Parents know children spend money buying video games, but it is some less-visible in-game purchases that could be worrisome later on, experts say. Research has suggested that loot boxes — virtual “treasure chests” with potential prizes inside some video games — may have ties to gambling addictions.

Loot boxes are randomized, in-game items a player can purchase with real money. They contain both items that give players a leg-up in the game and cosmetic items that can be used to customize characters and weapons.

Legislators from different countries have questioned the legality of loot boxes, as their function meets some countries’ definition of gambling. So far, no country has successfully banned the in-game items.

Differing legal definitions, conflicting research and circumventable restrictions have prevented countries from banning loot boxes. And while not everyone’s convinced they should be banned, experts told the Deseret News they see cause for concern.

A gambling worry?

Recent research from Newcastle and Loughborough universities concluded that items obtained via microtransactions — small in-game purchases for virtual items — were harmful for young people. The findings suggest these alluring collectibles encourage gambling behaviors at a young age.

Mark R. Johnson, a lecturer at the University of Sydney in Australia, has studied the connection between video games and gambling, as well as how the gaming community has responded as the line between the two activities becomes ever-thinner.

“(Loot boxes) definitely have led to a lot of gamers gaining a degree of familiarity with gambling and gambling-adjacent practices that wouldn’t ordinarily be the case,” Johnson told the Deseret News by email. “The fact that these mechanics are not coming in more traditional gambling contexts, e.g. casinos or online gambling websites, makes them rather more insidious than they might otherwise be.”

Johnson said that many developers of blockbuster and mobile games covertly incorporate gambling elements into their games. While Johnson emphasized gambling-esque microtransactions were not present across the gaming industry — “indie” game developers are among examples of innocents — he said larger companies intentionally use deceptive game mechanics to generate a profit, with little regard to how gamers are affected. 

While Johnson believes action against these business strategies is mandatory, finding a way to accomplish this is difficult, he said.

“The biggest games companies have increasingly shown that they really have little interest in corporate responsibility, making the largest possible profits regardless of the cost,” Johnson said. “Outright restriction might not be a bad move, but these sorts of companies have proven themselves to be very skilled at finding new loopholes, new ways around existing rules, new ways to present or create gambling-style mechanics and so on.”

One challenge to banning loot boxes is that while evidence confirming the link between loot boxes and normalization of gambling is abundant, research stops short of confirming loot boxes cause negative gambling behaviors.

“A lot of research projects on this topic go in with the expectation of finding problem gambling, and often with the agenda to develop ideas of ‘problematic gaming’ or ‘gaming addiction’ that don’t really have much evidence in fact,” Johnson said.

Hard to regulate

Using the Newcastle and Loughborough study as evidence, a bill was crafted in the Australian Parliament to restrict games with loot boxes and gamblified microtransactions. The bill would require those games to be classified as either 18+ or unrated, allowing access only to adults. It would also require a warning parents can easily see.

The Entertainment Software Rating Board in North America includes a notice of “In-Game Purchases (Includes Random Items)” on game boxes. This applies to any game with “loot boxes, item packs, mystery awards,” as well.

While the Australian bill takes inspiration from other countries’ attempts to restrict microtransactions — both Spain and the Netherlands have proposed age-based restrictions on loot boxes, GamesRadar reported — successfully passing such a law may not be easy.

Leon Y. Xiao has a masters-level legal degree from the University of London and has researched video game law in depth, including regulation of loot boxes. Xiao told the Deseret News that while several countries have presented bills to regulate microtransactions, few have succeeded when it comes to loot boxes.

For legislators across the globe, semantics present a barrier. In many cases, legislators hit a roadblock when trying to prove loot boxes violate gambling laws.

“In most countries, gambling law is drafted differently,” Xiao said. “There are different legal elements that you have to meet before something becomes ‘gambling.’”

Xiao said three European Union countries — the United Kingdom, the Netherlands and Belgium — have tried to regulate loot boxes. Only Belgium passed a law against the virtual treasure chests, since only there did loot boxes fully meet gambling criteria.

Regardless, Xiao said, the Netherlands pushed to restrict games that contained loot boxes, while the United Kingdom did not. The Netherlands failed due to the sheer number of games with microtransactions.

“There are just so many games on the mobile market. On the Apple app store, there are over a million games, at least,” Xiao said. “The regulator can’t look at every one of them and then the frequent updates that games receive.”

He added, “Perfect elimination of this mechanic is probably not possible ... (but) the government can still spend a little bit more money to get some of the very popular games removed.”

Loopholes and workarounds abound. Xiao’s past research showed that even Belgium, which enacted a law against loot boxes, has been unable to fully eliminate the virtual chests from games. However, Xiao said that restricting some larger games on the market would still have positive impact on combating deceptive game mechanics.

He said a child searching for games would be less likely to encounter one with a loot box.

But Xiao also questions whether legislators and the public want to dismantle deceptive gambling practices or get rid of video games altogether. He disagrees with the reasoning of some who seek regulation of loot boxes.

Andrew Wilkie, an Australian member of parliament, quoted a concerned mother before the Australian Parliament: “The brain of the gamer is exactly the same as that of a heroin addict.” 

Excessive and inaccurate, smilies such as this only fuel the moral panic many fall victim to when discussing video games, Xiao said.

He noted that while efforts are made to regulate video game loot boxes, no similar effort exists for trading card games’ “booster packs,” which have a near-identical function.

Tricks of the gaming trade

Bingqing Wang, head of user research at virtual reality developer BlooXR Co, has seen the effect of loot boxes on players and the industry alike.

He said games once required a single, upfront payment, but developers now rely on “free-to-play” business models instead. Companies find this advantageous, as “free” games that are continuously updated attract new players, while the sale of virtual items earns a profit.

And microtransactions fuel gamers’ excitement. Loot boxes combine shopping and gambling, where you can pay for the chance to get a rarer item — but therein lies a problem, Wang said.

“When microtransactions combine with the format of gambling, then there’s debate because we are no longer getting what we pay for,” Wang said. “We’re paying for the enjoyment of gambling.”

Some giants of the gaming industry have perfected avoiding microtransaction regulation. For example, Chinese law requires games that contain loot boxes to display the probability of receiving each item before purchase. Wang said there is an information gap, as developers are rarely straightforward about the items available.

A 1% chance to earn an item would imply that a player would require a maximum of 100 loot boxes to receive the item they want. That’s not how it works. Instead of being progressive, the percentage remains 1% for each loot box.

There is an additional effect because of how players respond to losing, Wang said. It’s not atypical to try again and again, especially when it’s as simple as clicking the “Buy Now” button. A study from the Gambling Health Alliance found that roughly one-third of young gamers struggle to keep track of how much money they spend on loot boxes,

“The game industry doesn’t want to use the word “gambling.” They’ll say, ‘Oh, it’s microtransactions! It’s loot boxes!’ But essentially, it is the same thing,” Wang said. “You are not guaranteed anything.”

The question is whether that is harmful enough to demand alternatives. Developers have to keep the lights on and this is one of many business models that benefit companies within the gaming industry.

However, game developers are incentivized to follow regulations in each country or risk being banned. GameRant reported that Blizzard’s Overwatch 2, for example, opted to swap out loot boxes for direct purchases before launch.

“They will find new ways to adjust to these rules,” Wang said. “For these companies, their job is to understand each culture, and understand its rules to try and make a profit.” 

Measuring harm

While the Australian Parliament was presented with the Newcastle and Loughborough study, conflicting evidence and reasoning may prevent legislators from enacting a law.

While Johnson, Xiao and Wang all differ in occupation — and slightly in stance, as well — they share a common view of how minors are affected. 

Xiao told the Deseret News that the Newcastle and Loughborough study found potential for microtransactions to be harmful to children, but the percentage of children who actually buy and open loot boxes is not clear.

According to the Gambling Health Alliance, 15% of youth gamers have taken money from their parents without permission to spend on loot boxes. But Xiao asks, is that a gambling problem or a behavior problem?

“Children and young people are definitely at-risk of potential harm, but I don’t think realistically that children are going to be able to spend as much money on (loot boxes) as an adult,” Xiao said. “If a child starts stealing money to spend on loot boxes, that stealing part is more of a concern than what exactly they’re spending the money on.”

Johnson was unsure of the effect of loot boxes and gambling mechanics on minors, noting “there isn’t a great deal of data out there” specifically studying the topic.

“Examining the potential impact of these gambling-esque systems on young players is important, but we should keep in mind it’s certainly not only young people who are likely to be affected, especially given that adults obviously have access to far more money than your average teenager,” Johnson wrote.

Regardless of age, people and gamers are “curious, and seek excitement and profit,” Wang said. This aligns with CQUniversity Melbourne’s study that concluded positive feelings of enjoyment, financial gain and competition/challenge were among motivators for those who participate in “skin gambling” — gambling virtual items for profit.

Wang recommends that legislators first classify loot boxes as gambling and focus on the different effects between adults and minors afterward. 

Despite the public’s concerns, evidence is mixed on the impact of loot boxes on children. That’s likely to make it harder for Australia and others to regulate them.