Lootboxes: A new way for you to gamble - and it's probably illegal. Maybe.

My home state of Tasmania is Australia's home of gambling. From the first bookmakers at horse races in the 1800s, to Australia's first casino at Wrest Point, Hobart, and the founding of the Adams Family Trust (better known to Australians as Tattslotto) - we have always had the taste for a wager.


The industry has made many exceedingly rich and is highly regulated. Regulation of gambling is a state matter under Australia's constitution and the battles between states to attract businesses and host casinos, lotteries, poker machines, horse and greyhound racing, television wagers, online gambling websites and the like has been fierce, lucrative for state coffers and politically dangerous.


It is with these points in mind that we welcome to Australia the newest form of gambling: the Lootbox.


THE BACKGROUND - THE COMPUTER GAMING INDUSTRY


For a computer gamer like myself there is no doubt that games can be both art, and on a dollar-for-dollar basis, some of the best and cheapest entertainment around when compared to the price of a book, the cinema or online movie streaming services. A good A$80.00 to A$90.00 game can provide dozens or hundreds of hours of entertainment (despite the long complaints about software prices in Australia, which have been the subject of parliamentary inquiries and are a blog post for another time.)


Computer games are created by Developers, and then put on the market by Publishers. As a comparison, this is similar to the same way that an independent filmmaker might create a movie but the international distribution of the film is performed by major players such as Warner Bros., Dreamworks or Disney. Like the major film studios, major games publishers wish to maximise their returns and some games will not make a profit unless more than 3 million units (at US$60.00 each) are sold.


Put another way: we are not talking an individual in a garage. At least a dozen games with this sort of budgetary investment - $180million to $200million - will be published each year; the development and production costs of these "Triple A" games have exceeded the size of Hollywood's film industry for many years. And any negative publicit

y around a game can turn directly to a company's bottom-line: the recent news around lootboxes resulted in the share market value of Electronic Arts, one of the biggest publishers, falling US$3billion in a matter of days.


SO WHAT'S A LOOTBOX?


So... you've invested $200million, with hundreds of developers and staff, a huge international advertising campaign, and possibly some very hefty licence fees to use a popular science-fiction name - like Star Wars. How do you get more than a single, one-off payment, from each customer?


The most recent answer is: the lootbox. A game of chance. While playing your favourite computer game, you can receive certain bonus "gifts" in the form of a box that you find while playing, or that you can purchase with real money.


These might be cosmetic - some new hairstyles or outfits for your character, to make your gameplay feel more personalised to you.


Or it might be something that actually affects the gameplay: stronger weapons, that your character heals more quickly, or can't be shot by other players at a certain time.

For the consumers, these things matter. Electronic sports competitions around the world revolve around an even playing field, in the same way that an Olympic sport relies on natural ability and bans cheating. Electronic sports cheating might involve re-programming a game's code to give you an advantage, or using another piece of software to assist your speed or aim. The equivalent of an electric motor hidden in a Tour De France bicycle.


Or it might be that suddenly your character in your game (because of the money you've spent) is stronger, faster or more efficient. In real world sports, the only equivalent would be the use of performance-enhancing drugs.


Even for the amateur player at home, a good game is an investment of hundreds of hours of gameplay while learning the skills and mechanics of a game they enjoy. While lootboxes can result from sheer random chance, or "levelling up" as a player receives experience, the most efficient way is to simply pay real money to get them. And this is where we hit the problem legally.


LOOTBOXES ARE GAMBLING...


Paying real money in a game of chance, in the hopes of receiving rewards, is the definition of most forms of gambling. It is exactly how we would define numerous real world activities that are highly regulated - be it a lottery ticket, poker machines, casino card tables or a raffle.


They are a part of many common computer games. The most notorious example of 2017 has been the release of Electronic Arts' game Star Wars: Battlefront 2. A multi-player online shoot-em-up, it offered paid lootboxes to improve player's ability, including some that resulted in invulnerability. An ordinary player with large pockets could achieve what a skilled player, after hundreds and hundreds of hours of gameplay, could not achieve through their efforts.


There has been a massive public outcry from consumers about this, and the particular money-hungry nature of executives of Electronic Arts in pushing this revenue-raising. As mentioned above, the share price of EA has dropped US$3billion in the last week as a result and investigations are already happening in a number of jurisdictions - including the US State of Hawaii, and the European Union, for guidance on whether this is gambling under their local laws.


... AND WHILE IT'S ILLEGAL HERE, THERE'S NOT MUCH WE CAN DO


In Australia, governments have largely been silent on the matter - largely due to the ongoing apathy towards electronic media by Australian politicians, proven over numerous events in the last ten years.


However, some guidance has appeared from a strategic analyst in the Victorian Commission for Gambling and Liquor Regulation, as published here by media outlet Kotaku:

"Your research and suppositions on the matter are correct; what occurs with "loot boxes" does constitute gambling by the definition of the Victorian Legislation. Unfortunately where the complexity arises is in jurisdiction and our powers to investigate.

Legislation has not moved as quick as the technology; at both State and Federal level we are not necessarily equipped to determine the legality of these practices in lieu of the fact the entities responsible are overseas."

Similar experiences have beset gambling in Australia in recent years, from Paddy Power to online gambling. Australian law can only govern Australian behaviour. An overseas provider of services is subject to their local rules and regulations. However, there can be little doubt that lootboxes are illegal under Victorian law.


It is also likely illegal under Tasmanian law. Tasmania's Gaming Control Act 1993 provides that gaming activity means –

(a) the wagering in a contingency relating to a sports event, race wagering event, simulated game, major lottery, pools or prescribed event (where the event, simulated game, major lottery, pools or prescribed event is not a prohibited gaming activity); ...

Wagering, tick. On a contigency (i.e. the chance of something happening, like receiving a skill card in a lootbox?), tick. In a simulated game? Tick. Given that it is a gaming activity, licences would normally be required. To the best of my knowledge, no gaming licence has ever been issued around lootboxes or the like to any game publisher in Australia.


Again, Kotaku has provided excellent coverage regarding other bodies which are watching: for instance, particular provisions regarding "gaming machines" mean that lootboxes might be legal in Queensland; that the Australian Communications and Media Authority (ACMA) is watching the situation "closely" in its role as Australia's online regulator; and that the defence for all of this is the following from the Entertainment Software Association, an industry lobby group:


Loot boxes are a voluntary feature in certain video games that provide players with another way to obtain virtual items that can be used to enhance their in-game experiences. They are not gambling.

Depending on the game design, some loot boxes are earned and others can be purchased. In some games, they have elements that help a player progress through the video game. In others, they are optional features and are not required to progress or succeed in the game. In both cases, the gamer makes the decision.


"Voluntary" is a poor justification - a person may choose to gamble is all well-and-good, but that does not make the gambling legal. Equally, it matters little if the lootbox is used to "enhance" your experience - my trip to a greyhound racetrack can be enhanced with a wager with a bookmaker, or my evening's TV might be enhanced because I'm holding a lottery ticket when the numbers appear.


Where gambling has no oversight or regulation it makes it both dangerous and, possibly, criminal.


It remains to be seen what will happen with the gaming industry's current fascination with lootboxes. However - remember what it is, for your own benefit as a consumer: a new style of old fashioned gambling, pure and simple.

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