Loot boxes will NOT be brought within the scope of UK gambling regulation
Categories: News
In June 2020, we reported on the UK Government’s Call for Evidence on loot boxes and a ministerial roundtable on Esports best practice.
More than two years later, the Government has today (17 July 2022) published its consultation outcome response, a copy of which you can download below, together with an April 2021 Study by InGAME, commissioned by DCMS, entitled ‘Loot boxes and digital gaming: a rapid evidence assessment’.
One of the issues for determination arose from a September 2019 recommendation by the Digital, Culture, Media & Sport Select Committee Report on Immersive and Addictive Technologies (previously reported by us here) that “the Government should bring forward regulations under section 6 of the Gambling Act 2005 in the next parliamentary session to specify that loot boxes are a game of chance. If it determines not to regulate loot boxes under the Act at this time, the Government should produce a paper clearly stating the reasons why it does not consider loot boxes paid for with real-world currency to be a game of chance played for money’s worth”.
When announcing the subsequent June 2020 Call for Evidence, the Government said: “The results from the call for evidence will be considered alongside the review of the Gambling Act 2005. The government stands ready to take action should the outcomes of the call for evidence support taking a new approach to ensure users, and particularly young people, are protected.”
In its response published today, the Government has concluded that: “After careful consideration, the government does not intend to amend or extend the scope of gambling regulation to cover loot boxes at this time. We have considered regulating loot boxes as gambling as one means of mitigating the risk of harm for children and adults, and have concluded that it would come with significant limitations.”
Announcing the response, a DCMS press release (also downloadable below) states:
Companies must do more to ensure safe and responsible gaming and take action on ‘loot boxes’ to protect young people
Children and young people should not be able to buy in-game purchases known as ‘loot boxes’ in video games without parental consent
- Government’s call for evidence has unveiled a link between loot boxes and gambling harms, as well as wider mental health, financial and problem-gaming harm
- Government calls on games companies to step up and improve protections for children as well as players of all ages from the risk of harm
Video games companies and platforms must do more to make sure children can not make in-game purchases – known as ‘loot boxes’ – without their parents’ consent, Culture Secretary Nadine Dorries said today.
Loot boxes are a type of in-game purchase in some video games. Players can purchase a loot box with real money to receive random items, including “power-ups” to help a player compete better in the game and cosmetic items, such as virtual clothing.
The call for evidence on loot boxes, launched by the Department for Digital, Culture, Media and Sport in 2020, found that players who have purchased loot boxes may be more likely to experience gambling, mental health, financial and problem gaming-related harms. The risk may also be higher for children and young people.
To protect players, the Government is calling for the purchase of loot boxes to be made unavailable to children and young people unless they are approved by a parent or guardian.
Some games platforms, such as Xbox, have already taken steps to improve protections, such as including options that require parental permission for under-18s to spend money within games. The Government wants to build on this with strong protections for children across the entire games industry and will not hesitate to consider legislation if companies do not bring in sufficient measures to keep players safe.
Culture Secretary Nadine Dorries said:
“We want to stop children going on spending sprees online without parental consent, spurred on by in-game purchases like loot-boxes. Games companies and platforms need to do more to ensure that controls and age-restrictions are applied so that players are protected from the risk of gambling harms. Children should be free to enjoy gaming safely, whilst giving parents and guardians the peace of mind they need.”
Games companies and platforms should provide spending controls and transparent information to all players. Protections should support the minority of players who spend a disproportionate amount of money on loot boxes, and who may be at a greater risk of harm.
A new working group, convened by DCMS, will bring together games companies, platforms and regulatory bodies to develop industry-led measures to protect players and reduce the risk of harm. This will include measures such as parental controls, and making sure transparent, accessible information is available to all players.
The call for evidence also found a need for better evidence to improve understanding of the positive and negative impacts of video games. The Government will launch a Video Games Research Framework to support this.
The UK has a world class video games industry which contributed £2.9 billion to the economy in 2019, growing hugely from £400 million in 2010. As the sector continues to innovate the Government is committed to supporting its growth, whilst also ensuring games can be enjoyed safely.
Dr Jo Twist OBE, Chief Executive Officer, Ukie said:
“As a responsible industry, we have committed to exploring additional ways to support players and parents to build on our existing work developing and raising awareness of parental controls. We look forward to engaging closely with the Government and other organisations in the working group and on the Video Games Research Framework.”
Dr Richard Wilson OBE, Chief Executive Officer, TIGA said:
“TIGA believes that games businesses should aim to ensure that games are safe to use for all players. In 2020, TIGA formally adopted its 5 Principles for Safeguarding Players, designed to embody the spirit of the approach that games companies should adopt in operating their businesses within the UK. Children and young people should not be able to buy ‘loot boxes’ in video games without parental consent. TIGA also believes that vulnerable adults need to be protected against potential harms arising from loot boxes. TIGA looks forward to contributing to the DCMS’s planned working group to advance measures to protect players from potential harms.”
Notes to editors:
- The Government response is on gov.uk.
- The DCMS response considered over 32,000 responses to a player survey, 50 direct submissions, and an independent review of academic studies.
Loot box impacts and potential harms
10. The evidence we have considered, including the InGAME rapid evidence assessment, has identified a range of potential harms associated with the purchase of loot boxes. This includes harms which have been associated with gambling, but also a range of other potential mental health, financial and problem gaming-related harms. The evidence suggests that the risks of harm are likely to be higher for children and young people.
11. While the evidence base is still emerging, one of the more thoroughly explored harms from loot boxes is the association with “gambling-related” harm. The InGAME rapid evidence assessment found 15 peer reviewed empirical studies that identified a stable and consistent association between loot box use and problem gambling. There is also emerging evidence of a dose-response relationship, where greater loot box spending is related to greater problem gambling severity.
12. However, there are a range of plausible explanations that could underpin this association between loot box spending and problem gambling behaviours, and research has not established whether a causal relationship exists. Some academic research has also found evidence of “gateway effects” between loot boxes and gambling, whereby loot box purchasing influences subsequent gambling and the reverse. InGAME found that it is difficult to disaggregate which loot box implementations may be particularly problematic, and there are methodological limits to these studies.
13. Some respondents to the call for evidence identified legal, psychological and player-perceived similarities between loot boxes and gambling products. Most loot boxes currently on the market do not meet the definition of gambling under the Gambling Act 2005, as the prize is confined for use within the game and cannot be converted into real-world money. A number of respondents called for the government to expand the definition of gambling to capture all or most purchasable loot boxes, although others have argued against such a change.
14. Beyond the relationship with gambling, InGAME found an evidence base at an early stage of considering other types of harm, including five studies showing a positive association between the use of loot boxes and problem gaming. Some evidence suggests that a small minority of players may spend a disproportionately high amount on purchasing loot boxes relative to other players, and may be at greater risk of experiencing financial harm.
Reasons for decision not to amend/extend the scope of gambling regulation to cover loot boxes
Paragraphs 33 to 39 within the ‘Conclusions and next steps: summary’ section of the response’s Executive Summary goes into further detail with regard to the decision not to to amend or extend the scope of gambling regulation to cover loot boxes at this time. The entirety of that section reads as follows:
Conclusions and next steps: summary
25. In response to the findings of the call for evidence, the government wants to see improved protections for children, young people and adults with regards to loot boxes, and to support better longer term research into the impacts of video games. To achieve this, the government’s view is that:
- purchases of loot boxes should be unavailable to all children and young people unless and until they are enabled by a parent or guardian
- all players, including children, young people and adults, should have access to, and be aware of, spending controls and transparent information to support safe and responsible gaming
- better evidence and research, enabled by improved access to data, should be developed to inform future policy making on loot boxes and video games more broadly
26. In considering further actions that could be taken with regards to loot boxes, we have considered three broad types of responses that could be pursued: improved industry-led protections, by games companies and platforms, making changes to the Gambling Act 2005, and strengthening other statutory consumer protections.
Pursuing improved industry-led protections
27. The government welcomes progress made on industry-led protections for children and young people and consumers in recent years, and further commitments from industry trade body Ukie and its members to go further. However, this progress has been uneven, and there is more that can and should be done across games platforms and publishers to mitigate the risk of harm from loot boxes for children and young people and all players.
28. The government’s view is that games companies and platforms have the technical expertise and capability to develop and improve protections, and to communicate with players, parents and children, to support safe and responsible gaming. An industry-led approach, at least in the first instance, avoids the risk of unintended consequences which may be associated with legislation, and can enable the development of tailored tools and information that work across what is a varied sector. Industry-led measures would be adaptable, and may be more able to keep pace with a fast-changing environment for in-game purchases, in comparison to legislative options.
29. Purchases of loot boxes should be unavailable to all children and young people unless and until they are enabled by a parent or guardian. We welcome the commitment from Ukie to explore practical ways of achieving this objective, and call on the wider games industry to ensure that active and informed parental choice supports how children and young people engage with video games. We welcome that some platforms already require parental authorisation for spending by under-18s within games. As part of meeting this objective, games companies and platforms should take steps to strengthen age assurance and reduce reliance on self-declaration.
30. All players, including parents and children and young people, should have access to and be aware of spending controls and transparent information to support safe and responsible gaming. We welcome the commitment from Ukie to increase awareness of spending controls and responsible play, including through a new £1 million multi-year public information campaign. As part of meeting this objective, we expect games companies and platforms to provide information to players and parents that is transparent, balanced and accessible, and to ensure that protections specifically support the minority of players who spend a disproportionately large amount of money on loot boxes, and may therefore be at greater risk of experiencing financial harm.
31. DCMS will convene a technical working group to pursue enhanced industry-led measures to mitigate the risk of harms for children, young people and adults from loot boxes in video games. The technical working group will include representatives of games companies and platforms, government departments and regulatory bodies. It will engage with academics, consumer and third sector groups, to ensure that solutions are workable for parents, children and young people and all consumers. We expect the development of industry-led design norms and best practice guidance with regards to loot boxes to be an output of this work.
32. Our view is that it would be premature to pursue legislation with regards to loot boxes without first pursuing enhanced industry-led protections. We expect games companies and platforms to improve protections for children, young people and adults, and for tangible results to begin to be seen in the near future. If that does not happen, we will not hesitate to consider legislative options, if we deem it necessary to protect children, young people and adults. We will provide an update on the output of the technical working group and progress made to strengthen industry-led measures, by the first quarter of 2023.
Regulation under the Gambling Act
33. The government’s response to the call for evidence on loot boxes has been developed alongside its Review of the Gambling Act 2005. A White Paper setting out the conclusions from the Review and vision for the gambling sector will be published as soon as possible.
34. After careful consideration, the government does not intend to amend or extend the scope of gambling regulation to cover loot boxes at this time. We have considered regulating loot boxes as gambling as one means of mitigating the risk of harm for children and adults, and have concluded that it would come with significant limitations.
35. While many loot boxes share some similarities with traditional gambling products, we view the ability to legitimately cash out rewards as an important distinction. In particular, the prize does not normally have real world monetary value outside of the game, and its primary utility is to enhance the in-game experience. The Gambling Commission has shown that it can and will take action where the trading of items obtained from loot boxes does amount to unlicensed gambling, and it will continue to take robust enforcement action where needed.
36. In addition, changing the Gambling Act with regards to loot boxes would have significant implementation challenges and risks of unintended consequences. For example, it would require substantial changes to the gambling tax system, would dramatically increase the scope and costs of running the Gambling Commission, and it could risk capturing other unintended aspects of video games or activities outside of video games with a random reward mechanism.
Other statutory consumer protections
37. In not taking forward changes to the Gambling Act, the government recognises that other statutory consumer protection obligations will continue to be the relevant regulatory framework for loot boxes and wider issues concerning video games.
38. The government’s view is that the UK’s current consumer and data protection legislation and guidance provides a strong foundation for mitigating the risks of harms associated with loot boxes for children, young people and adults. As set out above, these protections have continued to develop in recent years. However, further legislative change may risk unintended consequences. For example, legislation to introduce an outright ban on children purchasing loot boxes could have the unintended effect of more children using adult accounts, and thus having more limited parental oversight of their play and spending.
39. We will continue to keep this position under review, in light of emerging evidence on harms, progress made in improving industry-led protections, and any specific proposals on increasing statutory protections for consumers. We will not hesitate to consider legislative options, if we deem it necessary to protect children, young people and adults.
Improving the evidence base on the impacts of video games
40. The call for evidence found limitations in the evidence base regarding loot boxes, and more broadly on the positive and negative impacts of video games. Access to industry and player data was identified in the call for evidence as a barrier to enabling better research.
41. The government will launch a Video Games Research Framework to support better research, enabled by improved access to data, on the positive and negative impacts of video games. An improved evidence base will support policymakers, the games industry, and players on future work to maximise the positive impacts of games, and to reduce the risk of negative impacts, including harms. DCMS will develop the Video Games Research Framework with academics, industry representatives and other partners, with the aim of launching it by the end of 2022.
Immediate reactions
Peers for Gambling Reform were not impressed with this news, tweeting:
Government proposals on Loot Boxes are inadequate. Children themselves believe they’re gambling when purchasing Loot Boxes.
Three years ago, the Children’s Commissioner called for “immediate action” to change the definition of gambling to cover Loot Boxes. Many researchers and the Lords Select Committee on Gambling have come to the same conclusion.
By abdicating their responsibilities and leaving parents to be solely responsible shows how out of touch the government is with the on-line activities of young people and the companies who seek to profit from them.
Neither too was the Gambling Related Harm APPG, tweeting:
Government proposals on loot boxes are a missed opportunity to take firm action which would protect children. Ministers have acknowledged concerns about a range of harms, including gambling, but have failed to regulate, sign-post addiction services or tackle toxic game design.
Instead, responsibility has been pushed to parents. The industry cannot be trusted to self regulate.
Adverse criticism was also expressed by Dr David Zendle, a video games expert at the University of York, who was quoted in a Guardian article entitled ‘UK will not ban video games loot boxes despite problem gambling finding’ as saying:
Prior select committee inquiries have unambiguously shown that certain bad actors within the video game industry cannot be trusted to self-regulate when it comes to player protection. By making those same industry bodies the ones that are responsible for regulating loot boxes, DCMS is essentially guaranteeing that foxes are the ones guarding the hen house.
Reacting to the consultation outcome response, one of the authors of the InGAME rapid evidence assessment, Heather Wardle, has tweeted:
The InGame report looked at evidence and recommended a cautious approach to regulation but crucially that “does not mean that nothing can or should be done. We advocate an expanded approach to loot boxes that incorporates consumer protection frameworks”
Recommendation #1 was age-gating for games with loot boxes.
Govn look like taking some action on this – but leaving it to parents. Pushing responsibility onto parents not getting industry to tackle issues of design a missed opportunity? Especially as my book showed how coercive youth thought these practices were