New report explores links between loot boxes and problem gambling with UK Government review of Gambling Act 2005 firmly in mind

A new report, entitled “Lifting the Lid on Loot-Boxes Chance-Based Purchases in Video Games and the Convergence of Gaming and Gambling” – completed by the University of Plymouth and the University of Wolverhampton – exploring links between video game ‘loot boxes’ and problem gambling has been published by GambleAware.

The report (that you can download below) was commissioned and funded by GambleAware with the UK Government’s review of evidence on loot boxes and review of the Gambling Act 2005 firmly in mind.

The accompanying press release (that you can also download below) states as follows:

Loot boxes are purchasable video game features which offer randomised rewards. They are widely recognised as being similar to gambling and are set to be considered in the forthcoming Gambling Act Review. The report states that 93% of children in the UK play video games, and that up to 40% of these have opened loot boxes.

When completing the report, the researchers found robust evidence that loot boxes are structurally and psychologically akin to gambling. The review of evidence also confirms that for surveys investigating relationships between loot box engagement and problem gambling, 12 of 13 publications have established unambiguous positive correlations: the higher the level of involvement in loot boxes, the higher the score on a measure of problem gambling.

At the end of 2020, the UK loot box market was estimated to be worth £700m. Analysis of self-report spend data from 7,771 loot box purchasers found that around 5% of them generate around half of industry loot box revenues. A third of these gamers were found to fall into the ‘problem gambler’ category (PGSI 8+) establishing a significant correlation between loot box expenditure and problem gambling scores. The researchers’ brief screen of around 14,000 gamers found that young men are more likely to open loot boxes, with those of a younger age and lower educational attainment also more likely to engage with these features.

In addition, interviews with UK loot box purchasers showed that motivations for purchase are complex, and embedded within a network of personal, social and gameplay factors. Loot boxes are just one type of ‘psychological nudge’ used to encourage purchase, working alongside other techniques such as in game currencies and the ‘fear of missing out’ on limited time offers. The interviews also highlight that the digital assets in loot boxes often have real-world and/or psychological value. This suggests that loot boxes could be regulated under existing gambling legislation.

Based on these findings the researchers have suggested a number of policies to prevent gambling harms associated with loot boxes:

  • Clear definitions of loot boxes
  • Game labelling and enforceable age ratings
  • Full disclosure of odds presented in an easily understood manner
  • Spending limits and prices shown in real currency
  • These changes could be instated via new regulations or changes to existing gambling laws.

Putting further flesh on the above bones, the “Conclusions and recommendations” section of the report reads as follows:

Any legislative framework for loot boxes will depend on the jurisdictive context. It might involve new loot box regulation, re-framing existing gambling laws, utilising consumer protection powers, or even a simple, outright ban – all of which are currently being considered, for example, by Spain. A future framework could even include a role for industry self-regulation – but given a rather questionable track record, any corporate measures would need to be decisive, comprehensive and transparent.

When and if policies are ultimately implemented, we recommend that they include provisions for:

Precise definitions. Loot boxes are available in a wide variety of guises and configurations, often complicated by niche implementations such as time delays or crate-and-key mechanisms. This could lead to inconsistently applied legislation. Any policy will need to pay attention to precise decisions, making sure to encompass ‘all game related transactions with chance based outcomes’.

Game labelling and age ratings. There is robust evidence that loot boxes are structurally and psychologically akin to gambling, with associations strongest amongst younger players97. New game labels should include clearly worded adult ratings for loot box games, applying across shop-purchased games and digital downloads.

Odds disclosures. The odds of obtaining digital assets in loot boxes should be displayed in an easy interpretable manner, yet also have provisions for full odds disclosure. These should include calculations for any modifiers (i.e. that influence item value, such as ‘wear ratings’) and the ultimate/ average cost of obtaining rare items. As an adjunct, regulation will need provisions for time-limited and other special offers, which can create a sense of urgency and further obfuscate underlying costs.

Spending limits and information. Our work has established that high spenders on loot boxes are disproportionately represented by people with gambling problems, rather than wealthy gamers2 . Default payment limits should be instated to limit gaming profits being derived from at-risk individuals. At more than $50/month (equivalent to around £36/month), the proportions of people with gambling problems rises substantially. Spending limits could thus be applied thereabouts (or at local currency equivalent). Other measures could include ‘breaks’ on purchasing (i.e. re-inputting username/login), self-limits, regular statements, cool-down ‘time-out’ periods, and provisions for ‘maximum item rarity’ (i.e. such that desirable items are not near-impossible to attain.)

Real currency. Loot boxes – and in-game currencies more generally – represent an obfuscation of underlying costs. According to many consumer protection frameworks, they would be unacceptable in most real world environments. Pricing of all game-related items should be clearly displayed in local currencies. Pricing items in ‘gold coins’ (with confusing and inconsistent exchange rates) is not acceptable practice in ‘bricks and mortar’ shops, and it shouldn’t be allowed in virtual shops, either.

Money’s worth definitions. Any ‘money’s worth’ definition of loot boxes needs clarification. At present, developer-run marketplaces are anomalous. Whilst Valve’s Steam (for example) may not explicitly allow ‘cash out’ features, they do enable loot box contents to be sold for money within the Steam wallet. These funds are then available for spending on over 30,000 games or the millions of game related items available in the marketplace. Such marketplaces would appear to satisfy ‘money’s worth’ definitions for many children and gamers. Any future policy will need to clearly state where the thresholds are for new definitions of ‘money’s worth.’

Gatekeeper obligations. Complex APIs – often poorly understood by lawyers and regulators – should be configured for efficient vetting and approved trading, rather than enabling anonymous third-party access. Just as we are starting to observe in other domains – for example, social media and news aggregation – gatekeepers should be accountable for the content they manage (and the profit they gain from it).

Provisions for oversight and enforcement. Loot boxes involve new layers of regulatory complexity. Parallels with traditional gambling are often vague and difficult to interpret. Existing gambling bodies are, at present, ill-equipped to deal with such challenges. Any legislation will necessitate increased provisions for monitoring, oversight, and enforcement. Furthermore, given the vast scale of the gaming industry, regulatory bodies would require substantively increased resources to deal with a vastly widened mandate.

Provisions for research and education. Despite some notable recent findings, research into game monetisation remains in its infancy. With an increasing convergence of gambling and gaming, any future research should be sensitive to ongoing trends in the evolution of the gaming and gambling ecosystems. Furthermore, longer-term mitigation of risk around loot boxes and game-related purchases will require provisions for broader research, consumer protection, development of child-focused data protection (such as the Information Commissioner’s Office ‘Age Appropriate Design Code’), and finally, educational approaches designed to curb the exploitation of psychological nudges and biases.

Concluding remarks

When reviewing the academic evidence, our systematic review has established that engagement with loot boxes has been robustly associated with problem gambling behaviours in around a dozen studies. Loot boxes, however, represent only the most obvious face of an accelerating convergence of gambling and gaming. They exist in a complex ecosystem that includes eSports betting, social casinos and skin-betting, where monetisation features also include downloadable content, season passes, events, add-ons and in-game items.

Here, our qualitative work with gamers has highlighted that motivations for loot box purchasing often overlap with motivations for purchasing this other, non-randomised content. Players are often nudged towards purchase via a number of well-known psychological techniques, such as endowment effects, ‘fear of missing out’ and obfuscation of costs (i.e. via in-game currencies, etc.), where loot boxes are just one aspect of the sophisticated choice architecture deployed for the monetisation of modern video games.

With loot boxes, emerging evidence suggests that certain categories of people may be at particular risk of any associated harms. Secondary analysis of open-access survey data has established that high spenders on loot boxes are over-represented by those with problem gambling behaviours. Unwittingly or not, developers appear to be profiting from at-risk individuals.

Furthermore, any risks and dangers associated with loot boxes are liable to affect specific demographics. Those particularly affected include males and younger gamers, with our survey screen of over 14k gamers also suggesting that those with lower educational attainment and lower levels of employment may be disproportionately affected. These factors, however, are unlikely to be limited to loot boxes. Those vulnerable to loot box mechanics may also be liable to be disproportionately affected by a suite of the other, alternate monetisation approaches – dangers that might not be so easily identified and defined as the gambling-like mechanics of loot boxes.

Such observations are particularly concerning when contextualised against the history of loot boxes, where there are examples of developers manoeuvring in response to policy action. In the dynamic and rapidly changing world of video games – and with large financial incentives for unscrupulous developers – any action against loot boxes runs the risk of rapidly becoming rendered an anachronism. Monetisation strategies will inevitably evolve in response to any new policy – but any dangers and risks are liable to remain. When taking this longer-term perspective, the potential short-sightedness of a ‘loot box as gambling’ regulation is revealed. Such a move wouldn’t just create a series of complex new challenges for governments, legislators, lawyers and gambling commissions – but furthermore (as the DCMS have already pointed out), games companies would be unlikely to even bother with the reams of paperwork, operating licences, and subsequent regulations around transparency, duty of care and age restrictions. After all the legislative heavy lifting, loot boxes would soon be consigned to a niche monetisation strategy.

This all begs the question: would an outright ‘loot box ban’ be simpler for all concerned – developers, gamers, governments, taxpayers alike? This approach would have advantages. It would likely be popular, applauded by many gamers, whose attitudes toward them are predominantly negative. Moreover, such a straightforward move would free up limited government and regulatory resources for more pressing tasks.

Whatever form policy might take, we need to stay mindful that there is now a whole box of psychological tricks available for unscrupulous developers. Longer-term mitigation of risk, as suggested above, will require more research, new education approaches, and updated consumer protection frameworks. Such recommendations, however, do not preclude policy action on loot boxes.

Perhaps, in the long run, the benefits of loot box regulation won’t stem from the legislative fine-print. Instead, the gains might be leveraged from a clear message, directed straight at transnational gaming companies that when left with few other options (when an industry does not effectively self-regulate), these types of predatory monetisation strategies are not beyond the reaches of national powers.

Commenting on the report:

  • Dr James Close, Senior Research Fellow, University of Plymouth, has said: “Our work has established that engagement with loot boxes is associated with problem gambling behaviours, with players encouraged to purchase through psychological techniques such as ‘fear of missing out’. We have also demonstrated that at-risk individuals, such as problem gamblers, gamers, and young people, make disproportionate contributions to loot box revenues. We have made a number of policy suggestions to better manage these risks to vulnerable people, although broader consumer protections may also be required” and
  • Zoë Osmond, CEO of GambleAware, has said: “This research is part of GambleAware’s continued commitment to protect children, adolescents and young people from gambling harms. The research has revealed that a high number of children who play video games also purchase loot boxes and we are increasingly concerned that gambling is now part of everyday life for children and young people. GambleAware funded this research to highlight concerns around loot boxes and problem gambling, ahead of the upcoming Gambling Act Review.  It is now for politicians to review this research, as well as the evidence of other organisations, and decide what legislative and regulatory changes are needed to address these concerns.”
Download article PDF: Lifting the lid on loot boxes report