Can legislation fix gaming's loot box problem?

Can legislation fix gaming's loot box problem?
From Engadget - February 24, 2018

Hawaii state Rep. Chris Lee, a gamer himself (he favors the Battlefield series and Rockstar Games' oeuvre), believes there's plenty to do. The Democrat introduced four bills last month: Two (one introduced to state House and one to the Senate) would restrict loot boxes in Hawaii to those older than 21, while another pair would force companies to disclose the odds of winning potential game items. It's not the strongest rebuke of the games industry he and his co-authors could have made, Lee told Engadget, but it's a step in the right directionand it will spur conversation.

The gaming industry has been challenged by legislators before. In the 1980s and '90s, lawmakers panicked that the violence, drugs and sexuality in gaming was affecting youth. To avoid government regulation, the industry formed the Entertainment Software Rating Board (ESRB), which warded off legislative oversight. But this time around, the issue is not moral corruption -- it's whether these particular reward mechanisms are merely gambling in disguise, and if so, should they be in games kids can play? Bills are very public statements, and those proposed by Lee and other state lawmakers have cast doubt on the future of loot boxes as they exist now.

The ESRB has staunchly maintained that loot boxes are not gambling:

"While there's an element of chance in these mechanics, the player is always guaranteed to receive in-game content (even if the player unfortunately receives something they do not want). We think of it as a similar principle to collectible card games: Sometimes you will open a pack and get a brand new holographic card you have had your eye on for a while. But other times you will end up with a pack of cards you already have," the ESRB told Kotaku late last year. We reached out to the ESRB for comment on the recently-proposed bills and did not receive a response at the time of writing.

Legislation is not the only tool lawmakers can use to effect change: Last week, US Sen. Maggie Hassan, a Democrat from New Hampshire, wrote a public letter to the ESRB urging it to take the loot-box issue more seriously, especially because children can easily access games with these mechanisms. Otherwise, as Hawaii's Lee noted, connecting with different groups to raise awareness could provoke a response by, in this case, the gaming industry. His office has started talking with concerned lawmakers, community leaders, medical institutes, schools and other interested parties across the country.

Still, nothing captures America's attention like potential new laws.

Bills proposed by other state lawmakers earlier this year have focused on whether loot-box mechanisms are gambling. Washington state Sen. Kevin Ranker, a Democrat, introduced one last month asking the state's gambling commission to decide whether loot boxes qualify as games of chance. Separately, two Indiana state senators introduced a bill commissioning a study to determine the same, though it was effectively buried when it did not get a committee hearing.

Given that players often buy loot boxes with real money and receive randomized assortments of in-game items, there's a case for considering this mechanism as gambling. If states decided they were, loot boxes would likely fall within the jurisdiction of statewide gambling commissions and be regulated just like any other pay-to-play game of chance.

The gaming industry has good reason to stamp out any loot box-gambling connection: Once states decide to regulate them as such, game studios will have to comply with each law and statute. They would have to switch off features for players in some regions and ensure compliance lest they run afoul of state authorities. This may be a big issue for titans of the industry like Activision-Blizzard, which has centralized loot boxes in many of its AAA games (Call of Duty: WWII, Destiny 2, Overwatch, Hearthstone) to drive up revenue. Smaller studios that ca not afford legal counsel but include loot boxes could suffer more if they violate state laws, according to Marc Whipple, an intellectual-property lawyer who frequently advises video-game companies.

"There's an old saying, 'You may not be interested in politics, but politics are interested in you.' The same thing applies here: You may not be interested in gambling regulation, but gambling regulators are interested in you," Whipple said in an interview with Engadget.

"Because gambling is seen as a privilege, not a right, if the gambling regulators believe that you are in their jurisdiction, if they have jurisdiction over you, they can do a lot of things to you that a lot of people probably do not understand are possible ... up to and including declaring your product an unlawful gambling device and issuing a warrant for your arrest," Whipple said.


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