NSW Doesn't See Loot Boxes As Gambling, But They Still Have Concerns

Pictured: Julian Hoskins (L), Angus Abadee (R). Image: Alex Walker (Kotaku)

As the furore over loot boxes has spilled into the legislative arena, it's also exposed the reality that every state and territory looks at the issue differently. The Department of Industry's Liquor & Gaming is the relevant body in New South Wales — and while they don't believe that loot boxes principally fall under the definition of gambling, that doesn't mean they don't have concerns.

The topic of loot boxes was briefly touched on by Angus Abadee, director for policy and legislation at Liquor and Gaming NSW, and Julian Hoskins, principal of boutique law firm Senet Legal, during Ashton Media's Esports Conference last week. Hoskins in particular noted that loot boxes were being looked at by legislators and regulators around the world, and he stressed that the complexity of their implementation was a key factor for regulators.

"Loot boxes by their nature are not picked up in the Interactive Gambling Act," Hoskins said. "The complexity is ... when you have a third party platform, whether it be Steam's marketplace or integrated, that's the complexity, and that's what the Senate inquiry will focus on. I suspect what will eventually happen is that there might be some restrictions on accessibility of third party platforms, but I suspect loot boxes might be left alone."

Abadee offered more insight from a government perspective, noting that NSW did not believe loot boxes constituted gambling per se. However, their major concern was the ecosystem in which those loot boxes operated — a loot box in Overwatch isn't the same as a tradeable PUBG or CS:GO crate, where users can trade those items on a secondary marketplace.

"[They're] similar to a Kinder Surprise or trading card games in terms of purchasing the right to open it up and getting a prize, not knowing the value," Abadee said. "It's about the difference between a closed system and one where you have the ability to take the item outside. Where it is occurring in a closed system, from a NSW perspective, it's not considered gambling. In essence, you're not laying a cash stake."

Image: Alex Walker (Kotaku)

Abadee noted that NSW was supporting a lot of education and discussion amongst stakeholders and gambling regulators. The panel also touched on the need to ensure that some issues weren't conflated: discussion around loot boxes and are separate to the need to implement greater integrity measures into esports, for instance.

The Senate inquiry into loot boxes will largely touch on microtransactions around chance-based items, and whether current consumer protections are adequate. That inquiry is due to report back by the middle of September.

Australian Senate Inquiry Into Loot Boxes Will Report By September 17

Following notice of a motion submitted by the Australian Greens yesterday, the Australian Senate has supported a move to have the Environment and Communications References Committee investigate the use of loot boxes in video games.

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"The more fundamental issue ... is addressing this risk of normalisation of gambling to minors," Abadee said. "I think there is a concession that certain features of [loot boxes] that have gambling-like elements."

Psychologists Argue Loot Boxes In Some Games Are 'Akin To Gambling'

A comment paper published in Nature Human Behaviour argues that loot boxes in some video games, including Call of Duty. Infinite Warfare, FIFA 18, Halo Wars 2 and For Honor, can "meet the structural and psychological criteria for gambling".

Read more

Disclosure: Kotaku Australia is the media partner of The Esports Conference.

Update: The panel was attended by Angus Abadee from Liquor & Gaming NSW, not Paul Sariban as was outlined in the list of panellists (which can be seen in the second photo). The story has been amended above to correct this.


Comments

    "The complexity is ... when you have a third party platform, whether it be Steam's marketplace or integrated, that's the complexity, and that's what the Senate inquiry will focus on. "
    What in the actual fuck does that even mean?

    To be fair, I can see where they're coming from (above quote excluded) - it might not constitute gambling from a legal perspective because you can't actually 'lose', you just end up with something that is of no real value to you. You still get something from putting money in - money that's the same whether it's a valuable item or common trash. The Kinder Surprise example is stretching it a bit (it's all low value garbage) but blind bags with rare finds might be a better analogy.

    I still think loot crates are complete bullshit and needs to die (just let me buy items!) and psychologically I think they have more in common with gambling, but they may have a point.

      What it means is that they consider the act itself as not strictly gambling, because the money side of it isn't a direct part of the process.

      This is the big problem with loot boxes. Some Governments look at gambling as merely a chance based outcome, others look at it as a chance based outcome with money involved. Money being the key part of it.

      So now you're seeing split decisions because of that money angle. With money being one step away (not PUBG or CS:GO, but Steam), and the process itself not concerning itself with money, is it gambling or not? Legally, its not an easy one. Morally, people have made their minds up already.

      At least this one, while saying legally it doesn't fit their definition, understands that morally its a technicality that may not be good enough.

        I should have clarified - I understand completely the government's position, I was commenting on the ridiculous statement by Hoskins, which basically said "The complexity is... the complexity!" without elaborating on why third party marketplaces make it more complex. It isn't until Sariban later clarifies that Hoskin's intent behind the statement becomes clear - although I'd argue that at the end of the day the differences between an Overwatch crate and a CS:GO crate aren't all that important. Trading things for actual money on Steam? Well, that might be different.

        Legally, its not an easy one.
        Well actually it might be an easy question, because there's a huge distinction between a loot crate and putting money into the pokies. If you put $20 in the pokies there's a very real possibility that you don't get anything at all back. If you put $20 into loot boxes you will get something for the game, even if it's not worth anything to you.The real issue is the psychological aspect of it - that incentive for people to keep spending money on crates to get that item they want. That's what draws the parallels to gambling.

        Ironically, we can probably thank Valve for popularising it in modern Western games thanks to TF2's key and crate system, basically porting it from casual/mobile games. Thanks Valve.

          Look at the rest of my comment. Various Governments are splitting their decisions with loot boxes because of the money side of it. THAT makes it legally difficult to manage.

          With CS:GO, there are two sides. Firstly, the lootboxes themselves. That's with CS:GO, but after the initial purchase theres no monetisation within CS:GO. Is that gambling? You buy a box, theres a random item in it.

          Some Governments say yes, some (like here) say no. Because THEY don't facilitate the next part, which is what raises the gambling issue. People being able to trade the result, and hence monetising the process.

          That all happens with third party products, like Steam, or Paypal. An agreement is reached, money changes hands, the item is traded. WoW was doing that in 2004.

          How is that CS:GO's responsibility? They have no business arrangement to profit out of those sales, so its not gambling for that alone under most laws.

          And because of that disconnection, the legalities on it being gambling aren't straightforward. Its a nanny state backlash to ban the tradability, and you cant penalise CS:GO for what happens on those third party platforms. You may as well outlaw EBAY.

          With pokies, theres still a return along the way by the way, being around 90% on average. Sometimes more, most times less, but on average that. $20 isn't going to see 20 x $1 spins with no wins very often, so theres something along the way. People just choose to keep spinning, rather than taking a loss.

          Its things like this that make the issue so hard to fix. At every level, there are gambling elements, but the same elements are in Kinder Surprises as well. How far do people go to put something in place, and how nanny state do they want it to be?

          Personally, I think people need to be more responsible for their own actions anyway. A lot of this is offloading personal choices onto the gaming companies, who are really just offering the option of these. Pretty much every game you don't need to buy lootboxes.

            That doesn't change the fact that legally NSW doesn't seem to see buying to unlock loot boxes as gambling. The argument presented by those who suggest it is gambling is that paying money to open a loot box when you have no idea what's inside is gambling. The counter-argument (that NSW seems to accept) is that this is no different than buying a packet of trading cards or a Kinder Surprise. You get something of 'value' - to accept this as gambling would mean that any blind bag or mystery box purchase is now gambling.

            What happens afterwards - namely, whatever value the community puts on whatever items are in the box - is going to be a trickier issue, but probably doesn't change whether or not loot boxes are gambling. The trading card analogy still applies - the community might be willing to pay loads for a Charizard card, but that doesn't mean that buying booster packs is gambling because a particular card is more highly prized by the community.

            CS:GO is a slightly odd one in that skins were being used analogously to goods to bet on the outcome of a game, which could be translated into real money if sold. That's more suggestive of a problem with those betting sites, rather than with loot boxes.

            I fucking hate loot boxes and they probably need to be closely examined due to the psychology behind them, but what happens after the box is opened probably has little bearing in Australia on whether offering loot boxes is gambling or not. The reaction from those countries in the EU who consider it akin to marketing gambling to minors - gambling itself isn't actually illegal.

              I hate the psychology argument myself. Its a nanny state justification that's opening a peanut with a sledgehammer and there whether money is involved or not. it impacts way too much to be a straightforward solution. Again, why this is difficult to deal with from a legal point of view.

              Protecting the minors is the best argument I've seen yet, but you don't need to legislate this to stop that problem, when all you need to do is classify the games as 18+. If the parents are letting their kids play after that, punish them. Hit em with a $550 penalty and they'll block their kids quick enough.

              I'm not against changes with this, I think somethings needed as well. But straight up calling it gambling has repercussions. If the items cant be traded, what happens then? The psychology is still there, and wowsers then go after that. Just see masquerade's comment directly below for an example of that.

              The psychology of gambling runs deep into so much of how we work as a society. So where do you draw the line?

              For me, this ruling is about where it should sit right now. Its not gambling, but its damn close. Any closer, and it is. So right now, responsibility still falls on the individual, and their own decisions.

              Which I agree with. Make people responsible for their own damn failings. If I choose to go put $500 in the pokies, that's my decision. As long as the bills are paid, what harm is there? I'm close to owning my place and have plenty in the bank, so can afford it. And nobody says boo when I occasionally do that.

              If someone goes too far, there are already avenues to handle their addiction, but that's an issue for them, not the focus for their gambling. Gamblers can always find a way, whether its pokies, horses, keno, or lootboxes.

    You're paying cash for a chance to win a virtual item/skin/dance etc. That's still gambling.

    There's been a few governments around the world now that are saying loot boxes need to be regulated, because they constitute gambling. I wonder, are they taking a consistent approach with booster packs for games like Magic: The Gathering? Seems like a similar issue.

      Exactly! Loot boxes have more in common with things like M:TG in that you'll get something for your money. It might have very little value to you (a duplicate, a bunch of trash cards, etc) but it's not that you open the packet up and find nothing inside.

      Demanding that all loot boxes be considered gambling is sort of like saying buying Pokemon card booster packs was gambling because not every pack had a Charizard in it. Doesn't mean that it shouldn't be regulated or examined closely, just that it isn't the same as someone dropping money into the pokies and ending up with nothing to show for it.

        It might have very little value to you (a duplicate, a bunch of trash cards, etc) but it's not that you open the packet up and find nothing inside.

        This isn't really a relevant distinction. If it were, pokies would be able to avoid regulation by having a $0.01 minimum payout instead of $0. Gambling regulators are generally going to see "get bigger or smaller prize" the same as "get prize or no prize." I think NSW is actually being a bit inconsistent here, in that M:TG packs probably should be regulated as gambling (if you don't play the game, they're basically scratch-card tickets with a prize somewhere between Plains and Black Lotus). The reasons that they're not probably have more to do with cultural traditions around sports cards than the actual mechanics of the activity.

          Pokies offering a $0.01 minimum payout wouldn't pass the test though - it's giving an actual monetary amount, one which is effectively worthless (how does it pay out 1 cent when you lose?). Loot boxes, and card games, are giving you something for said game - what you get has some value or utility, even if it isn't what you want. The value placed on said items is ultimately up to the player base - which is probably why NSW are examining the role that these 'third party systems' play in their determination.

            How about a poker machine giving either a happy meal toy or the latest iphone?
            It's hard, maybe impossible, but we want a definition of gambling that isn't "I know it when I see it" and isn't easily broken.

              It's still entirely possible to regulate loot crates without trying to shoe horn it into a gambling definition. Arguably holding it out as a separate class allows for better regulation. Especially since it's not even dealing with tangible goods at the first instance.

    In the end it's not really going to matter, it appears that developers know loot-crate is a dirty word now and tend to be steering away from them for future games. The public as a whole dislikes them and it's hurting sales for any game with them in. There's a reason * No Loot-crates!, was a big talking point at E3 this year when devs discussed their games.

    Last edited 31/07/18 9:35 am

      *Developers of AAA titles. Loot boxes still exist and are extremely prevalent in a lot of mobile games.

        Valid concern, I never play mobile games so always overlook that market.

        To be fair though most mobage are F2P so there is a business need to get a somewhat reliable income source.

        The issue is when this practice bled and became common practice in the AAA industry where you are technically buying a premium product only to be nickel and dimed again for continuous purchases

          Mobile games are much, much worse. They're designed specifically in a way to encourage people to spend hundreds if not thousands of dollars. There have been a lot of case studies on mobile game addiction and how much money it is costing people. Essentially the same people who are susceptible to gambling addiction get taken advantage of by mobile games and their loot boxes.

          It may have been brought into the wider gaming community when AAA titles started doing it but the problem has existed for a long time.

    Yeah. The finding makes sense to me. Doesn't fit the traditional definitions of gambling - legal or otherwise - but exploits the same psychological vulnerabilities as gambling in ways that pose a risk to society if left unregulated, especially for minors, and deserves closer examination to minimize harm/bolster consumer protections.

    'Regulation' makes some folks break out in hives, but something as simple and light-touch as age limits on games containing paid loot boxes would do a world of good and is generally well-accepted already. The whole, "telling a man he can't have a steak because a baby can't chew it," crowd should be easily shut down by pointing out that the man CAN have a steak as he's not affected by age restrictions.

    When you knock out minors as a target audience, the biggest offenders are very likely to re-think the entire approach anyway, which would be a win for consumers.

      Yep. This is in line with my long-time stance on this, that shoehorning it into gambling laws is inappropriate but that some form of tailored regulation is required.

    To most laypeople, I doubt any of this would pass the pub test - if it quacks like gambling and all that. From a legislative perspective, the industry appears to be engaging in concerted definitional obfuscation. Whenever I hear a publisher say 'we've looked at our lootboxes and concluded that they don't fit within X definition because of this technical distinction between our lootboxes and what the legislation considers gambling' - the loot box in question has almost certainly been designed, from the ground up, to fit within that exemption. Can't really blame them for that, misleading PR aside, but it's easily fixed by just broadening the definition of gambling slightly (admittedly not a simple task, but still).

    Law of unintended consequences though...maybe stock up on Kinder eggs and Magic cards before that change goes into effect.

      Broadening the definition to catch edge cases isn't an objective solution, because that just moves the edge cases to a new edge - ie. if you keep broadening the definition to include edge cases, eventually it includes everything, or more practically it oversteps its purpose. The decision on what gambling laws are for and what constitutes gambling needs to be made on fundamentals.

      For the majority of implementations, loot boxes aren't gambling based on the criteria from the Australian study that was conducted and reported here previously - they're close, but not over that line. Rather than trying to expand the definition of gambling, which as you recognise has undesirable overreach problems, the better solution is to define a new law that allows it the precision to work with this specific problem domain.

        Yeah true. I would presume that either broadening the scope of the current laws or creating an entirely new legislative instrument would essentially be attempting to achieve the same change? Either way there's still the possibility that the publishers just morph their lootboxes so they don't fit the new definition and then we're back to square one (unless they actually manage to come up with a comprehensive, water tight definition of course but....yeah not confident about that). I didn't want to go into way too much detail in my previous post, but I was thinking maybe shifting some of the definitional elements into a Schedule might help. Giving the legislation more capacity to change and stay up to date, kind of how they do with synthetic cannabinoids and the like.

        Last edited 31/07/18 10:58 am

        If you broaden the definition of gambling, you're bringing Kinder Surprises, lucky dips, and even some claw machines into being gambling.

        Might be able to define it under the Telecommunications Act though, which deals with digital data. That's always been a handy catch-all for games, should still work now.

        Personally, I'd look at a way to define it there, and transfer the repercussions to the relevant Gambling Act from there. That way you're limiting it to online games and not bringing those low level toys into it.

          Yeah exactly, I would imagine it would be very difficult to broaden it in such a way that it only applies to lootboxes and not some other unintended things. Good call with the Telecommunications Act, that's seems like a solid way to shield those physical chance-based games from any lootbox laws.

      Well look how long it took them to come down on Lottoland for gambling on lotteries (which are State owned). New things are confusing cause legalese is so specifically worded that it can be exploited.

      Gambling Law should be ignored here, its an specific industry and consumer protection law for gambling, lotteries and prize competitions.

      A new Microtransaction Law needs to be established that has similar protections you would see in a Gambling Law, specifically aimed at the gaming industry and their third party sellers.

      No item in a loot box should be exclusive to said loot box and made available as an indepedent purchase, all microtransaction products and their companies need to be licensed and registered in Australia, and parental controls should be mandatory. (bonus if they can get accounting and banking clauses in their so Australia can tax them at a higher rate)

    The problem with Loot Boxes being called Gambling is this, it CONFUSES them.

    Trying to label it gambling is the worse thing you can do at this moment, cause modern gambling laws are a hybrid policy of Industry Protection and Consumer Protection. It protects both parties from shady practices by regulating compliance, stated odds, customer services... since its not the gambling industry, its basically outside of the intent of the law (which is stupid)

    The issue is we need to stop calling it gambling, and immediately give it to the ACCC to take it up as a straight Consumer Protection issue and then claim their practices are exploitative (using the same reasons gambling laws exist) and write a Microtransaction Law that covers the buying and selling of virtual goods, and that such goods must be in compliance with Australian Law.

    I would like...
    Companies that allow microtransactions have to be registered and their games are licensed.
    Without a licence to sell microtransactions (or breaking the rules associated) bans the game from sale.
    All money earned is held in escrow in Australia for 30 days.
    Accounts and game code are to be made available to auditors.
    Can't sell to children under 18+, without parental consent.
    Parental controls to be added to all platforms to allow blocking and permissions.
    Can't sell items that are deemed pay to win
    Can't sell items with random chance mechanics, unless all items are also available independently in the game as a single purchase.
    All transactions must be in Australian Dollars.

    The big thing, the Australian Government has ZERO reason to protect the loot boxes in video games, cause all those THIRD PARTIES, don't pay their fair share of taxes in Australia and most loot box money is offshored the instant you pay (Steam is a European bank account)... which is one reason I am suggesting escrow accounts. So Australia gets the taxes and knows which individual companies to charge.

    So here's a thought experiment:

    If you've ever played Borderlands 2 you'll know there are one armed bandits (not the mob, the pokie machines) you can throw some currency in for the chance of loot that ranges from guns of varying rarities to skins to currencies and in one unfortunate case, a grenade that explodes in your face. Exact same premise as loot boxes but presented in a common gambling format.

    Is that gambling? If it is because you have the chance to lose and get a grenade, what if we took that out? Would it still be gambling? What if the option was given to buy in game currency with real world money so you could keep trying for a good gun or skin? Does it come under the same law as online gambling or does the lack of a cash reward exempt it?

    Say it is gambling because it's presented in exactly the same format as a common gambling mechanism (a slot machine). What then if we changed it to be a box that pops out loot, ie an actual loot box, does it still count as gambling even though we changed the visual representation?

    I don't understand why people are defending the game industry on loot boxes (or anything for that matter), any change will bring improvement for consumers to provide them better protection from the greedy developers. There is a right way and a wrong way to do microtransactions and lootboxes, we saw it with Battlefront II and FIFA Ultimate Team.

    Game companies are designing these games so the 1% (the whales) get the best gaming experience. Pay2win is the worse for this, but still most people just want to be able to enjoy the game they paid full price for and maybe buy their favourite toon their favourite cosmetic outright and be happy with that.... but most consumer don't get that option, they get a one armed bandit, who promises no odds and all the risk.

    Just remember that NSW also banned greyhound racing due to live bait training, and not only reintroduced it, but just recently also pumped hundreds of thousands into the 'sport', despite committing no funding to combating live bait or other disgusting training practices.

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