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Loot Box - OG

Loot Box Legislation… Just Stop Already

Banning loot boxes is back on the legislative table. Earlier this month, US Senator Josh Hawley introduced a bill that aims to ban loot boxes and pay-to-win microtransactions in games that are played by minors, or conceivably could be played by minors.

This bill follows previous attempts of US lawmakers to regulate loot boxes. In early 2018, a set of four bills were proposed in Hawaii to try to (1) age-gate games that contained loot boxes, and (2) require game publishers to disclose the odds of winning particular items. None of these bills ended up becoming law.

Hawley’s bill goes one step further and proposes to ban all loot boxes and pay-to-win purchases in games that could be seen as appealing to children. On paper, the bill is designed to prevent games from targeting children with addiction-inducing gambling mechanics, which is great. But in reality, the ban covers pretty much every game that has repeatable microtransactions regardless of who the intended audience is. As long as the publisher or distributer has constructive knowledge that children might play the game, it is not allowed to include loot boxes or pay-to-win.

As a Canadian, there are two reasons why I care about this American bill (side note: there’s a lot to criticize about the actual language used in the bill, but I’ll save that rant for another day…):

First of all, if (and this is a big “if”) this bill passes into law, how would it work internationally? Would there be geo-specific versions of the game that don’t have loot boxes? Would non-American publishers have to create US versions of their games to comply with US law? Or would the bill force game companies to remove loot boxes and similar mechanics altogether?

Second, and more importantly, there’s a point where the law just becomes paternalistic. I’m all for regulation and guidelines that encourage a better, safer society. But the law must operate without overly interfering with economic choice or removing responsibility from the citizens it’s meant to protect.

This issue commonly arises in emerging industries. Advances in technology, media, and communications greatly outpace legal developments in these areas. But having an overcompensating approach with regulation only serves to stifle innovation and displace accountability.

Using loot boxes as an example, here are three things regulators should remember when making new laws:

Knowledge: Sometimes, industries are better off self-regulated, especially if they are on the more technical side. The Entertainment Software Association, an organization that lobbies on behalf of game developers and publishers, has a division called the ESRB that reviews games and provides age-ratings based on a variety of metrics. The ESRB also publishes guides to help parents understand the risks involved with online components of gaming. The ESA and ESRB have a very nuanced understanding of the games industry and are in a better position to regulate than the government.

Accountability: Laws that take away responsibility don’t solve anything. Parents play an important role in safeguarding and educating their children. Games with loot boxes are often compared to casinos, but this analogy removes the fundamental difference that online environments are much more easily accessible to children than physical locations. Just as much caution is needed when letting kids explore online environments as in the real world, and games do give parents the control to restrict their children’s online experience. But having a blanket ban on loot boxes and microtransactions insulates people from the reality of online gaming and does nothing to help them understand what’s going on.

Innovation: There is nothing inherently illegal about loot boxes or microtransactions. They are innovations (yes, I use that term loosely) made in response to the economic pressures involved in creating AAA games. Whether or not loot boxes or microtransactions belong in games should be a market decision, not a regulatory one. Publishers are fairly receptive to negative feedback. So, if players take issue with how loot boxes are used in games, they can sound off against the publisher, not purchase loot boxes, or simply stop playing the game.

Hawley’s bill (which, by the way, is dramatically titled the “Protecting Children from Abusive Games Act”) lacks sincerity. It’s a prime example of a law made in response to the hot topic of the day. Hawley may have tried to drum up publicity by vilifying the video game industry, but this is counterproductive as it does nothing to address the underlying and legitimate issues surrounding loot boxes and microtransactions. So, I won’t be surprised if the bill does not achieve what it has set out do.

Alexandria Chun

Alex is a Lawyer at Spark LLP. Having joined the firm as its first articling student, Alex spearheads the firm’s video game and esports practice. 

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