In the realm of videogame regulation, "loot boxes" are defined as virtual mystery packages that players can acquire using in-game credits or real money, offering a random assortment of items. Distinguished from typical in-game rewards by their unpredictability, loot boxes are at the center of loot box regulation debates. The items found in loot boxes are unique to each game title but could include any combination of the following:

• Upgraded weapons and extra items to boost armour or health.
• Power-ups to make a player stronger or more agile.
• Access to new characters or followers.
• New skins that allow players to change the appearance of their game character.
• Access to new features or game environments.
• Extended time limits to enable longer gaming sessions.

The potential risks

When players purchase loot boxes, there's often an element of mystery and excitement involved, with the process made more enticing by the use of eye-catching graphics and sounds. Because loot boxes are now ubiquitous in games, there's an argument that without regulation, they may normalise gambling and worsen mental health for young, impressionable gamers prepared to spend real world money to unlock potentially valuable prizes.

Are loot boxes a form of gambling?

There are countless ongoing debates about whether players purchasing loot boxes constitutes a form of gambling. Some governments and regulatory organisations claim that they are because gamers can't see what they've bought until after they've paid.

Who currently regulates loot boxes?

Loot boxes and online gaming generally are not governed by a single international organisation or a uniform set of rules. Therefore, each country or jurisdiction has its own laws concerning loot boxes, deciding on an individual basis as to whether this type of in-game monetisation falls under local gambling laws.

Meanwhile, many countries have no regulations in place whatsoever concerning loot boxes, making the current landscape somewhat confusing, especially if developers wish to release the same game in multiple regions worldwide.

Below, you'll find a summary of the latest developments in loot box regulation worldwide, taking a look at a selection of countries with large gaming markets, and how the laws vary considerably from location to location.

Loot box regulation in the EU

A December 2022 report recommended that the EU implement stricter loot box regulation and called on the video game industry to "mitigate the risks of gaming disorders".

Meanwhile, a European Parliament Report has made several recommendations to the EU Commission to enhance consumer protection around loot boxes. However, aside from existing EU consumer protection laws, loot boxes do not fall under specific legislation like gambling. In other words, loot box regulation is currently being enacted state-by-state and remains fragmented.

Belgium

The Belgian Gaming Commission has been quick to act on the issue of loot boxes, declaring as early as 2018 that when players can buy into loot boxes with real currency (whether directly or indirectly), the act legally constitutes gambling.

A company requires a licence to be legally allowed to deliver gambling products and services in Belgium. Unfortunately, because videogame loot boxes cannot currently be licensed, all paid-for versions of this mechanism are classed as illegal gambling products.

However, despite the somewhat draconian laws that have been enacted, Belgian authorities haven't yet strictly enforced the ban on loot boxes. One report found that "82% of Belgium's 100 highest-grossing iPhone games continued to generate revenue by selling loot box products". So far, big-name developers have either complied with the loot box ban and removed them from their titles, or chosen to forego publishing in the Belgian market.

Meanwhile, Belgian gamers continue to access versions of games containing loot boxes in other jurisdictions using VPNs, highlighting a major stumbling block for non-unified, country-specific legislation.

The Netherlands

Like their counterparts in Belgium, the Dutch Gaming Authority was quick to ban loot boxes for violating gambling laws. Netherlands law prohibits offering games of chance without the necessary permits, and loot boxes were brought under these regulations in 2018. 

The Netherlands is an interesting jurisdiction when it comes to loot box regulation, as the country has levied fines of up to €5 million against game publisher Electronic Arts for its in-game Team Packs within FIFA Ultimate. EA appealed the decision on the grounds that the in-game packs have no real-world value, and The Administrative Jurisdiction Division of the Dutch State Council subsequently sided with the developer.

France

The French Autorité Nationale des Jeux (National Gaming Authority) has stated that loot boxes are not subject to regulations on games of chance unless the items inside the loot boxes have real-world monetary value.

Spain

In July 2022, the Spanish Ministry of Consumer Affairs announced a draft bill to regulate loot boxes in order to protect minors from addictive gambling behaviours. Under the proposed legislation, game developers will be required to include self-exclusion mechanisms in their products, where users have an option to temporarily suspend themselves from opening loot boxes for a set period of time.

Finland

Until now, Finland hasn't attempted to regulate loot boxes, but members of the Finnish parliament have now proposed a bill to class them as gambling. The new bill seeks to amend gambling regulations to encompass "virtually utilisable profits" so that all prizes, regardless of monetary value, will be caught by gambling laws.

Several prominent game developers, including Supercell (Brawl Stars and Clash of Clans) and Rovio (Angry Birds), are based in Finland, and the former has already removed loot boxes from Brawl Stars and has replaced them with a progressive reward system to unlock new content.

United Kingdom

The UK government began a review of the existing Gambling Act back in December 2020, which also called for evidence on the impact of loot boxes on "gambling-like behaviour". Although lawmakers said they would not be amending the current gambling regulations to cover lot boxes, officials have announced that they would like to see improved protection for players, including:

• Restricting the purchase of loot boxes to children and young people unless a parent or guardian specifically enables the feature.
• Forcing developers and distributors to make all gamers aware of spending controls and put measures in place to support safe and responsible gaming.

The UK Government has also stated that there should be improved research on the "positive and negative impacts of video games to inform future policy making".

United States

In 2021, a US federal court threw out a class action lawsuit against Google where parents of young gamers claimed that under California law, loot boxes constituted illegal "slot machines or devices".

While there have been efforts in the United States to tighten regulations surrounding loot boxes — including a Federal Trade Commission workshop — the US Constitution and state-to-state legal differences make it difficult to reach a consensus.

For the foreseeable future, it seems that loot boxes will remain outside of the scope of gambling laws, though so-called "soft legislation" could force developers to issue warnings and guidance for parents and young players.

China

China has strict and meticulous laws in place on gambling, and loot boxes are already included in the regulations. Legislation prevents loot boxes from being purchased using real or virtual currencies, and if implemented, the contents of a loot box must be accessible via other means.

As well as the above considerations, developers must disclose the odds of winning individual items in loot boxes, and a publicly available record of loot box prizes and outcomes must be provided for the last 90 days.

China's loot box laws also disallow:

• More than 30 single loot boxes per day.
• More than three "10x" loot box bundles per day.
• More than 50 total boxes per day.

Due to the scope and complexity of China's gambling laws, many developers prefer to remove loot boxes entirely. However, it should be noted that the rules are tricky to police, so it's possible to find games in the Chinese market that appear to be transgressing — or at the very least bending — the comprehensive government regulations.

Japan

As the birthplace of the loot box, Japan was the first country to outlaw a particular style of in-game purchases known as Complete Gacha, in 2012.

Today, Japan allows many types of micro transactions and in-game spending to take place in video games. However, some specific mechanisms are still prohibited, including multi-level loot boxes that must be completed sequentially to advance to a higher game level. 

Japan also has several requirements that developers must meet if they plan to implement loot boxes, including disclosing the odds of receiving a specific item and adding measures to prevent virtual items from being traded using real money.

Singapore 

Singapore's new Gambling Regulatory Authority (GRA) oversees various gambling games and genres, including casinos, lotteries, sports betting, and now, videogame loot boxes.

At the end of 2022, plans were set in motion for Singaporean laws covering "online gaming containing virtual prizes" to be revised to cover virtual items that could potentially be transferred out of the game and traded for real money or used as a currency on other platforms.

The result of the legislation means that virtual items must only be available in "the context of gameplay and entertainment" and cannot be transferred away from the game. These changes mean that online gambling sites allowing virtual items from other games to be used in casino stakes or for other bets will be prohibited.

South Korea

Some South Korean game developers and distributors have been voluntarily disclosing the probability of obtaining particular items from in-game loot boxes, though until recently, the country had no specific laws in place forcing them to do so.

On February 27th 2023, a bill was passed by the South Korean government that amended the Game Industry Promotion Act. The National Assembly voted to force video game developers to disclose the odds of obtaining loot box items in games, as well as on official websites and when used in advertising.  

If videogame companies fail to comply with the new legislation or make false claims regarding loot box prizes, they face fines of up to $15,000 and even imprisonment for up to two years.

Australia

Australia's videogame rating system has historically been very strict, though the ‘Classification Guidelines and Classification Enforcement Act’ disregarded loot boxes when determining the age rating of a game. 

However, at the end of 2022, the government announced upcoming reforms to the National Classification Scheme, which will significantly tighten regulations when implemented. New Federal government proposals would immediately upgrade any game with simulated gambling to an 18+ certificate while putting age restrictions on in-game loot boxes. New laws will also require games featuring loot boxes to carry warnings for parents and guardians.

Although the proposed laws have not yet been set in stone, tighter regulation will likely come into force soon, meaning that even seemingly innocent mainstream titles like EA's FIFA series would be out of the reach of children.

Brazil

Brazil is home to the world's 13th-largest videogame market, and in 2017, the country's government began the process of creating laws to prohibit or limit loot boxes. 

The decision to tighten regulation came after Brazil's National Association of Child and Adolescent Defense Centers agreed on a Public Civil Action against several major game publishers, including Nintendo, Konami, Electronic Arts, Valve, Ubisoft, Microsoft, Sony, Apple and Google. The public action contends that loot boxes are gambling and, therefore, illegal under Brazilian law. 

Although game developers have not yet been forced to remove loot boxes from titles sold in Brazil, if officials determine that Brazilian law has been violated, $700,000-per-day fines could be levied for ongoing violations.

As of 2023, a new federal government has been instituted in Brazil. Although we know the general position the country will take on loot box regulation, the finer details are still somewhat vague.

Summing Up

As you can see, loot box regulation varies significantly between jurisdictions, with many countries still in the final stages of updating their gambling laws. Therefore, if you intend to release a game featuring a loot box element of any kind, you should carefully consider whether it's worth being excluded from certain markets due to stricter legislation.

Here are just a few essential questions to ask when building a loot box mechanism:

• Does the loot box (directly or indirectly) use real money?
• Are the virtual items generated tradeable outside of the game?
• What element of chance exists when obtaining a loot box prize?

It's possible to circumvent the legislation of many countries by selling listed (non-random) virtual items for a fixed price or completely eliminating the monetary aspect of the feature. However, if a developer wishes to implement paid loot boxes in the traditional sense, they must adopt a mindset of transparency while introducing measures to help gamers keep track of and control their spending.

Finally, if you’re an indie developer feeling overwhelmed by loot box legislation and other gaming industry regulations, working with a merchant of record can significantly reduce your stress. A merchant of record sells games on your behalf, enabling you to scale globally while remaining compliant with local laws. With all that being said, you’ll still need to make regional changes to your games if you want to include loot boxes or face exclusion from specific markets.