Loot Crates In The Gaming Industry – Will 2018 Be The Year Of Change?

Over 90% of apps offered through Google Play (and Android App stores) are free-to-play and over 25% of all apps in the Apple store are games. Developers of free-to-play games thus rely on advertising and crucially on in-app purchases in and around the games to generate revenue. Seeking to encourage players to spend more money in-game, game developers have begun to use "loot crates" as an increasingly standard in-game reward feature. While most loot crates do not feature real-money prizes, the use of "loot crates" has come under the scrutiny of UK authorities. It has been argued that loot crates have a "game of chance" nature and thus could constitute a form of gambling.

Loot crates are an in-app or in-game purchase item where players purchase virtual boxes for a set fee that contain random rewards such as new characters, bonus lives, virtual money or power boosts to progress further in a game. The value of the item inside the loot crate (within the in-game economy) may exceed the price paid for the crate. Equally, the item inside the loot crate may be sold at a lower price (in the in-game shop) than the price paid for the crate. In this way, the player takes the chance that the price he or she pays for the crate will be lower than the price he or she would pay for the item(s) inside the crate if he or she were to buy it/them from the in-game shop. This chance is meant to enhance enjoyment of the game and to incentivise players to stay engaged and spend money in the game.

In 2016 loot crates were identified by the UK Gambling Commission as creating a potential risk to children and young people. That same year the Commission published a position paper which considered whether loot crates fell into UK gambling law or not. "Gambling" is defined as "betting, gaming or participating in a lottery". "Gaming" is defined as playing a "game of chance for a prize" and a "prize" is defined as including "money or money's worth". On considering whether loot crates fell within the definition of Gambling, the Commission concluded that where loot box "game of chance" rewards consist solely of in-game items as prizes, they cannot be characterised as money or money's worth because their value is confined for use within the in-game economy. Moreover, the fact that a player is not able to 'cash them out' means that use of loot crates is unlikely to constitute an activity that will require a gambling license.

However, although the UK Gambling Commission concluded...