtube.com/watch?v=P2D_v9a_GgM.

. Heather Alexandra, supra note 41 (quoting an anonymous Overwatch

developer).

. Id.

. See NAT’L RESEARCH COUNCIL, supra note 30, at 241 (“[M]any gamblers

also believe independent, random events are somehow connected.”).

. See McGrody, supra note 12. The author recounts stories from addicts,

noting that opening multiple loot boxes “had a feeling of a continuous

rush . . . like opening a bunch of Christmas presents” and that “the rush of

pulling [items from a loot box] is addicting” but that this rush was replaced by

shame. Another player said, “I realized what I had done, checked my bank

account and wanted to throw up.” It is worth comparing these narratives with

the Diagnostic and Statistical Manual of Mental Disorders symptoms for

Pathological Gambling which include a tolerance, resulting in taking “greater

risk . . . needed to continue to produce the desired level of excitement” and

attendant regret resulting in “repeated unsuccessful efforts to control, cut back,

or stop gambling.” AM. PSYCHIATRIC ASS’N, DIAGNOSTIC AND STATISTICAL

MANUAL OF MENTAL DISORDERS § 312.31, at 616 (5th ed. 2013).

. See McGrody, supra note 12 (“I ended up calling a suicide hotline that

night. I felt distraught, pathetic, that I had just blown so much money on

nothing but virtual jewels. I felt like I deserved to die for letting it get so bad

and for wasting this much money.”).

. A search of “loot box opening” on YouTube yields more than 182,000

results.

https://www.youtube.com/results?search_query=%22loot+box+opening%22.

2019] PRECIOUS AND WORTHLESS 89

millions of views.

Game companies are aware that a user who

watches others open loot boxes will be more likely to buy a loot

box. For example, Activision plans to actively reward players

who watch other players unbox loot through in-game

streaming.

In contrast to designers of other gambling systems, game

designers can shape not only the feedback mechanism but can

also manipulate other game playing experiences to incentivize

user purchases. A 2017 patent, “System and Method for Driving

Microtransactions in Multiplayer Video Games,” granted to the

game developer Activision sets out numerous purchase-

increasing avenues connected to multiplayer match-making.

These include:

 Creating an achievement gap: Systems can match a

junior player against a marquee player who has already

purchased elite weapons. “A junior player may wish to

emulate the marquee player by obtaining weapons or

other items used by the marquee player.”

 Pairing a user with a purchasing role-model: The

game may further refine the above-referenced

enticement by placing junior users in matches against

marquee users who have adopted the very strategy

preferred by the junior users:

[T]he junior player may wish to become an expert sniper in a game

(e.g., as determined from the player profile). The microtransaction

. See, e.g., Muselk, Overwatch: Unboxing 101 Halloween Loot Boxes!,

YOUTUBE (Oct. 11, 2016), https://www.youtube.com/watch?v=dyf_UbtfGOY

(showing 2.8 million views as of Nov. 8, 2018); Muselk, [Overwatch] Unboxing

201 Anniversary Lootboxes + Giveaway, YOUTUBE (May 23, 2017),

https://www.youtube.com/watch?v=Rou5wPuOOSI (showing 3.2 million views

as of Nov. 8, 2018). Overwatch is not the only game with such videos. See, e.g.,

MasterOv – Mobile & io Games, Fallout Shelter - OMG BEST GUN EVER! MY

FIRST LUNCH BOX OPENING! - Fallout Shelter IOS Gameplay, YOUTUBE

(June 30, 2015), https://www.youtube.com/watch?v=HkJNTexLyoE (showing

782,160 views as of Nov. 8, 2018).

. See Rachel Weber & Sam Loveridge, Why It’ll Pay to Hang Out in Call

of Duty WW2’s New Social Headquarters, GAMESRADAR (Aug. 24, 2017)

https://www.gamesradar.com/why-itll-pay-to-hang-out-in-call-of-duty-ww2s-

new-social-headquarters/ (“If you open your [loot box] and get something really

cool, there’s a chance people watching you open your [loot box] will also get

something cool.”).

. U.S. Patent No. 9,789,406 (filed May 14, 2015) (issued Oct. 17, 2017).

. Id. at col. 5, l. 37.

90 MINN. J.L. SCI. & TECH. [Vol. 20:

engine may match the junior player with a player that is a highly

skilled sniper in the game. In this manner, the junior player may

be encouraged to make game-related purchases such as a rifle or

other item used by the marquee player.

 Rewarding purchasers with immediate success:

Targeted match-making can also boost the satisfaction of

users immediately after their purchases by placing them

in matches where the newly purchased item is

particularly effective “giving the player an impression

that the particular weapon was a good purchase. This

may encourage the player to make future purchases to

achieve similar gameplay results.”

C. GAMER RESPONSE—TOLERABLE FOR COSMETIC ITEMS

While game players have bemoaned microtransactions,

particular ire is reserved for those transactions that provide a

competitive advantage. The criticism of “pay-to-win” games is

ferocious. For example, the inclusion of the mechanic allowing

users to buy additional basketball skills in NBA 2K18 resulted

in the lowest Metacritic user-rating in the series, 1.6 out of 10,

with users complaining that virtual currency was needed for

nearly every aspect of the game. One user memorably remarked

“[y]ou either have to spent [sic] lots of extra money or suffer

through hours of comically poor gameplay, in what they call the

road to 99. This is not the road to 99, this is the road to hell.”

Microtransactions for purely cosmetic changes or

collectibles, such as “skins” for characters, are far less

offensive.

For example, the loot boxes in Overwatch drop only

player costumes that have no effect on game play.

While users

. Id. at col. 24, l. 37.

. Id. at col. 6, l. 6.

. NBA 2k18, METACRITIC, http://www.metacritic.com/game/playstation-

4/nba-2k18 (last visited November 8, 2018).

. xmicta, User Review to NBA 2k18, METACRITIC: USER REVIEWS (Sept.

18, 2017), https://www.metacritic.com/game/playstation-4/nba-2k18/user-

reviews.

. See Paul Tassi, Activision is Doing Loot Boxes Right, EA is Doing Them

Horribly Wrong, FORBES (Nov. 14, 2017),

https://www.forbes.com/sites/insertcoin/2017/11/14/activision-is-doing-loot-

boxes-right-ea-is-doing-them-horribly-wrong/#18f693f33b24.

. See Daniel Tack, Blizzard’s Mike Morhaime Talks Loot Boxes,

Battle.net, Mobile, And More, GAME INFORMER (Nov. 7, 2017 4:19 PM),

http://www.gameinformer.com/b/features/archive/2017/11/07/blizzard-39-s-

2019] PRECIOUS AND WORTHLESS 91

may dislike this system, it is generally looked on more favorably

than perceived “pay-to-win” games.

D. INDUSTRY RESPONSE AND CASE STUDIES

1. “Pay-To-Win” Comes to Full-Price Games

2017 saw a rash of games with loot box microtransactions

that offered competitive advantages or were perceived as

necessary to complete the game.

These “pay-to-win” games

have precipitated greater discussion of loot boxes. While

previous pay-to-win titles involved free-to-play mobile games

such as Clash Royale and Fire Emblem Hero,

numerous full-

price games incorporated the mechanic in 2017. The first crop of

major releases incorporating this dynamic included Need for

Speed: Payback, Forza MotorSport 7, and Middle-earth: Shadow

mike-morhaime-talks-loot-boxes-battle-net-blizzcon-and-more.aspx

(differentiating Overwatch from games offering gameplay advantages in loot

boxes).

. See, e.g., Maxwell Jeffery, Why Star Wars Battlefront 2 Removed

Cosmetics from Loot Boxes, GAMERANT (Jan. 4, 2018),

https://gamerant.com/star-wars-battlefront-2-comestic-loot-box/ (“Overwatch

make[s] good use of the system by having the drops contain purely cosmetic

items so as to not impact the core gameplay experience. Star Wars Battlefront

2, on the other hand, uses loot boxes . . . that can give players an edge online.”);

Robert Workman, Anthem’s Loot Box System Will Only Involve Cosmetic Items,

Says Analyst, COMICBOOK (Jan. 3, 2018)

http://comicbook.com/gaming/2018/01/04/anthems-loot-box-system-bioware-

cosmetic-items/ (calling payments for loot boxes in Overwatch “ancillary”).

. See, e.g., Jason Schreier, Fall Loot Box Glut Leads to Widespread

Alarm, KOTAKU (Oct. 10, 2017 4:30 PM), https://kotaku.com/fall-loot-box-glut-

leads-to-widespread-alarm-1819328610 (noting at least three major games that

included loot boxes in recent versions); Sam Machkovech, Loot Boxes Have

Reached a New Low with Forza 7’s “Pay-to-Earn” Option, ARS TECHNICA (Sept.

29, 2017 6:00 AM), https://arstechnica.com/gaming/2017/09/loot-boxes-have-

reached-a-new-low-with-forza-7s-pay-to-earn-option/.

. See Jessica Famularo, ‘Fire Emblem Heroes’ Is a Gacha Game – Here’s

What That Means, INVERSE (Feb. 2, 2017),

https://www.inverse.com/article/27267-what-are-gacha-games-fire-emblem-

heroes; Andrew Reiner, Clash Royale and the Guilt of Pay-to-Win Gaming,

GAMEINFORMER (Mar. 22, 2016, 12:14 PM).

92 MINN. J.L. SCI. & TECH. [Vol. 20:

of War, among others.

These releases were harshly reviewed

for their inclusion of loot boxes.

2. Electronic Arts—Star Wars Battlefront 2 Full Price Debacle

Perhaps the most famous developer reaction to loot box

protests was that of Electronic Arts with full-price game Star

Wars Battlefront 2. The popular game entered public beta-

testing on October 6, 2017.

The game contained “star cards”

which provided stats boosts and abilities for use in multiplayer

play.

The best of these cards – “epics” – were obtainable only

through in-game loot boxes.

Upon release, it was unclear

whether these loot-boxes could be purchased with real money or

in-game currency.

This occasioned numerous complaints that

such a system was “pay-to-win.”

. See Hayden Dingman, How Loot Boxes Are Turning Full-Priced PC

Games into Pay-to-Win Games of Chance, PC WORLD (Oct. 10, 2017, 3:30 AM),

https://www.pcworld.com/article/3231668/gaming/loot-boxes-ruining-

gaming.html; Hayden Dingman, Need for Speed: Payback Review: Pouring Loot

Boxes on a Tire Fire, PC WORLD (Nov. 10, 2017, 7:26 AM),

https://www.pcworld.com/article/3236057/gaming/need-for-speed-payback-

review.html.

. See, e.g., AngryJoeShow, NFS: Payback Loot Boxes - Angy R4nt!,

YOUTUBE (Nov. 14, 2017), https://www.youtube.com/watch?v=wFAG2MLVjAY;

Pretty Good Gaming, Shadow of War Ending LOCKED Behind Loot Boxes or

HUGE GRIND!?, YOUTUBE (Oct. 9, 2017),

https://www.youtube.com/watch?v=el39hB8t37A.

. See Erik Kain, Everything You Need to Know About the ‘Star Wars:

Battlefront 2’ Beta, FORBES (Oct. 3, 2017, 11:45 AM),

https://www.forbes.com/sites/erikkain/2017/10/03/everything-you-need-to-

know-about-the-star-wars-battlefront-2-beta/#7b9617b977b7.

. See Star Cards and Crates Add New Progression Options, ELECTRONIC

ARTS, https://www.ea.com/games/starwars/battlefront/battlefront-2/news/star-

wars-battlefront-ii-star-cards-1 (last visited Nov. 7, 2018).

. See Hannah Dwan, The Loot Boxes in Star Wars Battlefront 2 Are

Changing Due to Player Feedback, THE TELEGRAPH: TECH. INTELLIGENCE (Nov.

1, 2017, 1:26 PM), https://www.telegraph.co.uk/gaming/news/loot-boxes-star-

wars-battlefront-2-changing-due-player-feedback/ (discussing the beta-version

use of loot boxes in Star Wars Battlefront 2).

. See Heather Alexandra, Star Wars Battlefront 2 Beta Shows EA has

Made Better Choices This Time, KOTAKU (Oct. 5, 2017, 10:00 AM),

https://www.kotaku.com.au/2017/10/the-star-wars-battlefront-ii-beta-shows-

ea-has-made-better-choices-this-time/.

. See, e.g., AngryJoeShow, Angry Rant – WTF?! At the Loot Crates in

Battlefront 2, YOUTUBE (Oct. 8, 2017),

https://www.youtube.com/watch?v=ne4CnyNW9O4; Jim Sterling, Star Wars

Battlefront 2: A Pay-To-Win Loot Box Bollock Hole, YOUTUBE (Oct. 12, 2017),

2019] PRECIOUS AND WORTHLESS 93

EA responded two days later, suggesting they would change

the system: “As a balance goal, we’re working towards having

the most powerful items in the game only earnable via in-game

achievements” as opposed to purchasable boxes.

However, EA

made clear that purchases might still be retained to allow an

alternative to grinding, noting that the company “will work to

make sure the system is balanced both for players who want to

earn everything, as well as for players who are short on time and

would like to move faster in their progress towards various

rewards.”

The company later confirmed that “Epic Star Cards,

the highest tier of Star Cards available at launch, have been

removed from Crates.”

The game went pre-release live on November 9, 2017.

suspected, the loot boxes were purchasable with real money or

with in-game currency earned by grinding.

The meager

amount of in-game currency earned meant that consumers

would need to grind for days to restore competitive balance with

consumers who opted to purchase crates with cash.

Additionally, famous characters such as Darth Vader could only

be unlocked with very high amounts of credits (themselves

derived from in-game achievements or recycling duplicate star

cards).

EA responded to consumer outcry by removing

https://www.youtube.com/watch?v=XUfkGSbabSo (drawing numerous

comments lambasting EA for the “pay-to-win” format); TotalBiscuit, I Will Now

Talk About Lootboxes and Gambling for Just over 40 Minutes, YOUTUBE (Oct.

8, 2017), https://www.youtube.com/watch?v=YMDGPSWWA18.

. Thank You for Playing the Beta, ELECTRONIC ARTS,

https://www.ea.com/games/starwars/battlefront/battlefront-2/news/thank-you-

beta (last visited Nov. 25, 2018).

. How We’ve Updated Crates and Progression, ELECTRONIC ARTS,

https://www.ea.com/games/starwars/battlefront/battlefront-

2/news/progression-oct-2017 (last visited Nov. 7, 2018).

. Id.

. See Kain, supra note 70.

. See Heather Alexandra, Star Wars Battlefront 2 Lets You Pay Real

Money for Multiplayer Advantages, KOTAKU (Nov. 11, 2017, 12:00 PM),

https://www.kotaku.com.au/2017/11/star-wars-battlefront-2-lets-you-pay-real-

money-for-multiplayer-advantages/.

. See id. (“The loot crates add an unnecessary layer of complication, upset

the game’s balance, and exist entirely to screw you over.”).

. See GameSpot Staff, Star Wars Battlefront 2’s Loot Box Controversy

Explained, GAMESPOT (Nov. 22, 2017, 12:37 PM),

https://www.gamespot.com/articles/star-wars-battlefront-2s-loot-box-

94 MINN. J.L. SCI. & TECH. [Vol. 20:

microtransactions immediately before the launch of the game,

adjusting the cost of specific heroes and the rate of credit awards

for in-game achievements.

However, this did not remove the

game advancement designs predicated on the loot box mechanic,

it merely made it impossible to avoid grinding in order to gain

in-game currency. There remains speculation that

microtransactions in some form will return to the game.

Battlefront’s loot box system has occasioned serious

economic and political consequences. The game missed sales

targets, which EA attributed to the loot box controversy.

The

episode also sparked greater discussion of loot boxes in the game

playing community and legislative bodies.

Hawaii state

representative Chris Lee noted, “This game is a Star Wars-

themed online casino, designed to lure kids into spending money.

It’s a trap.”

3. Apple—Mandatory Odds Disclosure

Apple recently altered App Store requirements to ensure the

disclosure of loot box odds by game developers: “Apps offering

‘loot boxes’ or other mechanisms that provide randomized virtual

items for purchase must disclose the odds of receiving each type

controversy-expl/1100-6455155/ (stating that Darth Vader’s character cost

60,000 credits at one time).

. See Allegra Frank, Star Wars Battlefront 2 Update Increases Credit

Drops, with More Changes to Come, POLYGON (Dec. 4, 2017, 10:59 AM),

https://www.polygon.com/2017/12/4/16733416/star-wars-battlefront-2-loot-

boxes-credit-rewards-increased.

. See Paul Tassi, Seven Weeks After Launch, Battlefront 2’s

Microtransactions Remain Shelved, FORBES (Jan. 4, 2018, 9:24 AM),

https://www.forbes.com/sites/insertcoin/2018/01/04/seven-weeks-after-launch-

battlefront-2s-microtransactions-remain-shelved/#695fdbce6222 (“I don’t

believe that Battlefront 2 will stay microtransaction free forever. My guess is

that there will be some sort of cosmetics system introduced down the road,

which will either contain new loot boxes or a more traditional storefront (but

probably loot boxes).”).

. See Samit Sakar, Star Wars Battlefront 2 Sales Miss Targets, EA

Blames Loot Crate Controversy (Update), POLYGON (Jan. 30, 2018, 5:05 PM),

https://www.polygon.com/2018/1/30/16952396/star-wars-battlefront-2-sales-

loot-boxes-returning (“Sales of Star Wars Battlefront 2 fell short of Electronic

Arts’ expectations, and the publisher is citing the furor over the game’s

microtransactions as the primary explanation.”).

. See Alexandra, supra note 41.

. Chris Lee, Highlights of the Predatory Gaming Announcement,

YOUTUBE (Nov. 21, 2017), https://www.youtube.com/watch?v=_akwfRuL4os.

2019] PRECIOUS AND WORTHLESS 95

of item to customers prior to purchase.”

While a potential step

in the right direction, the App Store rule is vague enough to

allow developers to continue to hide true odds from game

players.

Items are typically organized into class rarity

categories like “rare,” “epic,” and “legendary.”

Developers may

announce overall odds in terms of those categories, e.g.,

announcing that a loot box has a 1 in 13.5 chance to contain a

“legendary” item, while keeping individual item rates a secret.

Thus, a user may still not know the chance of arriving at a

desired item.

Additionally, this rule was not applied to all

markets simultaneously, indicating that cultural norms in

markets may trump corporate concern.

For example, the rule

was not immediately applied to Japan.

4. The ESA—Loot Boxes are Voluntary and Not Gambling

Unsurprisingly, the Entertainment Software Association

(ESA), a trade association, has strongly opposed any suggestion

that loot boxes are a form of gambling.

ESA has wrongly made

this argument based on the voluntary nature of the activity,

. App Store Review Guidelines: 3.1.1 In-App Purchases, APPLE INC.,

https://developer.apple.com/app-store/review/guidelines/#in-app-purchase (last

updated Dec. 19, 2018).

. See Sam Machkovech, Apple Now Requires App Store Games with Loot

Boxes to List Odds, ARS TECHNICA (Dec. 21, 2017, 1:05 PM),

https://arstechnica.com/gaming/2017/12/apple-now-requires-app-store-games-

with-loot-boxes-to-list-odds/ (comparing Apple’s rule to similarly-phrased

Chinese rules that allowed Blizzard to use unclear descriptions in its disclosure

and “leave players in the dark”).

. See id.

. Id.

. See Casey Baseel, Apple Still Lets Video Game Developers Keep Their

Loot Box Odds a Secret in Japan, SORANEWS24 (Dec. 22, 2017),

https://en.rocketnews24.com/2017/12/22/apple-still-lets-video-game-

developers-keep-their-loot-box-odds-a-secret-in-japan/ (finding that the lack of

change to Japan’s App Store rules could be “a reflection of the lower level of

outrage towards randomized video game content purchases in Japan”).

. See id.

. See Brian Crecente, State Rep to Video Game Industry: Regulate Loot

Boxes Before We Are Forced to Legislate, ROLLING STONE (November 27, 2017),

https://web.archive.org/web/20171128005142/http://www.rollingstone.com/glix

el/news/esrb-asked-to-address-battlefront-ii-loot-via-ratings-w512718

(discussing Hawaii state representatives’ proposed solution for squashing the

dangers of encouraging children to gamble).

96 MINN. J.L. SCI. & TECH. [Vol. 20:

rather than the relative value of resulting items.

The ESA

stated:

Loot boxes are a voluntary feature in certain video games that provide

players with another way to obtain virtual items that can be used to

enhance their in-game experiences. They are not gambling. Depending

on the game design, some loot boxes are earned and others can be

purchased. In some games, they have elements that help a player

progress through the video game. In others, they are optional features

and are not required to progress or succeed in the game. In both cases,

the gamer makes the decision.

The ESA’s approach is odd as gambling definitions do not

typically revolve around volition—it is assumed that bets do not

place themselves and that a viewer can watch a race without

placing a wager.

5. ESRB—Loot Boxes are Not Gambling Due to Assured

Receipt of Items

The domestic game rating organization, Entertainment

Software Rating Board (ESRB), has similarly commented that

loot boxes are not considered to be gambling.

However, the

ESRB appears to base this conclusion not on the voluntary

nature of the activity but rather on the guaranteed payout.

According to an ESRB spokesperson,

ESRB does not consider loot boxes to be gambling. While there’s an

element of chance in these mechanics, the player is always guaranteed

to receive in-game content (even if the player unfortunately receives

something they don’t want). We think of it as a similar principle to

collectible card games: Sometimes you’ll open a pack and get a brand

new holographic card you’ve had your eye on for a while. But other

times you’ll end up with a pack of cards you already have.

100

. Id.

. Jason Schreier, ESRB Says It Doesn’t See ‘Loot Boxes’ As Gambling,

KOTAKU (Oct. 11, 2017, 12:46 PM), https://kotaku.com/esrb-says-it-doesnt-see-

loot-boxes-as-gambling-1819363091 (finding that “‘Real Gambling’ is any sort

of wagering involving real cash, while ‘Simulated Gambling’ means that the

‘player can gamble without betting or wagering real cash or currency’”).

. Id.

100

. Id.

2019] PRECIOUS AND WORTHLESS 97

Commentators have criticized this position, correctly

pointing out that the search for a desired item constitutes the

win/fail state commonly encountered in traditional gambling.

101

II. STATE ACTOR RESPONSE

The proposed responses by state actors have focused on two

tracks: banning the sale of games with loot boxes to minors,

102

and increasing transparency through the labeling and disclosure

of odds within games containing loot box mechanics.

103

Actors

have differed as to how to effectuate these reforms. Some

attempt to directly regulate the activity through legislation,

104

some appeal to domestic game rating organizations to enforce

age-appropriate rating standards,

105

while others have referred

the matter to domestic gaming commissions.

106

The last approach is unlikely to succeed, as it can be difficult

to squarely conceive of loot boxes as gambling under existing

statutes.

107

Moreover, the classification of loot boxes as

gambling, through private suit or gaming commissions, seems

an unlikely outcome based on existing case law—baseball cards

101

. Erik Kain, The ESRB is Wrong About Loot Boxes and Gambling,

FORBES (Oct. 12, 2017, 7:00 AM),

https://www.forbes.com/sites/erikkain/2017/10/12/the-esrb-is-wrong-about-loot-

boxes-and-gambling/#579cdb122a64 (finding that “unlike a slot machine, a loot

box will always result in some form of a prize, that doesn’t change the fact that

the simple act of opening loot boxes is incredibly similar to gambling, and taps

into all the same parts of the brain”).

102

. See H.R. 2686, 2018 Leg., 29th Sess. (HI 2018); S. 3024, 2018 Leg., 29th

Sess. (HI 2018) (proposing to ban the sale of loot box content games to any

customer under the age of 21). However, outright bans of video game mechanics

are troubling, as video games are often the focus of public hysteria.

103

. See H.B. 2727, 29th Leg., Reg. Sess. (Haw. 2018); S.B 3025, 29th Leg.,

Reg. Sess. (Haw. 2018) (seeking to establish firm labeling and disclosure

requirements for games with loot box content).

104

. See S.B. 3025, 29th Leg., Reg. Sess. § II(A) (Haw. 2018) (discussing

proposed state legislation to ban the sale of games with loot boxes to minors and

increasing transparency though the labeling and disclosure of odds within

games).

105

. See S.B. 3025, 29th Leg., Reg. Sess. § II (B) (finding that U.S. Senators

are discussing their concern with loot box mechanics to the ESRB in hopes that

their discussion may encourage additional industry response).

106

. See S.B. 3025, 29th Leg., Reg. Sess. § II (E–F) (finding that Belgium,

Germany and New Zealand have deferred to their gambling regulation agency

to decide whether loot boxes are a form of gambling).

107

. Id.

98 MINN. J.L. SCI. & TECH. [Vol. 20:

and collectible card games, such as Pokémon,

108

have attracted

similar gambling lawsuits and investigations to no avail.

109

The

difficulty arises from the notion of value.

110

That is, if items are

treated as having value, then the fact that the user receives a

valuable (if undesired) item helps guard against charges of

gambling injury.

111

Courts have found that in light of the fact that “trading card

packs and display boxes typically state the odds of receiving in a

given pack an insert card from any of the various insert sets”

and that “[a]lmost every card manufacturer also includes a

disclaimer which states that the advertised odds are an average

for the entire production run and are not guaranteed within an

individual pack or box,” the consumer was entering into an

informed bargain.

112

It is true that rare insert cards have a

higher resale value, and users may purchase card packs in

search of valuable cards.

113

That the consumer receives at least

some value in the form of the more common cards, however,

prevents a clear finding of gambling injury:

Purchasers of trading cards do not suffer [a gambling injury] when they

do not receive an insert card. At the time the plaintiffs purchased the

package of cards, which is the time the value of the package should be

determined, they received value—eight or ten cards, one of which

might be an insert card—for what they paid as a purchase price. Their

disappointment upon not finding an insert card in the package is not

an injury to property.

114

108

. See David Halbfinger, Suit Claims Pokemon Is Lottery, Not Just Fad,

NEW YORK TIMES (Sept. 24, 1999),

http://www.nytimes.com/1999/09/24/nyregion/suit-claims-pokemon-is-lottery-

not-just-fad.html (discussing a class action made up of concerned mothers and

fathers alleging that Pokemon constituted a form of illegal gambling).

109

. See Chaset v. Fleer/Skybox Int’l, LP, 300 F.3d 1083, 1086 (9th Cir.

2002); Price v. Pinnacle Brands, Inc., 138 F.3d 602, 607 (5th Cir. 1998) (per

curiam); Dumas v. Major League Baseball Props., Inc., 104 F. Supp. 2d 1220,

1223 (S.D. Cal. 2000); see also Rodriguez v. Topps Co., 104 F. Supp. 2d 1224,

1227 (S.D. Cal. 2000); Schwartz v. Upper Deck Co., 104 F. Supp. 2d 1228, 1230–

31 (S.D. Cal. 2000).

110

. See Halbfinger, supra note 108.

111

. Id.

112

. Chaset, 300 F.3d at 1086 (holding that purchasers of trading cards do

not suffer an injury cognizable under RICO when they do not receive an insert

card).

113

. Id. at 1087.

114

. Id.

2019] PRECIOUS AND WORTHLESS 99

Nor would loot boxes qualify as gambling if one considers

the virtual items to be worthless.

115

Indeed, virtual items that

are tied to user accounts and not tradable in an aftermarket may

be considered to have no tangible exchange price.

116

If items are

treated as having no value, then the entire operation lacks a

“prize” and is not gaming.

117

Numerous courts considering

virtual casinos, with chips that cannot be traded for value, have

found that the action is not licensable gambling.

118

A review of current approaches provides a helpful overview

of the variety of goals and means employed by state actors.

A. U.S. STATE LEGISLATION

1. Hawaii—Proposes Banning Sales to Minors and Requiring

Odds and Content Labeling

The Hawaii legislature spearheaded the movement against

the current loot box regime. State Representative Chris Lee led

the effort: “I grew up playing games my whole life. I’ve watched

firsthand the evolution of the industry from one that seeks to

create new things to one that’s begun to exploit people, especially

children, to maximize profit.”

119

A total of four bills have been

115

. See Mason v. Mach. Zone, Inc., 851 F.3d 315, 319 (4th Cir. 2017)

(holding that when there is no money at stake while virtually gambling,

individuals do not “lose” money as required under the state’s Loss Recovery

Statute).

116

. Id. (finding that virtual gold and virtual chips are not sold on the

secondary market and, therefore, not equivalent to money).

117

. See Soto v. Sky Union, LLC, 159 F. Supp. 3d 871, 880 (N.D. Ill. 2016)

(holding that because the alleged prize of Talents was not exchangeable for real

money or other goods within the game, the alleged game was not a gambling

game under California law).

118

. See Mason v. Mach. Zone, Inc., 140 F. Supp. 3d 457 (D. Md. 2015), aff’d,

851 F.3d 315 (4th Cir. 2017); Soto, 159 F. Supp. 3d at 871; Phillips v. Double

Down Interactive, LLC, 173 F. Supp. 3d 731 (N.D. Ill. 2016); Desirée Martinelli,

Skin Gambling: Have We Found the Millennial Goldmine or Imminent Trouble?,

21 GAMING L. REV. 557, 564 (2017) (arguing that skin gambling does not have

any tangible worth and is therefore legal). But cf. Kater v. Churchill Downs,

Inc., 886 F.3d 784, 787 (9th Cir. 2018) (holding that virtual chips used, among

other purposes, to play games in a virtual casino had tangible worth under

Washington law).

119

. Michael Brestovansky, Bills target video games with rewards for a

price, HAWAII TRIBUNE-HERALD, (Feb. 12, 2018, 12:05 AM),

http://www.hawaiitribune-herald.com/2018/02/12/hawaii-news/bills-target-

video-games-with-rewards-for-a-price/.

100 MINN. J.L. SCI. & TECH. [Vol. 20:

introduced in the Hawaii legislature to address the proper sale

and labeling requirements of games involving loot boxes.

120

House Bill 2686 and Senate Bill 3024 aim to ban the sale of such

games to any customer under the age of 21.

121

Both bills note

that the “predatory mechanisms . . . known as a loot boxes, can

present the same psychological, addictive, and financial risks as

gambling.”

122

Accordingly,

[i]t 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 that includes:

(1) A randomized reward; or

(2) A virtual item that can be redeemed to directly or indirectly receive

a randomized reward.

123

A complimentary set of bills, House Bill 2727 and Senate

Bill 3025, seek to establish firm labeling and disclosure

requirements for games with loot box content.

124

The underlying

logic of the bills is that loot box games are functioning as casinos,

yet they do not follow the odds disclosure requirements of

gaming houses.

125

Moreover, the sophistication of loot-box odds

adjustment poses an insidious threat:

Unlike at casinos, there is rarely disclosure of the odds of winning

items of value in loot boxes or in-game gambling-like mechanisms.

There are no gaming commissions to ensure players are being treated

fairly and not exploited by gambling-like mechanisms which do not pay

out as advertised. Game publishers have already begun to develop

algorithms which are far more exploitive than casino games because

they can now change the odds of winning valuable items in real time

based on a player’s reactions and likelihood of continued spending, an

120

. Id.

121

. See H.B. 2727, 29th Leg., Reg. Sess. (Haw. 2018); S.B 3025, 29th Leg.,

Reg. Sess. (Haw. 2018)

122

. H.B. 2686, 29th Leg., Reg. Sess. (Haw. 2018),

https://www.capitol.hawaii.gov/session2018/bills/HB2686_.pdf; accord S.B.

3024, 29th Leg., Reg. Sess. (Haw. 2018),

https://www.capitol.hawaii.gov/session2018/bills/SB3024_SD1_.PDF.

123

. S.B. 3024, 29th Leg., Reg. Sess. (Haw. 2018),

https://www.capitol.hawaii.gov/session2018/bills/SB3024_SD1_.PDF.

124

. See H.B. 2727, 29th Leg., Reg. Sess. (Haw. 2018); S.B 3025, 29th Leg.,

Reg. Sess. (Haw. 2018).

125

. This essay argues that a more comfortable analogy would be to baseball

cards, which typically disclose odds.

2019] PRECIOUS AND WORTHLESS 101

ability which has already been included in multiple patent

applications.

126

Accordingly, the bills require all loot box games to contain a

label “Warning: contains in-game purchases and gambling-like

mechanisms which may be harmful or addictive” and

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.

127

2. Washington—Proposes Referral to the State Gaming

Commission

Democratic members in Washington have introduced

Senate Bill 6266 in an effort to curb loot boxes.

128

The bill

provides that:

(1) The use of loot boxes and similar types of mechanisms that provide

randomized virtual items in online games or apps has raised a number

of serious problems and concerns, including:

(a) Whether games and apps containing these mechanisms are

considered gambling under Washington law;

(b) Whether these mechanisms belong in games and apps;

vulnerable to gambling addiction, should have access to games and

apps with these mechanisms; and (d) the lack of disclosure and

transparency with respect to the odds of receiving each type of virtual

item.

129

Accordingly, the bill directs the Washington Gaming

Commission to investigate the matter.

130

126

. H.B. 2686, 29th Leg., Reg. Sess. (Haw. 2018),

https://www.capitol.hawaii.gov/session2018/bills/HB2686_.pdf; H.B. 2727, 29th

Leg., Reg. Sess. (Haw. 2018),

https://www.capitol.hawaii.gov/session2018/bills/HB2727_.pdf; S.B. 3025, 29th

Leg., Reg. Sess. (Haw. 2018),

https://www.capitol.hawaii.gov/session2018/bills/SB3025_.PDF.

127

. H.B. 2727, 29th Leg., Reg. Sess. (Haw. 2018),

https://www.capitol.hawaii.gov/session2018/bills/HB2727_.pdf; S.B. 3025, 29th

Leg., Reg. Sess. (Haw. 2018),

https://www.capitol.hawaii.gov/session2018/bills/SB3025_.PDF.

128

. See S.B. 6266, 65th Leg., Reg. Sess. (Wash. 2018),

http://lawfilesext.leg.wa.gov/biennium/2017-

18/Pdf/Bills/Senate%20Bills/6266.pdf.

129

. Id.

130

. Id.

102 MINN. J.L. SCI. & TECH. [Vol. 20:

The bill has not been enacted, but the Washington Gaming

Commission has previously intimated action against game hosts

for facilitating gambling.

131

In 2016, the Commission sent a

threat letter to Valve, the company running the popular game

site Steam, warning that skin gambling in Counter Strike, and

other games, violated gaming laws.

132

Valve responded

aggressively that such deals did not violate any specific gaming

law.

133

B. U.S. FEDERAL GOVERNMENT—LIMITED APPEAL TO ESRB

U.S. Senator Maggie Hassan authored a letter to the ESRB

asking it “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” and “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.”

134

Senator Hassan has not introduced any specific litigation to

address this issue. However, her highlighting of the issue to the

ESRB, which recently reiterated that loot boxes are not

gambling, may encourage additional industry response. Thus

far, the ESRB replied only that

[a]s the industry evolves, so does our rating system, and we will

continue to make enhancements to ensure parents continue to be well-

informed. We will also continue to provide information about

additional tools, including parental control guides, that help parents

131

. See Kyle Orland, The Legislative Fight over Loot Boxes Expands to

Washington State, ARS TECHNICA (Jan. 25, 2018, 10:05 AM),

https://arstechnica.com/gaming/2018/01/the-legislative-fight-over-loot-boxes-

expands-to-washington-state/.

132

. See Kyle Orland, Valve Refuses Government Request to Cut Off Steam

Skin Trading, ARS TECHNICA (Oct. 19, 2016, 10:44 AM),

https://arstechnica.com/gaming/2016/10/valve-pushes-back-against-

government-threats-over-steam-skin-gambling/.

133

. See Robert Grosso, Valve to Respond to Washington Gambling

Commission After Given Deadline, TECHRAPTOR (Oct. 17, 2016, 7:09 PM),

https://techraptor.net/content/valve-respond-washington-gambling-

commission-given-deadline.

134

. See Cecilia D’Anastasio, U.S. Senator Asks ESRB to Re-Examine Loot

Boxes, KOTAKU (Feb. 15, 2018, 5:20 PM), https://kotaku.com/u-s-senator-asks-

esrb-to-re-examine-loot-boxes-1823049616.

2019] PRECIOUS AND WORTHLESS 103

set spending and time limits and block potentially inappropriate games

based on the ESRB-assigned age rating.

135

C. CHINA—MANDATED ODDS PUBLISHING

China has passed legislation requiring, as of May 2017, the

mandatory disclosure of loot box odds:

.6 . . . Online game publishers shall promptly publicly announce

information about the name, property, content, quantity, and

draw/forge probability of all virtual items and services that can be

drawn/forge on the official website or a dedicated draw probability

webpage of the game. The information on draw probability shall be true

and effective.

.7 Online game publishers shall publicly announce the random draw

results by customers on notable places of official website or in game,

and keep record for government inquiry. The record must be kept for

more than 90 days. When publishing the random draw results, some

measures should be taken place to protect user privacy.

136

D. JAPAN—BAN OF MULTI-LAYERED LOOT BOXES

Loot box games or “gacha” are extremely popular in Japan.

Japan has adopted a narrow law that outlaws “kompu gacha” in

which players must attain a wide set of random items

137

in order

to gain a “grand prize,” but other gacha mechanics have been

undisturbed.

138

Kompu gacha ran afoul of Japanese lawmakers

as the practice is targeted at children and “significantly

135

. Senator Maggie Hassan, Sen. Hassan Presses FTC Nominees on

Student Loan Scams, Predatory Video Game “Loot Boxes”, YOUTUBE, (Feb. 14,

2018), https://www.youtube.com/watch?v=sc9VCJpm7qo; see also Games News,

U.S. Senator Calls on ESRB to Mark Loot Box Games, Claims They Cause

Addiction in Children, ALTCHAR (Feb. 15, 2018, 2:27 PM),

https://www.altchar.com/games-news/558809/us-senator-calls-on-esrb-to-

mark-loot-box-games-claims-they-cause-addiction-in-children; Andy Chalk, US

Senator Calls on ESRB to Take Action on Loot Boxes, Suggests FTC Could Get

Involved, PCGAMER (Feb. 14, 2018), https://www.pcgamer.com/us-senator-calls-

on-esrb-to-take-action-on-loot-boxes-suggests-ftc-could-get-involved/.

136

. See Andy Chalk, Chinese Law Will Force Game Makers to Reveal Loot

Box Drop Rates, PC GAMER (Dec. 8, 2016), https://www.pcgamer.com/chinese-

law-will-force-game-makers-to-reveal-loot-box-drop-rates/.

137

. Thereby increasing the number of loot box draws required to gain the

prize.

138

. See Kathleen De Vere, Japan Officially Declares Lucractive Kompu

Gacha Practice Illegal in Social Games, ADWEEK (May 18, 2012)

http://www.adweek.com/digital/japan-officially-declares-lucractive-kompu-

gacha-practice-illegal-in-social-games/.

104 MINN. J.L. SCI. & TECH. [Vol. 20:

increase[s] the passion for gambling.”

139

For example, “[i]n one

case, a boy in middle school racked up more than $5,000 (400,000

yen) in charges in a single month. Another boy in elementary

school was able to make $1,500 (120,000 yen) in purchases in

just three days.”

140

E. BELGIUM AND GERMANY—FALSE BANS AND REGULATORY

REFERRALS

In November 2017, several game-focused websites reported

that Belgium’s Gaming Commission had concluded loot boxes

constituted a form of gambling.

141

This was revealed to be

false.

142

While Belgium’s Justice Minister, Koen Geens, had

expressed a desire to classify loot boxes as gambling, no official

action was attendant to that comment.

143

The Commission

authored an informative note on the matter, but no final decision

has been taken.

144

A similar drama played out in Germany, where the USK

(Unterhaltungssoftware Selbstkontrolle or Voluntary

Monitoring Organization of Entertainment Software) was

reported to be considering a ban of loot boxes; the USK then

clarified that they “are actually examining regulations of online

advertising and purchasing as a whole” but are not formally

considering a ban.

145

139

. See id.

140

. Kathleen De Vere, How Japan’s Social Game Regulations Will Impact

GREE, DeNA and the U.S., ADWEEK (May 8, 2012)

http://www.adweek.com/digital/how-japans-social-game-regulations-will-

impact-gree-dena-and-the-u-s/?red=im.

141

. See Adeline Louvigny, No, Belgium Did Not Qualify Battlefront II Loot

Boxes as a Game of Chance, INFO (Nov. 22, 2017, 11:02 AM),

https://translate.google.com/translate?sl=fr&tl=en&js=y&prev=_t&hl=en&ie=

UTF-8&u=https%3A%2F%2Fwww.rtbf.be%2Finfo%2Fmedias%2Fdetail_non-

la-belgique-n-a-pas-qualifie-star-wars-battlefront-ii-de-jeu-de-

hasard%3Fid%3D9769751&edit-text=.

142

. See id.

143

. See Andy Chalk, Belgium’s Justice Minister Calls for Loot Box Ban in

Europe (Updated), PCGAMER (Nov. 22, 2017),

https://www.pcgamer.com/belgium-says-loot-boxes-are-gambling-wants-them-

banned-in-europe/.

144

. See id.

145

. See Andy Chalk, Germany May Ban Loot Boxes (Updated), PCGAMER

(Feb. 6, 2018), https://www.pcgamer.com/germany-may-ban-loot-boxes/.

2019] PRECIOUS AND WORTHLESS 105

F. NEW ZEALAND—REGULATOR COMMENT DENIES GAMBLING

CONNECTION

New Zealand’s gambling regulation agency, the Gambling

Compliance office of its Department of Internal Affairs, noted

that loot boxes do not meet the definition for gambling and are

rather a game enhancement.

146

The Department of Internal

Affairs said,

There are many games which enable the user to purchase additional

items to enhance the gaming experience. Loot boxes are a variation on

this theme. Gamers do not purchase loot boxes seeking to win money

or something that can be converted into money. They buy loot boxes so

that they can use their contents within the game and thereby have a

better gaming experience.

While the payment of money for a loot box with the contents of which

are determined by chance may appear to be gambling, the Department

is of the view that loot boxes do not meet the legal definition of

gambling. The Department therefore has no ability to regulate this

activity under the Gambling Act 2003.

147

G. AUSTRALIA—CONTRADICTORY REGULATOR COMMENTS

Jarrod Wolfe, a strategic analyst in the Victorian regulators’

compliance division, noted that loot boxes “constitute gambling

by the definition of the Victorian Legislation.”

148

However, the

overseas nature of these services may render them outside the

jurisdiction of Australian regulators.

149

Wolfe proposes that “[i]f

these companies want to include significant elements of

gambling in their products then perhaps we should work with

146

. Katherine Cross, New Zealand Says Lootboxes ‘Do Not Meet the Legal

Definition for Gambling’, GAMASUTRA (Dec. 11, 2017),

https://www.gamasutra.com/view/news/311463/New_Zealand_says_lootboxes_

do_not_meet_the_legal_definition_for_gambling.php.

147

. E-mail from Trish Millward, Manager Licensing Compliance

Regulatory Services, The Dep’t of Int’l Affairs Te Tari Taiwhenua, to Katherine

Cross, Gamasutra (Dec. 11, 2017) (on file with recipient). A reproduction of the

e-mail is available at supra note 146,

https://www.gamasutra.com/view/news/311463/New_Zealand_says_lootboxes_

do_not_meet_the_legal_definition_for_gambling.php.

148

. Alex Walker, Victoria’s Gambling Regulator: Loot Boxes ‘Constitute

Gambling,’ KOTAKU (Nov. 22, 2017, 4:00 PM) (quoting Jarrod Wolfe),

https://www.kotaku.com.au/2017/11/victorias-gambling-regulator-loot-boxes-

constitute-gambling/.

149

. See id.

106 MINN. J.L. SCI. & TECH. [Vol. 20:

‘The Australian Classification Board’ to ensure than any product

that does that and monetises it gets an immediate R rating.”

150

However, Robert Grimmond, a regulator of legalized

gambling in Queensland, contradicts this position.

151

Though

cautioning that he was “not in a position to definitively advise

whether ‘loot boxes’ or similar video game features would

constitute ‘gambling,’” Grimmond “confirm[ed] that video

gaming which provides for ‘loot boxes’ would not fall within the

meaning of a gaming machine as defined under the Gaming

Machine Act.”

152

H. UK—DEPENDS ON EXISTENCE OF AFTERSALE MARKET

In response to a public petition, the Gambling Commission

of the United Kingdom has taken a bifurcated approach to loot

boxes and gambling.

153

The Commission’s approach turns on

whether there is a clear aftermarket for loot; if no such market

exists, the items will be considered worthless and would not

implicate gambling, whereas the presence of an aftermarket

would likely result in a finding of licensable gambling.

154

However, “[t]he government recognises the risks that come from

increasing convergence between gambling and video games. The

150

. Id; see generally Marcus Carter, ‘Loot Boxes’ and Pay-To-Win Features

in Games Look a Lot Like Gambling, AUSTRALIAN BROADCASTING CORP. (Nov.

28, 2017, 3:33 AM), http://www.abc.net.au/news/2017-11-28/pay-to-win-

gaming-features-look-like-gambling/9201386 (discussing the potentially

significant problem surrounding loot boxes as well as possible solutions).

151

. See Alex Walker, Queensland’s Gambling Regulator Doesn’t Think Loot

Boxes Are Gambling, KOTAKU (Nov. 23, 2017, 11:00 AM),

https://www.kotaku.com.au/2017/11/queenslands-gambling-regulator-doesnt-

think-loot-boxes-are-gambling/.

152

. Id.

153

. See Adapt Gambling Laws to Include Gambling in Video Games Which

Targets Children, U.K. GOV’T AND PARLIAMENT,

https://petition.parliament.uk/petitions/201300?reveal_response=yes#response

-threshold

154

. See id. (“Where the facility exists for players of video games to purchase

a key to unlock a bundle containing an unknown quantity and value of in-game

items as a prize, and where there are readily accessible opportunities to cash in

or exchange those awarded in-game items for money or money’s worth, then

these elements of the game are likely to be considered licensable gambling

activities. In contrast, where prizes are restricted for use solely within the

game, such in-game features would not be licensable gambling. The Gambling

Commission is committed to working with the video game industry to prevent

gambling-related harm related to their platforms.”).

2019] PRECIOUS AND WORTHLESS 107

Gambling Commission is keeping this matter under review and

will continue to monitor developments in the market.”

155

III. PROPOSAL: TRANSPARENCY THROUGH GRANULAR

ODDS DISCLOSURE AND RATING LABELING

Increasing transparency offers the greatest opportunity to

address the loot box issue without curtailing consumer’s rights

or inviting overregulation of videogames. This essay proposes a

two-prong solution. First, developers should be required to

publish granular odds for all loot box items. Second, the federal

regulator should require that the ESRB label loot box games as

Mature.

A. PRONG 1: ODDS FOR ALL ITEMS OFFERED

Defenders of loot boxes often analogize the practice to

baseball cards and collectible card games.

156

However, the

analogy ignores the fact that tangible card manufacturers

routinely report the odds of rare finds.

157

These odds were of

course constrained by the fact that the probability of finding

particular categories of cards was stated in terms of the entire

run: the packs with those cards may have already been opened

by the time the consumer purchased his or her own pack.

158

For

this reason, “advertised odds are an average for the entire

production run and are not guaranteed within an individual

pack or box.”

159

Loot box designers have no such constraints.

Moreover, game designers may easily shift odds in ways

that are simply unavailable to mass scale printers. As

demonstrated by the Activision patent, game designers may

manipulate the consumer with detailed adjustments to rewards,

155

. Id. See generally Vic Hood, The Big Interview: The Gambling

Commission on Loot Boxes, EUROGAMER (Dec. 14, 2017),

http://www.eurogamer.net/articles/2017-12-14-the-big-interview-the-gambling-

commission-on-loot-boxes (discussing the debate surrounding loot boxes in the

United Kingdom).

156

. See Schreier, supra note 98; See also Tyler Wilde, Loot Boxes are Bad,

but New Legislation Could be Worse, PCGAMER (Nov. 28, 2017),

https://www.pcgamer.com/loot-boxes-are-bad-but-new-legislation-could-be-

worse/ (analogizing loot boxes to collectible cards).

157

. See Chaset v. Fleer/Skybox Int’l, LP, 300 F.3d 1083, 1086 (9th Cir.

2002).

158

. See id.

159

. Id.

108 MINN. J.L. SCI. & TECH. [Vol. 20:

multiplayer matches, and group acclaim.

160

Accordingly, federal

law should require designers to disclose odds for each loot box

item and empower auditors to check code to ensure those odds

are followed.

161

Such a requirement would mirror state laws that

require “[i]f more than one prize is offered, the odds shall be

separately stated for each prize.”

162

This approach is similar to

what Hawaii is pursuing in House Bill 2727 and Senate Bill

3025.

163

B. PRONG 2: PRESSURE ESRB TO LABEL LOOT BOX CONTENT AS

MATURE

The ESRB was formed to prevent federal review of violent

content in video games. Current “Mature” rated games are

described as “[c]ontent [that] is generally suitable for ages 17

and up. May contain intense violence, blood and gore, sexual

content and/or strong language.”

164

The ESRB should expand

this category to include games with loot box mechanics.

The inclusion of loot boxes need not dilute the meaning of

the “M” rating because game ratings are accompanied by content

descriptors, noting the primary reasons for the rating.

165

While

the ESRB does have gambling related descriptors—e.g.,

“Simulated Gambling - Player can gamble without betting or

wagering real cash or currency” and “Real Gambling - Player can

gamble, including betting or wagering real cash or currency”—

these are typically applied to Casino games, not games including

loot box mechanics.

166

The ESRB should incorporate a “Loot Box”

160

. See U.S. Patent No. 9,789,406, supra note 57.

161

. As the games at issue are delivered over the Internet, jurisdiction is

assumed. Moreover, the change to any one state’s gaming law to target this

issue would likely force national change due to the interconnected markets. If a

state such as California changed its laws, game makers would treat the

regulatory scheme as national. Because there would be little functional

difference between these approaches, this essay assumes a federal approach.

162

. CAL. BUS. & PROF. CODE § 17539.5. See also KAN. CONST. art. 15, § 3c

(“The state shall whenever possible provide the public information on the odds

of winning a prize or prizes in a lottery game.”).

163

. See H.B. 2727, 29th Leg., Reg. Sess. (Haw. 2018); S.B. 3025, 29th Leg.,

Reg. Sess. (Haw. 2018).

164

. ESRB Ratings Guide, ENTERTAINMENT SOFTWARE RATING BOARD,

https://www.esrb.org/ratings/ratings_guide.aspx.

165

. See id.

166

. Id.

2019] PRECIOUS AND WORTHLESS 109

descriptor “Loot Box – Player can use real cash or currency to

acquire random in-game items, features, or attributes.”

Though the ESRB is a not a regulatory agency, regulatory

pressure will lead to predictable results. Should the ESRB feel

that federal intervention was likely against loot box content on

the grounds, not that the practice constituted gambling, but that

it helped facilitate poor impulse control and addictive behavior

in children, the ESRB would likely label loot box games as

Mature.

167

Such labeling would allow retailers, parents, and end

users to determine their approach to games containing a loot box

mechanic.

168

This approach would respect and facilitate

informed consumer choice.

169

C. ADVANTAGES OF PROPOSAL

1. Increasing Consumer Information

The transparency approach outlined above would provide

users with information as to what games contain loot box

mechanics and information as to the odds attendant to those

mechanics. Increasing consumer information has been the

regulatory drumbeat for nearly fifty years across a variety of

products related to a wide field of practices.

170

As astute game

reviewers have noted, the hidden nature of microtransactions

and loot box odds currently prevents consumers from deciding

167

. See generally About ESRB, ENTERTAINMENT SOFTWARE RATING

BOARD, http://www.esrb.org/about/ (“[ESRB’s mission is] [t]o empower

consumers, especially parents, with guidance that allows them to make

informed decisions about the age-appropriateness and suitability of video

games and apps while holding the video game industry accountable for

responsible marketing practices.”).

168

. See id.

169

. See id.

170

. See, e.g., Be an Informed Consumer, NAT’L CTR. FOR COMPLEMENTARY

AND INTEGRATIVE HEALTH, https://nccih.nih.gov/health/decisions (urging

individuals to be informed consumers); John F. Kennedy, 35th President of the

U.S., Special Message to the Congress on Protecting the Consumer Interest

(Mar. 15, 1962) (recognizing the right to be informed); The Lisbon Treaty art.

169, Dec. 13, 2007, 51 O.J. C 115 (“In order to promote the interests of

consumers and to ensure a high level of consumer protection, the Union shall

contribute to protecting the health, safety and economic interests of consumers,

as well as to promoting their right to information, education and to organise

themselves in order to safeguard their interests.”).

110 MINN. J.L. SCI. & TECH. [Vol. 20:

whether a game is, in fact, a good deal.

171

The benefits of

informed consumers may lead to better reasoned purchases,

avoidance of “unfair” loot box games, and market competition

between loot box designers.

172

2. Educational Opportunity

The educational aspects of game playing are well

documented and adding greater probability transparency to

games may present a boon for mathematics education.

173

Numerous educators and psychologists have remarked on

harnessing children’s natural attraction to gambling as a means

to teach probability and critical thinking skills.

174

For example,

the Cambridge Health Alliance hosts a curriculum focused on

gambling called “Facing the Odds: The Mathematics of

Gambling and Other Risks.”

175

The greater publication of odds

may help spark gamer interest in the subject while

simultaneously dispelling some of the risk-taking fallacies that

encourage pathological gambling.

171

. See Trevor Ruben, Why Microtransaction and Loot Boxes Are

Destroying Games, ROLLING STONE (Oct. 13, 2017),

https://www.rollingstone.com/glixel/features/theres-no-such-thing-as-a-good-

loot-box-or-microtransaction-w508742 (“Microtransactions hurt the entire

industry by bending to breakage the one thing that every market needs: honest,

comparative judgment between products.”).

172

. See id.

173

. See Andrew Moshirnia &Maya Israel, The Educational Efficacy of

Distinct Information Delivery Systems in Modified Video Games, 21 J. OF

INTERACTIVE LEARNING RES. 383 (2010) (discussing the educational efficacy of

video games).

174

. See, e.g., Jill Cueni-Cohen, Students Learn Math, and Life, Lessons

Through Gambling, PITTSBURGH POST GAZETTE (Apr. 17, 2014, 6:13 AM),

http://www.post-gazette.com/local/north/2014/04/17/Students-learn-math-and-

life-lessons-through-gambling/stories/201404170029; Amy Cowen, Probability

and Playing Cards: Hands-on Family Math, SCIENCE BUDDIES (Sept. 27, 2013,

6:00 AM), https://www.sciencebuddies.org/blog/probability-and-playing-cards-

hands-on-family-math; Ed Feng, How to Get Your Child to Love Math, MEDIUM

(July 28, 2016), https://medium.com/age-of-awareness/how-to-get-your-child-to-

love-math-e1f44048dbd1 (“Blackjack was the best math tool.”)

175

. See Division on Addiction, Facing the Odds: The Mathematics of

Gambling and Other Risks, CAMBRIDGE HEALTH ALLIANCE,

http://www.divisiononaddiction.org/curr/facing_the_odds.htm.

2019] PRECIOUS AND WORTHLESS 111

3. Avoiding an Outright Ban

The proposal also avoids an outright ban of the loot box

mechanic in any game sold to minors. A ban would likely harm

developers and also deny access to those users who enjoy the

occasional sampling of this mechanic. More importantly,

eschewing a prohibition approach is vital in the case of video

games, which serve as a boogeyman for any number of social ills

and a convenient political target.

176

A gambling-focused ban could open the floodgates for

overregulation of video game content. Indeed, a total ban is the

archetypical response of uninformed regulators.

177

For example,

video games are routinely blamed for school shootings.

178

Politicians singled out video games as the likely cause for school

shootings in Stoneman Douglas,

179

Sandy Hook,

180

and Virginia

Tech

181

amongst others, arguably as a means to avoid discussion

of gun control.

182

The consequence of this displacement is a rash

176

. See Adam Rosenberg, Gaming’s Loot Box Controversy Just Took a

Dangerous New Turn, MASHABLE (Nov. 22, 2017, 10:41 PM),

https://mashable.com/2017/11/22/ea-star-wars-battlefront-loot-box-

gambling/#UD0ZdJ0oFiqg (arguing that legislation could trigger a rush for

greater censorship in gaming).

177

. Id.

178

. Jesse Singal, Psychologists: Stop Blaming Mass Shootings on Video

Games, THE CUT (May 12, 2017),

https://www.thecut.com/2017/05/psychologists-stop-blaming-mass-shootings-

on-video-games.html.

179

. Stefanie Fogel, Kentucky Governor Blames Video Games for Florida

School Shooting, MSN (Feb. 15, 2018) https://www.msn.com/en-

us/news/us/kentucky-governor-blames-video-games-for-florida-school-

shooting/ar-BBJc6G2; Erik Kain, Trump Blames Violent Video Games For

School Shootings—Here’s Why He’s Wrong, FORBES (Feb. 22, 2018, 2:51 PM),

https://www.forbes.com/sites/erikkain/2018/02/22/trump-blames-violent-video-

games-for-school-shootings-heres-why-hes-wrong/#775495cd67f3.

180

. Christopher J. Ferguson, Sandy Hook Shooting: Video Games Blamed,

Again, TIME (Dec. 20, 2012), http://ideas.time.com/2012/12/20/sandy-hook-

shooting-video-games-blamed-again/.

181

. Winda Benedetti, Were video games to blame for the massacre,

NBCNEWS (Apr. 20, 2007, 10:05 PM),

http://www.nbcnews.com/id/18220228/ns/technology_and_science-

games/t/were-video-games-blame-massacre/.

182

. Ben Kuchera, I can’t believe we’re still blaming video games in 2018,

POLYGON (Feb. 20, 2018, 2:22 PM),

https://www.polygon.com/2018/2/20/17031864/gun-violence-video-games. This

phenomenon is not limited to the United States. Officials in Germany recently

blamed a shooting rampage on video games; see also, Souad Mekhennet, Griff

112 MINN. J.L. SCI. & TECH. [Vol. 20:

of legislation as the state and federal level aimed at banning

violence in video games able to be purchased by minors.

183

While

such legislation has been ruled unconstitutional, it is likely that

a successful loot box ban would encourage further attempts to

censure digital creativity and harm game development.

184

IV. CRITICISMS AND AREAS FOR FURTHER STUDY

One criticism to the above proposal is that the mere

disclosure of odds will not discourage gambling. The criticism

has some merit as there are numerous studies showing that

probability is not intuitive and the mere provision of odds may

not diminish gambling.

185

Indeed, the prevalence of gambling, in

the face of prohibitive odds, supports the notion that the odds

are not well understood.

However, the criticism ignores the fact that the furnishing

of statistics will allow for the possibility of reasonable

assessment, while the current regime bars such assessment

entirely. Moreover, game players frequently delve into complex

formulae in order to arrive at a competitive advantage.

186

It is

Witte and William Booth, Munich officials: Gunman acted like ‘a deranged

person’ but had no ties to terror groups, WASH. POST (July 23, 2016),

https://www.washingtonpost.com/world/munich-police-hunt-for-a-motive-after-

iranian-german-gunman-kills-nine-in-rampage/2016/07/23/5e3058d6-5055-

11e6-bf27-405106836f96_story.html?utm_term=.b24525aa21a1 (explaining

that the German Interior Minister Thomas de Maizière believed that “violent

video games had probably helped inspire the attack”).

183

. Bredan Sasso and Pete Kasperowicz, Dem lawmaker introduces bill to

ban sales of violent video games to minors, THE HILL (Jan. 17, 2013, 5:45 PM),

http://thehill.com/policy/technology/277781-dem-bill-would-ban-sale-of-violent-

games-to-minors; Brown v. Entm’t Merchants Ass’n, 564 U.S. 786 (2011) .

184

. Andrew Moshirnia, A Tale of Two Breyers, DIGITAL MEDIA LAW

PROJECT (Jun. 28, 2011), http://www.dmlp.org/blog/2011/tale-two-breyers.

185

. See Williams, R. J., & Connolly, D., Does learning about the

mathematics of gambling change gambling behavior? 20 PSYCHOL. OF

ADDICTIVE BEHAV. 1, 62–68 (2006). See also Robert Williams et al.,

PREVENTION OF PROBLEM GAMBLING: A Comprehensive Review of the

Evidence and Identified Best Practices 1, 21–24 (2012),

https://www.uleth.ca/dspace/bitstream/handle/10133/3121/2012-prevention-

opgrc.pdf?sequence=3 (collecting various studies showing variable long-term

impact on gambling education campaigns on gambling prevalence).

186

. Walkthroughs and other game guides provide a truly staggering

amount of information regarding stats growth and other algorithms for a wide

variety of games. See GAME FAQS, https://gamefaqs.gamespot.com/ (last visited

Nov. 19, 2018) (Walkthroughs and other statistical breakdowns are accessed by

selecting a game and then the FAQ tab.)

2019] PRECIOUS AND WORTHLESS 113

not unreasonable to assume they may similarly engage with loot

box probabilities if given the appropriate data.

Another likely criticism is that labeling alone will not

provide a sufficient obstacle for purchases of loot box games by

minors. Retailers may stock the game and sell to minors,

187

and

unaware parents may disregard the rating, especially if the

underlying game content seems non-violent.

188

As with any rating system, there exists the possibility that

ratings will be gamed or ignored. However, the provision of

greater information to parents is generally considered in the

public interest. While a total ban would likely prevent more

minors from accessing loot box games, such a ban would occasion

much greater legal push-back from developers, may not be

feasible, and would open the floodgates to politically-opportune

overregulation.

189

This essay is the first survey of this novel problem. As such,

further study must be conducted on the impact of loot box

mechanics on game players. Moreover, it remains to be seen if

consumer reaction may force additional changes to game

development practices absent regulatory intervention. Lastly,

the pending actions of state actors must be observed and

evaluated.

V. CONCLUSION

Loot boxes threaten to degrade game design and to foist

addictive mechanics on vulnerable users. Consumer displeasure

with loot boxes has not prevented the spread of the device. It is

natural to seek a legal response to a practice that results in some

users spending thousands of dollars and contemplating suicide

when facing the shame of their actions. However, gambling laws

187

. This fear is largely overblown. See FED. TRADE COMMISSION, FTC

Undercover Shopper Survey on Entertainment Ratings Enforcement Finds

Compliance Highest Among Video Game Sellers and Movie Theaters (2013),

https://www.ftc.gov/news-events/press-releases/2013/03/ftc-undercover-

shopper-survey-entertainment-ratings-enforcement.

188

. Katie Cox, Two-Thirds of Parents Admit They Don’t Bother Checking

Video Game Age Ratings, KOTAKU (April 13, 2012, 11:30 AM),

https://kotaku.com/5901395/two-thirds-of-parents-admit-they-don’t-bother-

checking-video-game-age-ratings; Louise Egan, Video Game Content Ratings:

Does Anyone Care Anymore?, THE ARTIFACE ( Jan. 9, 2014), https://the-

artifice.com/video-game-content-ratings-anyone-care-anymore/.

189

. Kain, supra note 179.

114 MINN. J.L. SCI. & TECH. [Vol. 20:

are a poor fit for virtual items that are simultaneously precious

and worthless.

While loot boxes may not constitute gambling, the opaque

nature of loot box odds is troubling and warrants intervention.

At the same time, an outright ban of the device should be

avoided, if only to prevent the predictable rush to overregulate

video games by inimical political actors. Greater transparency

may help consumers decide if they wish to purchase games

involving loot boxes. Even if loot boxes persist, better knowledge

of odds may convince game players that they are better off just

taking their chances with the dragon.