Leon Y. Xiao ponders what 2022 might bring for video games regulation and how states might curb the growing trend for loot boxes
2021 has seen China impose strict restrictions on the playing of video games by young people under 18: only three hours total a week that can only be spent from 8–9PM on Fridays, Saturdays, and Sundays are permitted. This was done citing the need to protect children from video gaming “addiction,” which itself is a disorder whose very existence researchers continue to debate. In contrast, 2021 has also seen Hanguk (South Korea) repeal its online video gaming restrictions on young people under 16 from playing between midnight and 6AM, citing the need to better protect the rights of children to self-determination and to pursue happiness.
Countries in Far East Asia have been particularly proactive with video gaming regulation, but regulation of this media, which is now enjoyed by nearly half of the world’s population and whose market value (in the UK) is now worth more than both the movie and music industries combined, is also likely forthcoming in the UK and many other countries around the world. For example, the UK Advertising Standards Authority published its revised guidance on advertising in-game purchases in September 2021 after consultation.
Indeed, forthcoming regulation is particularly likely in relation to a quasi-gambling mechanic in video games known as “loot boxes.” These are bought by players using real-world money to receive randomised rewards. Most of the time, the player will receive a reward that is perceived to be worth less than the purchase price of the loot box, but, rarely, the player will receive a valuable reward. Many players are known to purchase multiple loot boxes in an effort to try to obtain the rare rewards. These mechanics are therefore considered conceptually and psychologically akin to gambling.
The UK Government closed a dedicated consultation on loot boxes in late 2020. An official report is expected imminently. There are multiple divergent regulatory approaches that the UK might adopt. Following Belgium, the UK might decide to regulate all paid loot boxes as gambling and effectively ’ban’ them, thus preventing both children and adults alike from purchasing them (which has caused certain companies to withdraw their games from the Belgian market citing commercial unviability). Following China, the UK might choose to require companies to disclose the probabilities of obtaining randomised rewards without banning loot boxes, thus providing consumers with some degree of transparency and protection but being unable to completely shield them from potential harms. Following France, the UK might continue its laissez-faire approach, impose no regulations, and continue to not enforce the Gambling Act 2005 in relation to obvious contraventions (specifically those paid loot boxes containing rewards which can be transferred and therefore sold to other players for real-world money), in contrast to the Netherlands Gambling Authority (Kansspelautoriteit) which has sanctioned companies implementing such illegal loot boxes.
Each of these regulatory options has its pros and cons, but what is true, regardless of the UK’s forthcoming regulatory approach to loot boxes, is that video game companies will need to adapt to being more closely scrutinised by regulators: whether this is in relation to quasi-gambling loot box mechanics or in relation to the increasing implementation of blockchain technology that grants transferable, real-world value to virtual in-game items.
Leon Y. Xiao is a PhD Fellow at the IT University of Copenhagen and a Teaching Associate in law at Queen Mary University of London. Leon researches video game law, particularly the regulation of loot boxes, a quasi-gambling monetisation mechanic in video games.