Regulating Loot Boxes as Gambling? Perspectives from Psychology, Behavioural Economics and Ludology

Loot boxes are virtual items in video games which represent a popular contemporary monetisation innovation that offers the purchasing player-consumer, who always pays a set amount of money for each attempt, the opportunity to obtain randomised virtual in-game rewards of uncertain in-game and real-world value. The popularisation of loot boxes has caused a shift in the business model of the video game industry to rely significantly on microtransactions, such as loot boxes, rather than title sales to monetise. Loot boxes have been subject to regulatory scrutiny 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 and applies the psychology and behavioural economics literature on loot boxes to establish the abusive nature and potential harms of loot boxes, which justify their regulation. Informed by game design and using examples from recent games, this paper extends the ludology literature on loot boxes to identify various different implementations of loot boxes and the differing nature of their respective potential harms. This paper argues that, currently, regulators and academics have not subjected each implementation of loot boxes to sufficient regulation and scrutiny. This paper reviews the effects of national loot box regulations and general video gaming regulations in European and Asian countries in order to recommend that loot boxes which involve real-world money should be regulated as gambling, and that a variety of ethical game design measures should be implemented to further ensure consumer protection.