Microtransactions: Loot Boxes and Pay-to-Play in Video Games - Fordham Intellectual Property, Media & Entertainment Law Journal
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Microtransactions: Loot Boxes and Pay-to-Play in Video Games

Microtransactions: Loot Boxes and Pay-to-Play in Video Games

The video game industry is estimated to be a $150 billion global industry.1 Many of the biggest games are currently utilizing a free-to-play model which is enticing for new players. In order to monetize, more and more games have been introducing microtransactions in the form of “loot boxes” or “mystery boxes.” Separate from just buying in-game accessories directly, these mechanisms allow players to essentially “roll the dice” and purchase a randomized chance of receiving various in-game accessories. Much like buying a pack of sports cards, the rarer, more valuable cards or items are harder to obtain. Additionally, “pay-to-win” games allow players to buy virtual points or items that give them an actual advantage in the game.2 However, the loot box mechanism has drawn even more scrutiny, as many consider it a form of unregulated gambling.3

Gambling is traditionally defined as “an activity in which (1) a person risks something of value on (2) the outcome of an uncertain event, with (3) the opportunity to win a valuable prize.”4 The Entertainment Software Association (“ESA”) holds the position that loot boxes are not gambling, since the virtual goods have no cash value.5 However, players on games such as “Counter-Strike: Global Offensive” (“CS:GO”) can make a lot of money selling skins on Valve’s Steam Marketplace, or other third-party trading sites.6 Some of these skins can sell for as much as several thousand dollars.7

One user of a free-to-play game titled “Path of Exile” actually contacted the game developers to voluntarily disable the loot box feature on her version of the game.8 This is similar to many voluntary exclusion policies used by casino control boards in order to address gambling addictions.9 There are numerous stories of people losing hundreds or thousands of dollars on video games due to gambling addictions and “poor impulse control.”10 One boy racked up a bill of $8,365 on his father’s credit card by gambling and trading skins from CS:GO.11 He was one of many plaintiffs who brought a class action lawsuit against Valve, the game developer, for “knowingly allow[ing], support[ing], facilitat[ing] and/or sponsor[ing] illegal gambling.”12 The trial court ruled in Valve’s favor, holding that the children agreed to mandatory arbitration of any disputes when they created their accounts and that their parents were also bound by those terms.13

One of the major concerns here is that children make up a significant portion of player bases for these games.14 Critics view loot boxes as an unauthorized form of online gambling, as well as an addictive predatory practice, specifically with children playing these games.15 At least one piece of legislation has been introduced to the U.S. Senate seeking to ban loot boxes and other pay-to-play mechanics in video games.16 The bill states that the Federal Trade Commission (“FTC”) would enforce these rules by levying fines against companies that violate the proposed rules.17 These practices are still largely unregulated since there has been no legislation passed to address the issue. The ESA announced that it would add a warning label to alert purchasers of games that contain these microtransaction mechanisms, but that is about it.18

  1. Omer Kaplan, Mobile gaming is a $68.5 billion global business and investors are buying in, TechCrunch (Aug. 22, 2019), https://techcrunch.com/2019/08/22/mobile-gaming-mints-money/ [https://perma.cc/Q77P-L4DL].

  2. Patrick Sullivan, Video Game Industry Responds to Regulation of Pay-to-Win Microtransactions and Loot Boxes, Dickinson Wright (Sep. 4, 2019), https://www.lexology.com/library/detail.aspx?g=5a8275ef-7320-4557-a97a-7fc84af56ca1 [https://perma.cc/5KL7-Y4RH].

  3. Id.

  4. Id.

  5. Id.

  6. Simon Coutu, Here’s How You Make $12,000 In Profit a Day Selling Virtual Guns, Vice (Jun. 30, 2015), https://www.vice.com/en_us/article/wnj935/heres-how-you-make-12000-in-profit-a-day-selling-virtual-guns [https://perma.cc/K8BW-B7NB].

  7. Id.

  8. Makena Kelly, How Loot Boxes Hooked Gamers And Left Regulators Spinning, theverge (Feb. 19, 2019), https://www.theverge.com/2019/2/19/18226852/loot-boxes-gaming-regulation-gambling-free-to-play [https://perma.cc/59FS-W5VP].

  9. Id.

  10. Id.

  11. Shaun Assael, Skin in the Game, ESPN (Jan. 20, 2017), http://www.espn.com/espn/feature/story/_/id/18510975/how-counter-strike-turned-teenager-compulsive-gambler [https://perma.cc/8ZWM-D89N].

  12. Id.

  13. Fact Sheet: Cases Tossed Out of Court Because of Forced Arbitration Clauses and Class Action Bans, Center for Justice Democracy at New York Law School (Apr. 16, 2019), https://centerjd.org/content/fact-sheet-cases-tossed-out-court-because-forced-arbitration-causes-and-class-action-bans [https://perma.cc/N77X-9ZY9].

  14. Steven Blickensderfer, U.S. Regulation of Loot Boxes Heats Up with Announcement of New Legislation, National L. Rev. (May 9, 2019), https://www.natlawreview.com/article/us-regulation-loot-boxes-heats-announcement-new-legislation [https://perma.cc/34F4-NMEU].

  15. See id.

  16. Brendan Sinclair, US Loot Box Bill Receives Bipartisan Support, gamesindustry (May 24, 2019), https://www.gamesindustry.biz/articles/2019-05-24-us-loot-box-bill-receives-bipartisan-support [https://perma.cc/JV9Y-VAD7].

  17. Id.

  18. See supra footnote 14.

Joseph Walsh

Joseph Walsh is a second-year J.D. candidate at Fordham University School of Law and a staff member of the Intellectual Property, Media & Entertainment Law Journal. He holds a B.S. in Biology from The University at Albany, State University of New York.