Victoria's Gambling Regulator: Loot Boxes 'Constitute Gambling'

It's not just the state of Hawaii that are investigating loot boxes. In email correspondence with a local university student, the Victorian Commission for Gambling and Liquor Regulation (VCGLR) has revealed that, yes, loot boxes constitute a form of gambling - at least in Victoria.

The correspondence kicked off by way of a student who reached out to the VCGLR, the independent regulator for the gambling and liquor industries in Victoria. They're the body that issues licenses for bartenders, proof of age cards, and generally regulate venues where alcohol and/or gambling will happen.

Video games isn't typically one of those industries. But with all the recent controversy around Battlefront 2, and loot boxes in general this year, the student got in touch and asked: do loot boxes constitute gambling?

Hawaii Wants To Fight The 'Predatory Behaviour' Of Loot Boxes

Here's Rep. Chris Lee (D) from Hawaii standing in front of a camera and making an announcement about steps being taken to combat the "predatory behaviour" of video game publishers, with particular emphasis given to Electronic Arts and its inclusion of loot boxes within Battlefront 2.

Read more

Jarrod Wolfe, a strategic analyst in the Victorian regulators' compliance division, replied. And under Victorian law as far as he's concerned, loot boxes are a form of gambling:

My name is Jarrod Wolfe and I am the Strategic Analyst for the Compliance Division at VCGLR. I have received your correspondence in regards to gambling functionality (loot boxes) being incorporated into games.

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.

The correspondence was forwarded to Kotaku and has been posted in the main Battlefront 2 and gaming sub-reddits.

Wolfe went on to say that the VCGLR has been "engaging with interstate and international counterparts" to work on policy changes that would "modernise and inform both federal and state based legislation". They're also particularly concerned with the proliferation of gambling-based mechanics being targeted at minors, which Wolfe said was "not just morally reprehensible, but is also legally questionable".

The real kicker, as Wolfe wrote in a second email, is one of jurisdiction.

Gambling isn’t necessarily “Unauthorised gambling” so there are a lot of variables at play. For perhaps a real world example think of overseas betting agencies. Such as Bet 365 – Australians can and do use this service; yet it is clearly administered and run from the UK.

This isn’t illegal. However, if that company set up “shop” in Victoria or started specifically advertising and offering gambling products to Victorians. Then we could investigate and it could be considered a breach of legislation and we would pursue, overseas or not. One of the downfalls is that using overseas based products, Victorian residents do not have us to investigate any complaints or issues they have.

The VCGLR analyst noted that the regulator could potentially work with other Australian bodies to keep a closer eye on gambling elements in video games.

For instance, the Classification Board could get involved. "If these companies want to include significant elements of gambling in their products then perhaps we should work with 'The Australian Classification Board' to ensure than any product that does that and monetises it gets an immediate R rating," Wolfe proposed.

"I could imagine that this would send ripples through the industry and it would support the objectives of the Gambling Legislation to ensure minors are not encouraged to participate in gambling."

I've contacted EA and Blizzard for a comment on today's developments, and I'll update this post if a statement or response is issued.

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Comments

    You may not be able to buy a sword without a license but at least Victoria acknowledges gambling.

    Ok so what does this mean? do they remove them from the games or raise the rating?

    Surely that would take a hit in sales?

      Right now, it doesn't mean anything. The regulator is looking at it and thinking, "OK, what can we actually do about this."

      And that's kind of the kicker: what can local regulators do about a digital product, with effectively no country of origin, that doesn't have a physical form or presence in Australia that local/state/federal governments can just lock down?

      So that's where things are at: talking with other bodies, seeing what the best way forward is. The law is great at dealing with things within physical boundaries. This is much, much harder.

        R rating crippling? unlikely, I look at my ps4 library of games and it's seriously like 45% R rated. people already buy their kids R rated games, I think these people are ludicrously stupid but oh well. BUT if you start raising game ratings over such things, it will just give parents more reasons to go. R aint that bad, probably just have to loot boxes in it.

        Jurisdiction didnt stop the ACCC from going after Valve for customer rights violations.

        Could they just go after the distributors?
        Presumably they have something that addresses those problems in place already to prevent refused classification material being distributed.

          This is what I was thinking. In a pure digital world I see this guy's point. However, the majority of games sold are still physical in nature.

          I'm sure they could clamp down on distributors and even retail shopfronts who continue to sell the product.

            Yeah exactly. Even so, I wouldn't have thought they would have any problems introducing restrictions on digital distributors (or more likely, pecuniary penalties for ignoring those restrictions). The major prosecutorial hurdle with digital shopfronts has always been jurisdiction, but the Federal Court kind of sorted that when they determined that Steam conducts business in Australia. I guess it's possible the ruling wouldn't apply more generally, but I would be surprised if it wasn't applicable to other digital distributors.

      In the short term, not much. Anyone who was going to boycott Battlefront 2 already has and as mentioned in the article, the VCGLR does not have the authority to intervene.

      In future though? The inclusion of loot boxes could mean an instant R rating for any game with them. That's a huge restriction of market plus negative publicity. It could be a death/crippling blow to loot boxes or the developers.

      For now it means nothing: the Victorian regulator says that while they consider loot boxes to be gambling, it is out of their jurisdiction.

      They suggest that it could be controlled by the classification system, but adding that to the National Classification Scheme would presumably require agreement of all the State Attorneys General. I suspect this would be easier to bring about than the R18+ classification for games was though: it plays to the conservative "protect the children" crowd and it is gambling that the states aren't able to tax.

        So.......if we never actually got a R18+ rating for games, we could have actually seen a situation where all games with loot boxes are automatically banned in this country. Given MA was the highest rating previously.

          That's not what I said: rather that having presence of gambling affect the classification would require similar processes to the introduction of the R18+ for games.

          Australia doesn't actually have federal censorship laws: instead each state has their own ones. The thing that makes things manageable to sell or advertise products nation wide is that each state's laws reference the National Classification Scheme (which defines the various classifications) and the ratings handed out by the ACB. Since each state's laws depend on the National Classification Scheme, it isn't updated without their consent. This is why R18+ for games took so long to implement: they needed to come up with a change that every state agreed to.

          So to have gambling affect classification, you'd again need all states to agree. I think this would be easier than the R18+ change though, since there would be less disagreement from conservatives.

    but the product is advertised and sold as a physical disc in Victoria. So you do have authority to investigate. EA also has offices in Australia, including Victoria, technically they have "set-up-shop".

    If this isn't the case and it is imported, then why am I paying GST on the product?

      Further to this even if you don’t consider the base game gambling both Sony and Microsoft sell the the boxes or currency to buy boxes themselves through Australian spesific storefronts

      I wouldn't trust a guy who used the word 'lieu' in lieu of the word 'light'...

    Victoria's Gambling Regulator: Loot Boxes 'Constitute Gambling'

    Rest of Victoria: 'No duh!'

    This is interesting.. "Gambling isn’t necessarily “Unauthorised gambling” so there are a lot of variables at play. For perhaps a real world example think of overseas betting agencies. Such as Bet 365 – Australians can and do use this service; yet it is clearly administered and run from the UK."

    Easy solution, bring in legislation that means only companies with a presence actually in Australia, can advertise in Australian media. No office, no local presence, not paying tax? Get your ads the fuck off our screens.

      As someone who thoroughly enjoys access to a global market, I don't think this is a good idea.

      Federal Government's Interactive Gambling Act 2001 (which so happens to be run by the Australian Media Authority)

    A more in depth statement from Wolfe would be great.
    Mainly, what exactly makes this gambling and other products like card game packs or Kinder Surprise eggs or even blind bag toys not gambling and totally fine to market to kids?

    Also I'm worried that the narrative that loot boxes are marketed to kids is going to inadvertently revive the narrative that video games are only for kids in the mainstream media :/

      @lambomann007 - this is where there will probably only be one chance to get this right. these things technically, aren't gambling (game loot crates, kinder surprise eggs etc) as there's a reward in every crate, but in video games especially, they use the same mechanics and psychology as slot machines to increase the amount of time that people spend on it \ in the game.

      the mechanics being used here by games with loot\reward crates are feeding the compulsive habits of people and fostering this type of thing as normal in children. the video games industry needs a complete shake up. from AAA video games down to the $1 or free derivative mobile games that stink up Apps tores.

        That reward in every crate thingo isn't actually part of the legal definition of gambling in Australia, or any other jurisdiction as far as I can tell. It's solely a part of the ESRB's definition - and they're a US based self-regulatory body not a government agency like the ACB.

        Last edited 22/11/17 6:08 pm

        For kinder surprise eggs, I imagine the little plastic toy constitutes no more than a bonus under any kind of scrutiny, the product you're buying more or less is the chocolate.

        For a more likely comparison, trading cards. You can buy a booster and get random cards, it's random and no guarantees, is that gambling? Thing is though, you get actual physical products that are then free to be used by yourself or any other in any matter you please, including trading, hence the name, it's a social aspect.

        Loot boxes though aren't a social construct, they're simply a means to gate content to maximise the amount of money you can get from consumers with less product to give. Even cosmetics are bad in this regard, everyone's okay with Overwatch and it's a free pass, Blizzard probably thought about selling skins directly but then figured that your average consumer casts a blind stupid eye and is more than happy to spend many dollars at a chance of what they actually want instead. What would have been, say, a 5$ skin purchase is now a 20~50 buck gamble.

          Overwatch is far from the only/first/biggest player in the space doing cosmetic loot boxes, too. MMOs have been all over this for years. For example, weapon skins and outfits are in the drop table as rewards from 'black lion chests' in Guild Wars 2, where you can pay a smaller price for the gambling box, or a higher price to guarantee the outright purchase of some of the items that are in the boxes. Many of the items aren't actually purchasable directly with cash, though, and can only be bought on the player market from people who opened boxes but want to sell the items they got. Others can be earned through a truly insane grind.

          Every different aspect of attainment here would need to be considered in any kind of ruling, which means the rules will need to be crafted very carefully, and the MMO industry in particular may well find such rulings to prove cataclysmic.

      You know you make a great point there. I can't stand blind-bagged toys, and there is no difference between these and loot boxes (apart from the digital nature of the loot boxes, and perhaps the possibility of picking up loot boxes for 'free' in a lot of cases).
      You could argue that Kinder Surprise does not constitute gambling because you're buying the chocolate and the toys are a bonus, but blind-bagged collectible figurines surely are exactly the same as loot boxes. So if loot boxes == gambling, then blind-bagging == gambling also.
      I wonder if you could argue that to the legislators and what effect it would have. Would they want to ban the blind-bagging, or just forget the loot box issue?

        The argument can be made that the psychological effects are different as the process isn't immediate at loot boxes.

        Let's say a skin for an Overwatch characters comes out you really want. You repeatedly buy credits to spend on loot boxes trying to get that skin, every time you open to box and you don't get one, you compulsivity buy another box until either you get the skin, the price gets too high or you lose all your money. (I don't play Overwatch, so it may not work exactly like that, apologies)

        Let's say you really want Duffman figure from the Simpsons blind box collection. To get one, you catch the bus down to your local nick-nack store give someone $10 and then open the box. If you don't get the one you want, you have to go up to that same person, give them another $10 and ask for another one. Rinse, repeat. The social shame of this is going to slow you down considerably.

        Also, blind box toys are often sold "unboxed" as a complete set for the same price as each item individually.

      Also I'm worried that the narrative that loot boxes are marketed to kids is going to inadvertently revive the narrative that video games are only for kids in the mainstream media :/

      I think the point is that we have an R18+ rating. Games that have gambling should not have less than an R18+ rating making them unavailable to kids.

        Australia's R18+ rating is a sham, and in no way relates to the actual decision-making process of adults. We have different standards for games and print/film that continues to operate on the assumption that video-games are still for children. It'll be interesting to see how the wowsers in charge of classification standards reconcile this.

          If there's a big stickers with the reason for the classification that says "Gambling, Real Money Transactions", then parents just have themselves to blame.

    "If these companies want to include significant elements of gambling in their products then perhaps we should work with 'The Australian Classification Board' to ensure than any product that does that and monetises it gets an immediate R rating," Wolfe proposed.

    How does that work with games like COD and Battlefront 2 where they add the microtransactions after launch ie after the game has already been classified and sold?

      @braaains then they should be forced to resubmit them for reclassification - or simply ban the ability for that to happen.

    do I need to provide ID to buy Magic booster cards?

    I don't think loot boxes are so far removed from the same concept. You pay for something, it might be shit it might be good, but at least you get something.

      I'd very much like to hear VCGLR's opinion on what differentiates loot boxes from collectible card game packs. @alexwalker Any chance you could pose that question to them if you plan on following up this article?

        Only difference I can think of is the fact that magic boosters have a level of certainty in the fact that you always get 1 legendary and etc from memory. I could definitely be wrong as it's been 10+ years since I played magic

          I suppose there's also the fact that if you get two duplicate Magic cards, you have two usable cards (and if you don't want the duplicate you can sell or swap it). With most of these loot box systems, the second is converted to some in-game currency at a poor exchange rate.

            (tagging @stretch also) They're both differences but I have a hard time believing the legal definition the VCGLR would be using for its decision-making.

            They both also seem like they could be easily mitigated by A) publishing the odds table for a loot box, and B) giving you coin or something for duplicates of things you already have so you can buy something else. I get the feeling the legal distinction would be along more firm lines than that.

              Yeah, I'm going to be chasing this up tomorrow to see if I can have a longer chat with the analyst involved, or someone else at the department. Be fun to see where that goes.

              I agree that collectable card game booster packs fall fairly close to gambling too: I was pointing out ways that loot boxes are even closer. By not offering the option to trade with other players and keeping the sell back price low (or by offering a different currency for the sale), the games are effectively reducing the value of each loot box the longer you play.

      Disc: I sell and play as a store owner.
      I would imagine that a physical product has more worth than a digital product, especially over its lifetime ie collectors. However you are also able to buy the individuals at a market price set by the community if you dont want to buy packs. Regardless if you look at the back of all booster boxes it speficies that they are for a draft format where the game is based on random draw. Buying individual packs isnt the way theyre "intended" to be distributed so it might come down to your responsibility.

      Although i think this is mainly focused on marketing. If magic were played at your lgs by only competitive whales and you were told "BUY BOOSTERS!! MAKES YOU BETTER" every time you played and lost while other players were parading around with their mythics in your face, youre either gonna quit or bite the bullet and pay to enjoy it. But then instead of getting 15 cards (11,3,1) you start to get 6 (5,1/1) so it takes longer for you to afford (earn) it irl but you want to enjoy it now so it fuels a habitual behaviour

        Even if they're intended for draft and not individual sale (which is bunk anyway, they're clearly intended for individual sale), unless the full range of cards is available in every booster box then there's still chance involved, just the numbers are bigger. I've bought several booster boxes myself over the years (used to play competitively and later judge MTG) and rarely got the specific cards I was after even in a single booster box.

          While i understand the pain of chasing cards due to random distibution, i still think the issue falls more to the marketing and psycholgical side of it.
          https://youtu.be/tWtvrPTbQ_c
          This video is fairly old, well before the AAA game microtransactions but it does detail how players can be exploited

      True. But if casinos offer 5c back at every time you sit at a table and spend money does that mean they can bypass and consider it not gambling? Your not winning the prize pool and not getting anything you want back but 5c is better than something right? Since you are getting something back all licences for gambling should be waved...?

        There’s a distinct difference between cash gambling and prize gambling that you can’t ignore. Otherwise a school would need a gambling license to hold a raffle.

        That said, For the loot boxes to not be gambling, the value of the prize should be equal to the cost of the loot box. I think that’s probably how the trading cards exist outside of gambling regulation.

    Can't say I'd be at all upset if Lootboxing ended up going the way of the dodo.

    EA ruining everyone's revenue streams. Someone needs to teach them how to greed.

      EA, the only company that could shit the bed so hard they ruin other people's games

    So, the Gambling Regulation Act 2003 (VIC)...

    s.1.3AA Meaning of "Gambling" is:

    (1) For the purposes of this Act, gambling means an activity in which—
    (a) a prize of money or something else of value is offered or can be won; and
    (b) a person pays or stakes money or some other valuable consideration to participate; and
    (c) the outcome involves, or is presented as involving, an element of chance.

    Now, with an Overwatch lootbox (dunno about BFII) 1(b) and 1(c), are satisfied, but that little "and" in 1(a) is problematic. There are other subsections in the definition but they don't seem to apply.

    There's no pecuniary advantage to be gained from Overwatch lootboxes, as you can't resell or exchange the items contained within. Therefore, the regulator would have to argue a lootbox contains "something else of value", in this case being a purely cosmetic item.

    I'd love to see the "value" purported by the regulator and presented to the Victorian Courts and Tribunals for my Tracer to do the Charleston...

      If people pay for them, they have value.

      Honestly it's really that simple... Diamonds are just shiny rocks after all.

        Did you consider you can sell a diamond?

          Resale might increase the value of something, but the lack of resale doesn't remove all value.

          Having a barber cut my hair is a service that has a value, even though I can't resell my haircut after the fact.

          I sell you a license to use a suite of software and you pay me because it's valuable, but I have a clause in there that prevents resale.

          Just because you can't on-sell something means it has no value and in fact it alters the scarcity and can increase the value.

          Most people see things in loot crates as having some value, some arguments suggest that there's too much value so it's exploitative and damages the product, others suggest it's over/underpriced but it seems pretty facetious to suggest they have absolutely no value purely because you think it's worthless.

          tl;dr If someone will pay for it, it has value.

          (Also @jamesh your haircut example is pretty good, probably a better abstraction than my example that I didn't read till the end of commenting unfortunately =P)

        Also, it'd come down whether a reasonable man sees value in it, not whether someone had paid for it. Good luck with that.

        The only value your average loot box items have is the value a person allocates themselves. They have no intrinsic value.

        And besides, in Overwatch, you don't even have to pay money for loot boxes. You can earn them for free just by playing the game.

          Almost nothing has intrinsic value though unless you’re looking at basics like food, even then that value massively increases due to subjective aspects we add on like taste or brand or aesthetics.

          My entire point was that as people we assign value. Hell I value loot boxes in OW even without paying for them, they are worth a certain amount of effort for me to try and unlock stuff.

      I was listening to a podcast the other week and they discussed something that I didn't think of. Selling accounts. If you have a lot of 'lootbox gear' tied with your account that can increase the price you can ask for.

      I assume this is harder to do on consoles than PC (again, I'm assuming here, I've never looked to hard into it). But you could ultimately receive a higher amount of $ depending on the loot you have - I'd consider that "value"

        Can't do this legally. It's against the TOS. Any regulations which affect the party providing the service are almost certainly protected by their terms of providing such.

        Last edited 22/11/17 8:38 pm

          I kind of touched on this in another reply but I'll try be more concise on this one point.

          Because a system prevents sales or makes them difficult doesn't reduce value, in general it increases it. Which is why smuggling has been a thing for most of human history.

      The value is actually assigned by the developers, by saying each box contains X amount of items and they range in rarity of items for a box that is $Y value. The ESRB said its not gambling cause the items have value... but if they have value, then the chance mechanic makes it gambling. (which Belgium agreed on)

      The value doesn't have to be dollar for dollar, it can be intrinsic cause the court can assign "value" to mean anything (ie every arguement ever in divorce court).

      Also if the item had no value, then its worse than gambling, its potential fraud (cause if the items have no value, then you forced a customer to pay money for nothing), therefore it has a value.

      I think we should be looking at the Australian Government Online Gambling Laws.

      Mate, they still have over a thousand pages to add to that paragraph and several other gambling regulatory acts to draw from and others such as fair trade, consumer law, online/electronic trading etc

      Overwatch and the cosmetic items might get off, not sure what they actually have the in the cross hairs aside from the all powerful Chillin's.
      Value is already established, my guess it will be more on the practices themselves.
      It's still early days and virgin territory, we haven't even seen any backlash yet.

        True, I haven't delved into it that much, and I'd be seriously interested in it being put before a Supreme Court Justice. I really don't think it would hold water.

        My point is, I'm not convinced that everyone is getting quite so excited by the carte blanche assertion of bureaucrat.

        Particularly when we're seemingly relying on the definition interpretation skills of one who apparently doesn't know the definition of "in lieu of".

          Lol no, I don't see Jarod stepping up to be the people's hero either.
          I'm more expecting him to get a phone call from his bosses, the boot for causing a stir or heavily lobbied long before he get near a court

      "Something of Value" if it were offered for 1c, would you but it, if so then it has value

    Loot boxes should be banned. The game you've already bought should contain everything. If the devs or publishers want to add more content, then release a DLC that can be purchased.

    Why is the left hand not understanding the right hand... there is already a law that exists.
    Bet 365 he used in his example is illegal, if it doesn't have the required permits and compliances in place under Australian law.

    https://www.communications.gov.au/what-we-do/internet/internet-governance/online-gambling

    The Interactive Gambling Act 2001

    It's illegal to provide some interactive gambling activities, such as 'online casinos', to someone in Australia. Under the IGA, it is an offence to:
    * provide a prohibited interactive gambling service to customers in Australia;
    * provide an unlicensed regulated interactive gambling service to customers in Australia; and
    * provide an Australian-based interactive gambling service to customers in designated countries.

    These offences apply to all interactive gambling providers, based in Australia or offshore, and Australian or foreign owned.

    Does this mean that all those 'vending machines' that spit out plastic balls with toys inside are also gambling and will be removed? How about collectable cards, where the packs are sealed so you don't know what you are getting? Is that gambling as well?

    Whether something is true or not as defined by the law is one thing...

    Another thing is to remember that laws can, have been, and will be changed.

    Many years ago my wife tried to enter the WOW arena tournament but was denied as Queensland classed it as gambling as there was a degree of chance involved.

    On the flip side in Star Trek online you can use Gold Pressed Latinum to purchase vanity items but to get it you have to play Dabo (star trek roulette) in order to get more and there are even achievements for winning x amount and that gets through....

    So if you were to pay for a loot box via Xbox Live, which is processed out of Singapore, out of region? Or Playstation, which are a part of SCEE and process in Europe, out of region?

    Tomorrow I will buy 20 cases & keys in csgo for $70AU with the hope of getting items I can sell for $400US or more. Any junk items I get instead will be sold towards getting a few more glove cases. I believe I will be lucky due to the amount of people who aren't.
    Yes, it's gambling. However for CSGO specifically it must be respected that a decent amount of the key money goes back into the events that are paid for, either whole or in part (including the prize money), by valve.

    Overwatch's loot system doesn't count because its not an esport, so theirs is gambling absolutely.

    So many people losing their shit over star wars even after they got rid of the lootboxes, but turn a blind eye to overwatch

    I get why you'd be upset with the new star wars game, but this is taking it way too far. EA are already backing down arent they? and you're gonna mess up a whole lot of games that are nowhere near as bad as what EA were doing simply because you're dirty over battlefront.

    Im posting my support for cosmetic loot crates. items that are not required for progress in the game are perfectly fine whether you consider it gambling or not. dont want to get a surprise item? dont buy them. but dont remove other peoples choice.

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