The Case for Banning Loot Boxes

Senator Josh Hawley is a bit of a rarity on Capitol Hill these days, by which I mean that he’s caused a controversy by trying to pass an actual piece of legislation instead of saying something dumb on Twitter. Well, this controversy is about a bill, at any rate. Back in May, the Freshman Republican from Missouri proposed a bill banning “pay-to-win” monetization in video games that were marketed to children. The bill (which is co-sponsored by Senators Ed Markey of Massachusetts and Richard Blumenthal of Connecticut, both Democrats) specifically targets pay-to-win microtransactions and loot boxes on the basis that both are designed to create an “addiction economy” that preys on younger players. Microtransactions and loot boxes are two of the biggest sources of revenue for the video game industry, so the bill has predictably generated a constant stream of opposition from that quarter ever since.

The Entertainment Software Association (ESA) has claimed that the bill is unnecessary, as numerous governments have determined that loot boxes aren’t gambling, and parental controls can shut down in-game spending anyway. Detractors further claim that the bill could “devastate” the game industry if passed. It’s incredibly broad in scope; it would apply to nearly every video game on the market. None of these facts prevent Hawley from being right. As I will demonstrate below, loot boxes are absolutely gambling. They explicitly target not just children, but teens and adults with problem gambling issues. Banning them outright is the only reasonable solution, especially considering how completely the video game industry has failed to regulate itself.

Honestly, it’s somewhat misleading of me to say that the video game industry has failed to regulate itself. In order to fail, you have to make an attempt. Most video game publishers maintain that loot boxes in their games aren’t gambling, and so don’t need to be regulated. CEO Andrew Wilson of EA laid out the most common arguments for that position in a 2018 conference call—namely, that loot boxes always dispense a set number of prizes and there are no ways to cash out. His arguments are ridiculous and irrelevant, respectively. While loot boxes may deliver a set number of rewards, there’s a minuscule chance that any of those rewards will be valuable to the player. The central concept of loot boxes is that players have to buy dozens or hundreds of them if they want a chance to get the rarest prizes. The claim that there’s no way to cash out is both untrue and obviously tailored to avoid a specific legal definition of gambling. And it hasn’t even worked—EA was forced to stop selling its virtual currency in Belgium earlier this year after the Belgian Gaming Commission declared loot boxes a form of gambling. The ESA did not mention that ruling in its response to Senator Hawley’s Bill.

The few attempts at self-regulation from the industry have largely come from platform holders (i.e. Microsoft, Sony, and Nintendo) installing parental controls on their devices. These controls—which, to be fair, the ESA does cite—can allow parents to block in-game purchases on their devices. Of course, parents have to be aware of the danger to activate parental controls, and most video game publishers have been doing their best to prevent such awareness. Recently, a number of games (including a remake of the now 20-year-old Crash Team Racing) have added microtransactions days or weeks after release, skirting mention of them in ESRB ratings and reviews. And the ESA doesn’t tend to advertise platform holders’ much-touted parental controls until after a big story about a kid emptying their parents’ bank account.

There are a lot of those stories. Just last month the BBC published an account of a quartet of kids who emptied their parents’ bank account buying "player packs" in FIFA 2019 (rated E for everyone). That article prompted a flood of similar stories, from five year olds paying for in-app purchases without realizing that they were spending real money to mentally disabled young adults emptying their savings accounts. The evidence of the widespread harm that loot boxes cause is scientific, as well as anecdotal—a recent study on loot box spending warned that the relationship between loot box spending and problem gambling was "more than twice as strong as the relationship seen recently in a similarly recruited adult population."

To borrow an industry term, loot boxes exploiting problem gambling is a bug, not a feature. Jim Sterling has published a series of video essays on the topic (profanity warning); to sum up, loot boxes are designed to get most of their money from “Whales,” the small percentage of a population that will spend thousands of dollars on a game. Though most of the discussion of loot boxes has focused on the harm they do to children (who are more vulnerable to social pressure and don’t always understand the consequences of their purchases), loot boxes also exploit those with gambling addictions, who can trap themselves in a cycle of spending just as easily and have even less protection from predatory purchases. Any of my sources can demonstrate the terrible consequences that ensue.

Senators Hawley, Markey, and Blumenthal’s bill is a scorched-earth option, there’s no doubt about that. But given the video game industry’s failure to regulate itself, I believe scorched-earth is the best option on the table. No game is worth the damage the industry is causing right now, certainly not the dreck that the biggest loot box offenders are producing.