Leon Y. Xiao reports on the latest decision on loot boxes from the Netherlands.
On 9 March 2022, in the Netherlands, the Administrative Jurisdiction Division of the Council of State, has found that loot boxes in the FIFA video games published by Electronic Arts do not contravene Dutch gambling law, contrary to the Netherlands Gambling Authority’s (Kansspelautoriteit; Ksa) previous interpretation of the law.
Loot boxes are virtual products in video games that can be purchased by players to obtain randomised rewards. Policymakers and regulators around the world have considered whether loot boxes might legally constitute gambling. The UK Government closed a dedicated public consultation on loot boxes and potential law reform in late 2020: a report is expected imminently.
In 2018, the Netherlands Gambling Authority opined that loot boxes that required players to pay real-world money to purchase and whose content possessed real-world monetary value (because the content can subsequently be transferred and thereby bought and sold between players) to legally constitute a ‘game of chance’ and therefore contravene Dutch gambling law, if offered without appropriate licencing. The UK Gambling Commission came to a similar conclusion in relation to UK law for this specific type of loot boxes, although it has not taken any enforcement actions.
In 2019, the Netherlands Gambling Authority then enforced the law according to its interpretation by imposing a financial penalty on Electronic Arts for its allegedly illegal loot box implementations (which required purchased using real-world money and whose content has transferable real-world monetary value).
In 2020, on appeal by Electronic Arts against the imposed 2019 financial penalty, the District Court of The Hague upheld the Netherlands Gambling Authority’s interpretation of Dutch law and opined that loot boxes do constitute a ‘game of chance’ and so Electronic Arts’ sale of which contravene gambling law.
However, Electronic Arts then successfully appealed to the highest administrative court in the Netherlands, whose judgment was handed down yesterday. The Netherlands Gambling Authority was wrong to have determined loot boxes as a standalone ‘game of chance’ without considering the wider video game that contains them.
The Court decided that the correct legal question to pose is not whether loot boxes constitute a ‘game of chance,’ but rather whether the overarching video game containing the loot boxes constitutes a ‘game of chance’ [paragraph 8.5]. The Court then decided that the FIFA video game is a ‘game of skill,’ albeit with an element of chance (the loot boxes), because the vast majority of players experience it as such. Accordingly, because the overarching FIFA game is predominantly a ‘game of skill,’ Electronic Arts has not contravened Dutch gambling law.
Importantly, and unlike previous assessments made by policymakers, regulators and the academic literature, the Dutch Court has determined potential contravention of gambling law based on the overarching video game and not based on the loot box in the abstract as a standalone mechanic or ‘game.’ This represents a paradigm shift. This Dutch perspective might not necessarily be adopted by other countries.
This Dutch judgment of the highest administrative court in the Netherlands cannot be further appealed.
The loot box issue continues to develop globally, perhaps taking surprising turns at times. How other countries will regulate this mechanic (if at all) remains to be seen.
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.