Over the past few years, the issue of loot boxes in games has popped up several times, with developer EA being the biggest culprit. It naturally earned the ire of the gaming community each time it happened, but eventually died down as no real action is taken besides the developer apologising and sales of said title slumping for a bit.

But are loot box systems actually permitted in games, from a legal standpoint?

This is something that candidate attorney, Sergio dos Santos, from local law firm Weber Wentzel has been investing.

“Many people, especially in the European Union, believe that the LB (Loot Box) system should be classified as gambling, and therefore be regulated, due to the fact that you pay for a chance to win a randomised reward. Should it constitute gambling, this would be worrying as the gaming industry targets children. Should this classification exist in South Africa?,” ponders dos Santos.

What does the SA law say?

According to the CA there are two pieces of local gambling legislation which are of importance when trying to answer that question.

The first pertains to the Lotteries Act, which notes the following, “any game, scheme, arrangement, system, plan, promotional competition or device for distributing prizes by lot or chance and any game, scheme, arrangement, system, plan, competition or device, which the Minister may by notice in the Gazette declare to be a lottery.”

Based on that definition, dos Santos says LB Systems could be classified as lotteries, but he also says a contradictory argument can be made.

“Some argue though, that the video game and the system form one indivisible product, with the latter being dependent on the former. The argument continues that as the video game was developed for the purpose of entertaining gamers rather than allowing gamers to gamble, the system is part and parcel of the entertainment purpose,” he explains.

Dos Santos continues by using the example of Activision Blizzard, which removed loot boxes from Overwatch and Heroes of the Storm in Belgium.

“Although the system and the video game form part of the same package, it can also be argued that the system is actually separate from the video game. Following this line of argument, the system was designed for a different purpose and it can operate on a platform that is entirely separate from the video game.  The video game can also function as intended without the system, which we saw when the video game developer Activision Blizzard was able to remove the system from some of its games in Belgium,” he adds.

Looking at the legislation

The other piece of legislation that dos Santos cites is the National Gambling Act.

Specifically Sections 3 and 5, with the former defining involving bets, wagers, totalisator bets, bingo or any other gambling game. With that in mind, dos Santos says it’s clear that loot boxes do not involve any betting, making it necessary to determine if they can be classified as a gambling game.

This is where Section 5 comes into play. It defines a gambling game as one where a player, upon payment of an amount, will become entitled to or receive a pay-out, and the result is determined by skill, chance or both.

To further determine whether loot boxes can be classified as gambling, dos Santos highlights Section 6 of the Act and how it terms a pay-out.

any money, merchandise, property, a cheque, credit, electronic credit, a debit, a token, a ticket or anything else of value won by a player – (a) whether as a result of the skill of the player or operator, the application of the element of chance, or both, and (b) regardless how the pay-out is made.”

Dos Santos then points out that loot boxes meet the criteria of Section 5, and in turn Section 3. “When purchasing a loot box using real world money you will generally become entitled to or receive some form of virtual item, the value of which is determined by the element of chance,” he adds.

Room for interpretation

Unfortunately it’s not as cut and dry as that, with the Weber Wentzel CA adding that the virtual nature of items obtained from loot boxes leave room opening for interpretation and argument.

In Counter Strike Global Offensive and World of Warcraft for example, items can be sold for in-game currency or on third-party platforms, which muddies the water as far as pay-outs go.

“If the loot box system is not classified as a lottery or gambling, the question remains whether it should be regulated in some way,” says dos Santos.

“It seems as if the possibility of classifying the loot box system as gambling exists but nothing is certain until either the courts or the legislator provide some guidance. Until such time, suppliers should consider labelling their gaming packages in order to keep consumers informed,” he concludes.

[Image – CC 0 Pixabay]