City Research Online

Abstract

Loot boxes represent a popular and prevalent contemporary monetization innovation in video games that offers the purchasing player-consumer, who always pays a set amount of money for each attempt, the opportunity to obtain randomized virtual rewards of uncertain in-game and real-world value. Loot boxes have been, and continue to be, scrutinized by regulators and policymakers because their randomized nature is akin to gambling. The regulation of loot boxes is a current and challenging international public policy and consumer protection issue. This article reviews the psychology literature on the potential harms of loot boxes and applies the behavioural economics literature in order to identify the potentially abusive nature and harmful effects of loot boxes, which justify their regulation. This article calls on the industry to publish loot box spending data and cooperate with independent empirical research to avoid overregulation. By examining existing regulation, this article identifies the flaws of the ‘regulate-loot-boxes-as-gambling’ approach and critiques the alternative consumer protection approach of adopting ethical game design, such as disclosing the probabilities of obtaining randomized rewards and setting maximum spending limits. This article recommends a combined legal and self-regulatory approach: the law should set out a minimum acceptable standard of consumer protection and industry self-regulation should strive to achieve an even higher standard.

Publication Type:	Article
Additional Information:	© Leon Y. Xiao, 2021. The definitive, peer reviewed and edited version of this article is published in the Interactive Entertainment Law Review, 4, 1, 27–47, 2021. https://doi.org/10.4337/ielr.2021.01.02.
Publisher Keywords:	loot boxes; video game law; video gaming regulation; consumer protection; gambling; video games; microtransactions; ethical game design
Subjects:	B Philosophy. Psychology. Religion > BF Psychology H Social Sciences > HA Statistics K Law
Departments:	The City Law School > Professional Programmes
SWORD Depositor:	Symplectic Administrator

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