Regulating Loot Boxes as Gambling? Towards a Combined Legal and Self-Regulatory Consumer Protection Approach

Updated 14 December 2022: Cite as: Xiao, L.Y. (2021). Regulating Loot Boxes as Gambling? Towards a Combined Legal and Self-Regulatory Consumer Protection Approach. Interactive Entertainment Law Review, 4(1), 27–47. https://doi.org/10.4337/ielr.2021.01.02 Loot boxes represent a popular and prevalent contemporary monetisation innovation in video games that offers the purchasing player-consumer, who always pays a set amount of money for each attempt, the opportunity to obtain randomised virtual rewards of uncertain in-game and real-world value. Loot boxes have been and continue to be scrutinised by regulators and policymakers because their randomised nature is akin to gambling. The regulation of loot boxes is a current and challenging international public policy and consumer protection issue. This paper reviews the psychology literature on the potential harms of loot boxes and applies the behavioural economics literature in order to identify the potentially abusive nature and harmful effects of loot boxes, which justify their regulation. This paper calls on the industry to publish loot box spending data and cooperate with independent empirical research to avoid overregulation. By examining existing regulation, this paper identifies the flaws of the ‘regulate loot boxes as gambling’ approach and critiques the alternative consumer protection approach of adopting ethical game design, such as disclosing the probabilities of obtaining randomised rewards and setting maximum spending limits. This paper recommends a combined legal and self-regulatory approach: the law should set out minimal acceptable standards of consumer protection and industry self-regulation should thrive to achieve an even higher standard.