Category Archives: Loot Box (video game gambling)

New Federal Legislation to Regulate Predatory Gambling-esque Loot Boxes in Video Games Announced by Mo Sen. Hawley

Casino Watch Focus has reported on the ongoing developments and many efforts by regulatory officials to bring awareness to a new form of gambling aimed at kids and video game players. Loot Boxes are a new gambling type mechanic that has the player pay money to open a mystery box in hopes of winning loot to help them in the video games they are playing. In some cases those items carry real value that can be sold, effectively making them video game slot machines aimed at kids. In other cases, loot boxes are implemented to play on the exact same psychology exhibited when people outright gamble, and regulators and studies agree. A lot of international efforts have been taken, but domestically, the reactions have been mostly to encourage the industry to fairly self regulate and to call for investigations into this gambling-esque video game mechanic that is largely targeting children. However, new federal legislation has now been announced by Missouri Senator Josh Hawley. NBC News Online reports: 

Senator Josh Hawley, R-Mo., is introducing legislation that seeks to ban exploitative video game industry practices that target children like loot boxes and pay-to-win, he announced on Wednesday.

“Social media and video games prey on user addiction, siphoning our kids’ attention from the real world and extracting profits from fostering compulsive habits. No matter this business model’s advantages to the tech industry, one thing is clear: there is no excuse for exploiting children through such practices,” Sen. Hawley said.

“When a game is designed for kids, game developers shouldn’t be allowed to monetize addiction. And when kids play games designed for adults, they should be walled off from compulsive microtransactions. Game developers who knowingly exploit children should face legal consequences.”

There are many strategies for regulating microtransactions and loot boxes. Some places have banned them outright, others have looked at making sure the items cant be sold for cash, thus not being gambling, but a transaction and others have focused on the intent of the loot box or simply the age of those making these purchases. Sen Hawley’s approach is a bit of an amalgam with the emphasis on the age of the player and the legislation utilizes a unique lens, The Children’s Online Privacy Protection Act. An online source explains: 

Called “The Protecting Children from Abusive Games Act,” the bill would specifically seek to protect minors by focusing on games either targeted at, or played by, consumers under the age of 18. Determining what games are targeted at minors would apparently be based upon a number of factors, including the game’s subject matter, visual content, and other indicators similar to those used to determine the applicability of the Children’s Online Privacy Protection Act (COPPA).

For games that meet the bill’s criteria, the legislation would prohibit “several forms of manipulative design.” In particular, the announcement identifies that the legislation would prohibit loot boxes, defined as “microtransactions offering randomized or partially randomized rewards to players.” Further, it would outlaw “pay-to-win” game designs, including both (1) attempting to induce players to spend money to quickly advance through game content that is otherwise available for no additional cost; and (2) manipulating the balance in competitive multiplayer games to give players who purchase additional microtransactions a competitive advantage over other players who do not pay the additional fees.

The proposed legislation would be enforced by the FTC through its authority to curb unfair and deceptive trade practices. In addition, the proposed legislation would empower state attorneys general to file lawsuits against game makers to enforce the act. 

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Tribal Casino Sues Video Gaming Company over Illegal Loot Box Gambling

Casino Watch Focus has reported on the ongoing saga of the new gambling mechanic in video games know as loot boxes. This mechanic works by having players purchase boxes full of mystery items in video games. These boxes often cost real world money and the items coming out of the box can be garden variety or fairly useless in game items all the way to very powerful weapons or items that give players a leg up. There have been may instances where these items hold real world value and some examples exist of those items being sold for real money. So the player puts money in the game, pulls the box open lever, gets a random prize of various value and then the player trades those in for real world money, very possibly at a financial gain. Many would argue that the mechanic described is the same as gambling on a slot machine, and that’s the very foundation of for a tribal casino’s lawsuit is video game manufacture.   An online source explains how such a lawsuit could be brought forth: 

The Quinault Indian Nation has filed a lawsuit against Valve, the makers of Steam, claiming that it is running an unlicensed gambling operation and demanding payment for damages.

Okay, this gets a little complicated so settle in. The Quinault Indian Nation owns and operates a licensed casino in the state of Washington, one that is regulated by the Washington Gaming Commission. Valve is also based in Washington.

In its suit against Valve (via Geekwire), the Quinault Nation alleges that “Valve facilitated illegal, unregulated and unlicensed online gambling” when it launched skins for /Counter-Strike: Global Offensive /(/CS:GO/).

Back in 2013, Valve started releasing skins for weapons in /CS:GO/, these upgrades are purely cosmetic. Players would earn crates by playing /CS:GO /and these crates could then be opened with keys which Valve sold in its store. The keys were the only way to open the crates, and it made Valve a tidy bit of cash.

The Quinault Nation says that “the look, feel, sound and experience [of opening a crate] was basically an online slot machine”, providing YouTube footage of players opening crates to back up its claim.

What’s particularly striking in this case, is that seemingly at every level of the transaction, Value, the company being sued by Quinault Indian Nation, had their hand in guiding the process. An online source explains:

It points to the skin gambling sites that were launching and says Valve did nothing to stop them. “Valve had actual knowledge of the identity of the Valve accounts that gambling websites used to effectuate gambling transactions, and chose not to take any action against them,” the court documents state.

It goes on to claim that “Valve allowed gambling websites to use Valve accounts on Valve’s servers and Valve’s computers to effectuate gambling transactions” and that “Valve also provided technical support to gambling websites and real-money cash out websites, despite those websites violating Valve’s Steam Subscriber Agreement, and would return control of gambling websites’ Valve accounts back to the gambling website after being hijacked or hacked by other third parties.”

Despite simply providing an incredibly clear picture for those legislative and consumer protection bodies looking to best understand just how much these loot boxes are no different from gambling, the tribe also outlines exactly how it hurts not only their business with the State, but how doing so illegally without following state regulation further harms those involved. They conclude: 

The Nation has a contract with the State of Washington that means it must remain compliant with the state’s laws if it wants to operate casinos, and that compliance costs money. It has to “engage in responsible gaming, prevent fraud, prevent illegal gaming, and prevent underage gambling”. The Nation also pays 2% of its earnings in Impact Mitigation Funds, which go to paying support services in area around the casino.

If Valve is a gambling operation, like the Nation claims, then it is an unlicensed one and doesn’t incur any of the costs or the risks that come with a gambling license. The Nation is suing for damages, but also the money Valve obtained through gambling transactions.

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New Studies Point to Connection between Loot Box Spending and Problem Gambling

Casino Watch Focus has reported on the newest gambling mechanic that has taken over video games aimed at children. Loot Boxes are a gambling reward system where the player pays to acquire mystery boxes that when opened provide random in-game items. These items can be simply cosmetic items like a new outfit for a character like Luke Skywalker to wear in Battle Front II, the Star Wars Game based on the Disney property that EA game developed that brought this issue to the forefront, to actually in game weapons that make you more powerful and thus able to win more. Many have called this mechanic out as simple gambling directed and children and the amount of money people spend on loot boxes chasing a certain item is staggering. Many world leaders and government agencies have either banned their use or have called for studies to enact legislation to properly regulate them. Now two large studies have come forward that provides proof that this mechanic plays on the same psychological principles that turn people into problem gamblers as well. An online source reports: 

Many popular games allow people to pay a small fee to obtain a “loot box” containing random selections of virtual in-game items. New research has found that there is a significant relationship between problematic gambling behaviors and spending money on loot boxes.

The findings, which appear in the journal PLOS One, indicate that people who spend more money on loot boxes are also more likely to be unable to keep their gambling habits in check.

“Loot boxes are extremely widespread. A recent analysis we did showed that they may feature in as many as 63% of mobile games. They’re extremely profitable, too: They’re estimated to have perhaps generated as much as $30 billion in revenue in 2018,” said study author David Zendle of York St. John University.

The societal impact of such finding is troubling to say the least. Various game publishers have made some changes to their loot box systems so that you can’t “cash out” or sell your items for real money, thus avoiding the technical definition of gambling in some jurisdictions. Still, others see the entire mechanic as so psychologically manipulative, that regulation is absolutely necessary, especially when so many games are geared towards children. The article goes on to outline the impact:

The participants all reported regularly playing at least of one of ten popular games that feature loot boxes: Player Unknown’s Battlegrounds, League of Legends, Hearthstone, Overwatch, Counter-Strike: GO, FIFA 18, Rocket League, DOTA 2, Team Fortress 2, and Tom Clancy’s Rainbow Six Siege.

“There is a link between loot box spending and problem gambling. However, we’re not sure if this means that loot boxes literally cause problem gambling, or if it means that people who are already problem gamblers spend significantly more money on loot boxes. In either case, though, it doesn’t look socially beneficial.”

Some researchers have compared loot boxes to a predatory form of psychological ‘entrapment’ where players spend an escalating amount of money because they believe they have invested too much to quit. But longitudinal research is needed to determine whether loot boxes are directly related to the development of gambling problems.

“Researchers have suggested that loot boxes might create a gateway to problem gambling. We still don’t know if this is true,” Zendle remarked. The study, “Loot boxes are again linked to problem gambling: Results of a replication study,
was authored by David Zendle and Paul Cairns. 

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YouTube Creators Under Fire for Underage Gambling Promotion by Sponsoring Loot Boxes

Casino Watch Focus has reported on the ongoing developments over a video game type mechanic known as loot boxes. Player, often children, spend money to gamble at receiving a mystery item from a box. This loot can sometimes be traded or sold for cash. Over 16 countries have either regulated it or called for studies. Most recently the FTC. In England, the House of Commons called loot boxes massive and addictive technology. The use has been primarily seen in video games but the idea has spread to YouTube. Both American and UK YouTubers are under fire for offering the ability for their viewers, mostly. The UK’s Telegraph explains: 

Popular YouTubers have come under fire for promoting controversial games linked to gambling to young viewers. Jake Paul and Brian “RiceGum” Lee, who have 28.5 million subscribers between them, were among those criticised for posting sponsored videos showing them spending money on “loot boxes”.

Loot boxes, which appear in video games, prompt players to spend money in exchange for random in-game purchases. In new promotional videos, both Jake Paul and Brian “RiceGum” Lee clicked on online mystery treasure chests and revealed they had won real life objects including Apple AirPods and trainers worth $1,000.

MysteryBrand, the company behind the promotional videos, offers a real-life version of these boxes that can cost between $3.99 (£3.16) and $1,300 (£1,028) apiece. Each box contains a range of possible pre-selected items but a user has no idea what they will get until they have paid.

MysteryBrand is understood to have paid $100,000 for the videos, which were lambasted by the duo’s viewers as well as YouTubers Ethan Klein, Kavos and PewDiePie.

Given the size of some to these content creators YouTube channels, its somewhat surprising that they wouldn’t vet the loot box concept. Unfortunately, they didn’t with one even saying he didn’t think it’s a big deal at all. YouTube released a statement and pulled at least one of the videos and regulators have called this out as gambling. An online source reports:

YouTube has already pulled Hudson’s promotion from view, with a spokesperson saying: “YouTube believes that creators should be transparent with their audiences if their content includes paid promotion of any kind. Our policies make it clear that YouTube creators are responsible for ensuring their content complies with local laws, regulations and YouTube community guidelines. If content is found to violate these policies, we take action to ensure the integrity of our platform, which can include removing content.”

The activities of MysteryBrand are still being assessed by the Gambling Commission but the children’s commissioner for England has already come out against the service, telling the paper that this amounted to ‘gambling, plain and simple’.

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FTC and Others Investigating the Dangers of Loot Boxes in Video Games and their Gambling Impact

Casino Watch Focus has reported on the ongoing happenings of loot boxes, a video game mechanic that most view as a form of gambling that prays on children. Various local and international agencies have taken the threat seriously and have started seriously looking into the dangers of loot boxes and their link to gambling. Most recently, 16 countries signed an agreement to study loot boxes as more and more evidence draws links between loot boxes and problem gambling. As an online source reports, the FTC is joining in those that have expressed serious concern with their own investigations:

Federal Trade Commission chairman Joe Simons announced Tuesday that the agency would be investigating the use of micro-transactions, commonly referred to as loot boxes, in video games. According to NBC, there has been growing concern around the use of these loot boxes, which some view as a form of gambling designed to be addictive that is marketed to children.

Earlier this year, Senator Maggie Hassan of New Jersey sent a letter to the Entertainment and Software Ratings Board (ESRB) president to request that she re-evaluate how the board rates games with loot boxes, according to the popular gaming news platform Polygon.

“The prevalence of in-game micro-transactions, often referred to as ‘loot boxes,’ raises several concerns surrounding the use of psychological principles and enticing mechanics that closely mirror those often found in casinos and games of chance,” Hassan wrote in her letter.

Researchers looking into the issue have found signs of addictive behavior and problem gambling among gamers who spend money on loot boxes. One study published in the /Public Library of Science/ which surveyed 7,000 gamers found that “the gambling-like features of loot boxes are specifically responsible for the observed relationship between problem gambling and spending on loot boxes.” They therefore concluded that “there may be good reason to regulate loot boxes in games.”

Across the pond, similar investigations are happening in the UK as the criticisms of look boxes grow, particularly as some of the most popular video games in the industry are adopting these predatory gaming mechanics. The Guardian reports: 

A House of Commons committee has announced plans to investigate the growth of “immersive and addictive technologies”, to advise the government on how to create policy and regulation that can protect the public from the negative effects of digitisation and “gamification”.

It follows a growing campaign against deliberately addictive mechanics in technology and video games, particularly the crossover with gambling represented by “loot boxes” – randomised rewards sold in games for real money.

The links between gaming and gambling is one of the key points to be investigated by the committee, which will ask: “What are the effects of in-game spending, especially on children, and does it need stronger monitoring or regulation?”

Games such as Fifa, Overwatch and Call of Duty have been criticised for the practice, which has led to reports of primary school-age children spending almost £500 on Fifa players and getting into the habit of spending £15 a week on pseudo-gambling. 

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UPDATE: 16 Countries Sign Agreement to Fight Loot Box Gambling in Video Games as New Study Draws Link Between Loot Boxes & Problem Gambling

Casino Watch Focus has long reported on the ongoing fight to regulate the addictive and gambling-esque gameplay mechanic known as loot boxes. Video games offer boxes that can be purchased for real money and they randomly provide in-game items. These items often have real world value and have certainly been sold as such. Clear links between this and slot machine gambling have been drawn and many are realizing what’s at steak. The issue became a main-stream topic when the Disney’s popular Start Wars franchise was licensed and used by video game publisher EA to make Battlefront II. The loot boxes were a critical component to advancing in the game and it was practically essential from children playing the game to buy these loot boxes to get equipment to be able to compete in the game. The situation was so bad one legislator called the game and Star Wars Themed online casino. After several individual dealings with loot box regulation, including the first actual ban, we now see the first coalition attempting to regulate this new form of gambling to children. Variety explains: 

Fifteen gambling regulators from Europe, as well as Washington State Gambling Commission, signed an agreement to work together to address the “risks created by the blurring of lines between gaming and gambling,” according to Gambling Commission It also plans to tackle third-party websites that offer players the chance to gamble or sell in-game items.

Certain countries, like Belgium and the Netherlands, have already taken measures including officially declaring loot boxes as gambling. Those countries even had players unable to open loot boxes in “Counter-Strike: Global Offensive” (CS:GO) due to some players selling rare skins and other in-game items on third-party websites, sometimes for large sums of actual money.

Another measure was taken by popular games selling platform Steam, as Valve removed the ability to trade items in “CS:GO” and “Dota 2” on its platform to comply with gambling regulations in June. However, this will mark the first international combined effort against the concerns of gaming and gambling— which could mean a more intense effort than what individual states have taken.

Neil McArthur, chief executive and signatory of the UK’s Gambling Commission explained the intent behind the effort. “We have joined forces to call on video games companies to address the clear public concern around the risks gambling and some video games can pose to children,” McArthur said. “We encourage video games companies to work with their gambling regulators and take action now to address those concerns to make sure that consumers, and particularly children, are protected.” McArthur further noted that children could be “gambling with money intended for computer game products” using sites that allow users to bet real currency on in-game items. “We want parents to be aware of the risks and to talk to their children about how to stay safe online,” McArthur said.

Such efforts are even more critically important as more and more research is revealing the true cost and risk to our children. It was already reported that the loot box industry is expected to reach $50 billion dollars, but new research is demonstrating exactly what kind of negative effects that can have on children, and given the psychological similarities between gambling and these gaming mechanics, its no surprise the finding point towards a gateway to problem gambling. An online gaming publication reports:

An Australian committee has released the findings of an investigation on loot boxes in video games started earlier this year, reporting that loot boxes and problem gambling are linked and that the monetization practice comes with “a serious risk […] to cause gambling-related harm.”

The debate about loot boxes and their connection to gambling has been raging for quite some time at this point, but the Australian government’s investigation and findings back a growing number of lawmaking bodies and regulatory committees working to impose or encourage regulation of the practice.

In the case of this investigation, and according to information on the study shared by Lexology, researchers looked at a sample size of roughly 7,500 individuals and found “important links between loot box spending and problem gambling.”

The report notes that players with severe gambling problems were more likely to spend large sums on loot boxes in video games, and that its findings suggest that loot boxes can act as a gateway to problem gambling and that the monetization practice itself gives game companies “an unregulated way of exploiting gambling disorders amongst their customers.”

“These results support the position of academics who claim that loot boxes are psychologically akin to gambling,” reads a statement shared along with the findings, shortly after calling back to an earlier quote from the ESRB that likened loot boxes to baseball cards. “Spending large amounts of money on loot boxes was associated with problematic levels of spending on other forms of gambling. This is what one would expect if loot boxes psychologically constituted a form of gambling. It is not what one would expect if loot boxes were, instead, psychologically comparable to baseball cards.” 

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McDonald’s Come Under Fire for Super Mario Slot Machine Toy

Casino Watch Focus has long reported on underage gambling and risk factors for children exposed to gambling. The NFL came under fire for marketing fantasy football to minors, and they decided to end those efforts. More recently, its been loot boxes in video games that have been so widely discussed. As many have explained, it’s a game mechanic with virtually no difference from gambling, with on legislator outright calling Battlefield II a “Star Wars Themed Online Casino.” Where as Mickey Mouse, the second most recognizable character in the world under Disney was under fire (as they own the Star Wars brand and had to intervene in the loot box situation), its now the world most recognizable character, Nintendo’s Mario, that’s in news.   McDonalds made a slot machine toy of Mario in a line of Nintendo themed happy meal toys, and its been called inappropriate by the National Council on Problem Gambling and others. An online source explains: 

Today, Jennifer Kruse, Executive Director of the Florida Council on Compulsive Gambling (FCCG), joined the National Council on Problem Gambling by calling upon the toy manufacturer giant, Nintendo® of America, and the fast food industry leader, McDonald’s®, to stop marketing their Slot Machine Super Mario™ toy from McDonald’s® Happy Meals®.

“We were shocked when we noted the slot machine toy in a Happy Meal® here in Florida. Nintendo® and McDonald’s® need to be attentive to the messages their products are promoting among children,” said Kruse. Youngsters are very impressionable and despite the restrictions to gamble among minors, research reveals that adolescents are involved in gambling activities and are at higher risk for developing gambling problems than their adult counterparts.”

“Just because you cannot easily ‘see’ a hazard, does not mean it doesn’t exist. Had the Super Mario™ Happy Meal® toy highlighted a bottle of beer or bloodshot eyes, or had the fantasy character smoking a cigarette, government and others would be up in arms. Unfortunately, we can no longer afford a double standard when research confirms that problem gambling is a growing public health issue, in general, and especially among adolescents, that demands attention now,” concluded Kruse. 

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