The monetisation of games is something that is constantly evolving. The industry has undoubtably developed well beyond the traditional “insert cash to play” model of gaming that players saw in arcades back in the 1970s and 1980s. There are now a number of monetisation models available to developers, including (amongst others) subscription fees (think World of Warcraft), season/battle passes (think Fortnite) and rewarded advertising/media (think Candy Crush).

However, the monetisation model that has attracted the most attention, and indeed the most scrutiny, is loot boxes. For anyone who isn’t aware, loot boxes are randomised mechanisms that are contained within games that allow players to pay for the opportunity of opening a “digital box” and receiving a randomly allocated in-game “item“. The major draw of loot boxes is that the items that are available to players within them usually have a varying degree of rarity. This essentially means that by opening loot boxes, players are paying for the opportunity of potentially obtaining a rare and desirable item that can be used within the game.

Anyone who has played Counter-Strike: Global Offensive will be familiar with the concept of paying for keys to open weapon cases which, when opened, can provide anything from very undesirable cosmetic weapon skins worth next to nothing, to very rare cosmetic weapon skins that can sell for hundreds of thousands of dollars (yes, hundreds of thousands of dollars) in what has turned out to be a very lucrative re-sale market.

To get a flavour of just how important loot boxes are to video game companies, you only need to look at a study by Juniper Research which confirmed that loot boxes generated an estimated revenue of $15 billion in 2020. The same study estimated that loot boxes are expected to generate $20.3 billion by 2025, with the expectation that over 230 million players will purchase loot boxes in 2025 alone.

The criticisms of loot boxes are essentially centred around one thing, and that is their uncanny resemblance to gambling mechanisms and their apparent association with problem gambling. This has led to regulatory bodies across the world scrambling to determine the legalities of loot boxes and whether there needs to be regulations put in place to protect players.

Many jurisdictions have already had their say on loot boxes, including Belgium, who have deemed that loot boxes are a form of gambling that are subject to their local gambling laws. In 2018, the Belgian Gaming Commission threatened to take legal action against gaming companies that marketed games containing loot boxes where they didn’t have an appropriate gambling licence. However, despite that, a study published by researcher Leon Y. Xiao found that 82% of the 100 highest grossing Belgian iPhone games during May 2021 had loot box features. Despite the apparent ban on loot boxes in Belgium, they still seem to be very much present. Accordingly, the inference could be that the ban is not being properly and adequately enforced by the relevant authorities.

Not to be left behind, the UK government has also had its say on loot boxes, confirming its view that:

• purchases of loot boxes should be unavailable to all children and young people, unless and until they are enabled by a parent or guardian; and
• all players, including children, young people and adults, should have access to and be aware of spending controls and transparent information to support safe and responsible gaming.

In response to the government’s calls for improved protections for players as set out above, Ukie (the trade body for the UK’s Interactive Entertainment industry) has published 11 industry principles that are designed to ensure that games are developed and marketed in accordance with the government’s objectives for improving player protections.

These industry principles include (amongst others):

• The introduction of technological controls to restrict people under the age of 18 from acquiring loot boxes without parental consent.
• Increasing awareness and uptake of those technological controls, starting with a public information campaign that was scheduled to start in July 2023.
• Forming an expert panel on age assurance in the industry, to develop and share best practices and stay appraised of technological developments.
• Disclosing the presence of loot boxes prior to purchase/download of games, so players can make informed decisions. Ukie highlights that best practice would be to adopt the PEGI “in-game purchases (includes random items)” descriptor to disclose the presence of paid loot boxes.
• Provide clear probability disclosures, so players can easily access clear and simple information on the probability that they will receive certain virtual items. This is something that has been adopted in other jurisdictions, with Taiwan requiring probability disclosures since 1 January 2023, and South Korea requiring the same from 22 March 2024. At present, there does not appear to be any further guidance as to how such disclosures should be made by developers.
• Design and present loot boxes in an easily understandable manner that promotes fair and responsible play.
• Tackling unauthorised external sales of items acquired from loot boxes for real money.
• Committing to lenient refund policies in the events where spending has occurred without parental consent/knowledge.

Compliance with these principles is, at present, voluntary. For now, it would now it would appear that the UK is content to continue to adopt an industry-led approach to loot box practices ahead of any Government decision as to whether to step in with formal regulations.

It is likely that the Government will revisit these principles in due course and, if non-compliance is evident at that stage, then further steps might be taken to ensure compliance (including potentially making the principles mandatory, rather than voluntary).

With that in mind, the Ukie principles will be key reading for developers involved in creating and monetising games that include loot box features.

This is not legal advice; it is intended to provide information of general interest about current legal issues. You should seek specific legal advice before acting in reliance on any of the information provided.