By Keith Whyte, National Council on Problem Gambling (US)
As regulators you know that gambling is regulated in almost every society due to the enormous revenue it generates, concerns about fairness and integrity as well as the potential for harm to the public especially from addiction. Gambling regulators around the world are faced with legal, regulatory and policy challenges presented by loot boxes and other “arguably not legally gambling” such as fantasy sports, social casino gambling, free-to-play sports betting apps and prediction games with prizes. These businesses are often engaged in “regulatory entrepreneurship” because they see enormous opportunity within gray areas of the law.* The National Council on Problem Gambling in the United States has been looking at these issues for a number of years and based on our decades of experience in gambling addiction and responsible gambling we would like to outline our concerns and our recommendations for regulators. For this article I will focus on loot boxes, drawing from my recent testimony at the US Federal Trade Commission workshop Inside the Game: Unlocking the Consumer Protection Issues Surrounding Loot Boxes on August 7, 2019.
Overall, we believe that many features of loot boxes are similar to those of slot machines. Players who pay to play a slot machine or unlock a loot box are risking that money for the chance of winning a prize or reward that is of value to them. Factors common to many loot boxes and slot machines include random distribution of prizes, variable value of the prizes, near-miss features plus visual and sound cues associated with participation and reward. These features are well known to trigger urges to play along with increased excitement and faster play. For some users this is a pathway to problem gambling.
While the research on loot boxes and gambling problems is still in its infancy, the published reports have all shown cause for concern. The most recent study concluded that paying for loot boxes is linked to problem gambling.** Problem gambling includes all gambling behavior patterns that compromise, disrupt or damage personal, family or vocational pursuits. The essential features are increasing preoccupation with gambling, a need to bet more money more frequently, restlessness or irritability when attempting to stop, “chasing” losses, and loss of control manifested by continuation of the gambling behavior in spite of mounting, serious, negative consequences. Consequences of gambling problems include financial harm, emotional difficulties, poor work or school performance, poor mental and physical health, and higher rates of depression, substance abuse and suicidal behavior. The scientific journal Nature published an editorial urging the scientific community to “engage actively in the debate regarding the status of video game loot boxes and the potential risks they present for vulnerable populations” and the authors also found that nearly half of the loot boxes they reviewed met psychological criteria for gambling even though those games are rated as appropriate for adolescent players under 18.”***/**** Noted gambling researcher Dr. Mark Griffiths stated loot boxes meet “almost any definition of gambling currently used in the field of social sciences.”*****
Some jurisdictions have found loot boxes meet criteria for gambling in their jurisdictions, including Belgium and the Netherlands. Most others are still reviewing the issue or haven’t yet made a determination. The National Council on Problem Gambling believes that an approach to loot boxes, particularly concerning potential negative impacts on youth, should be based on a precautionary principle. “The precautionary approach rejects the notion that risks are acceptable until harm has been proven or that risks can continue unmitigated until such time as the effectiveness of a harm minimization measure is proven.”****** As stated previously, every study we are aware of has found an association between loot boxes and gambling problems. Indeed, given everything we know about the similarities between loot boxes and slot machines it would be extremely surprising if there was not such an association.
Therefore there is reasonable concern that gambling-related harm may occur to some loot box users, particularly among minors and among individuals with or at risk for gambling problems. Video game players are predominately young men and boys, many under the age of 18. Males are consistently found to be at higher risk for gambling problems and youth are another vulnerable population with strong associations between gambling, gaming and gambling problems. “The early onset of gambling remains one of the biggest predictors for the development of gambling-related problems. There is abundant national and international research identifying the potential harms associated with young people’s early exposure to gambling.”*******
Based on the above information we recommend addressing concerns around loot boxes and addiction with a multi-layered approach to users, parents and communities to ensure an appropriate range of protections is put into place. The gambling addiction field has developed a variety of innovative responsible play policies and programs that may be applicable to loot boxes to better inform consumers, prevent gambling-related problems, facilitate treatment-seeking, support recovery and increase the evidence base.
Our recommendations specific to loot boxes call on game companies and designers/developers as well as software trade associations to play a constructive role by utilizing their data, design expertise and innovative technology to facilitate informed choice among users. This includes providing information on whether loot boxes are present, the number or value of items in loot boxes and the frequency of distribution. We acknowledge the efforts of Riot Games and Blizzard in this area as well as the recent announcement by the Entertainment Software Association that all their members would disclose loot box odds & information by 2020. However, we know from gambling research that information about odds and randomness alone does little to improve decision making or reduce risk of addiction so additional measures are necessary.
When loot boxes meet criteria for prize, chance & consideration as determined by subject matter, visual content, and other indicators the game should trigger a rating of M for Mature, regardless of whether the game meets legal definitions of “gambling” in a particular jurisdiction. NCPG also recommends changing ESRB definition to “using real currency to participate in gambling or simulated gambling” and adding a Simulated Gambling and/or Loot Box content descriptor to better inform parents and players about gambling-related risks. Apple recently announced a policy to require games with loot boxes that feature “heavy or intense simulated gambling” to carry a 17+ age rating.
NCPG provided additional recommendations around parental controls, data, research and revenue in our testimony. Most importantly, we call on national, state, tribal and local gambling regulators to review loot boxes (and other gambling-like activities that may fall in gray areas of the law) to determine if they meet the criteria for gambling and thus should be subject to regulation in their particular jurisdiction.
The author would like to thank Cam Adair, Christopher Hansford, Julie Hynes, David Monahan and Dan Trolaro for their help on loot boxes and related issues.
The National Council on Problem Gambling was founded in 1972 and is neutral on legalized gambling. We serve as the national advocate for programs and services to assist problem gamblers and their families. We improve health and wellness by leading state and national stakeholders in the development of comprehensive policy and programs to reduce the personal, social and economic costs of problem gambling.
* Pollman, Elizabeth & Barry, Jordan. Regulatory Entrepreneurship. Southern California Law Review. Vol 90: 383-448 (2017).
** Zendle, David. Paying for Loot Boxes Is Linked to Problem Gambling, Regardless of Specific Features Like Cash-out and Pay-to-win. Computers in Human Behavior, in press.
*** Editorial: Gaming or Gambling? Nature: Human Behavior, Vol 2, August 2018
**** Drummond, Aaron and Sauer, James. Comment: Video game loot boxes are psychologically akin to gambling. Nature: Human Behavior, Vol 2, August 2018.
***** Griffiths, Mark, Is the Buying of Loot Boxes In Video Games A Form of Gaming or Gambling? GLRE 2018.
****** Massachusetts Gaming Commission, Responsible Gaming Framework, Version 2.0, May 2018.
******* NCPG Letter to McDonalds & Nintendo of America, August 16, 2018.