Rep. Chris Lee said, “There is no requirement to disclose the odds of winning something meaningful.”
Hawaiian State Representatives Chris Lee and Sean Quinlan called EA’s Star Wars: Battlefront II a “Star Wars-themed online casino” this week, vowing action against loot boxes in games marketed to underage players. Rep. Lee and Rep. Quinlan said EA and the Disney Company are preying on the kids with their in-game mechanisms.
In a Tuesday press conference, Rep. Chris Lee said, “This game is basically a Star Wars-themed online casino designed to lure kids into an addictive cycle of gambling money for a chance to win game upgrades. These exploitive mechanisms have no place in games being marketed to minors, and perhaps no place in games at all.”
The two lawmakers represents Hawaii, one of only two US states to have a 100% ban on gambling. Only Hawaii and Utah avoid all forms of legal gambling — even a state lottery — so one would expect Hawaiian legislators to be some of the first American politicians to speak out on loot boxes.
How Loot Crates Work
“Loot boxes” are in-game enhancement players can purchase in video games, computer games, and gaming apps for smartphones. In many cases, free gaming apps have in-game purchases that allow players to collect weapons, equipment, and other loot that otherwise would require a lot of gameplay.
Gamers without the monetary resources to buy loot boxes see the practice as unfair, but the wider controversy stems from the very notion of an economy added to a video game. Players pay real money to acquire a loot box, but they contain random amounts or types of weapons. Some see loot boxes as the equivalent to the random allotment of cards one might get in a baseball card pack. Others see loot boxes as a form of gambling, due to the random aspect of purchases. Gaming researchers even say the random aspect creates anticipation, triggering consumerism and possibly even problem gambling behavior.
Chris Lee: EA Is “Exploiting” Youth
Chris Lee said loot crates are exploitative. He said at Tuesday’s press conference, “Nothing currently prevents EA from exploiting people buying lootcrates with random contents through microtransactions because there is no requirement to disclose the odds of winning something meaningful, and companies like these are allowed to specifically target youth without the cognitive maturity to know when they are being exploited.”
None of this might be controversial, except loot crates appear in games played by underage children. Using the same techniques used to get slot machine players to spend more cash, Chris Lee say Entertainment Arts (EA) and other game designers use microtransactions to generate billions of dollars. Meanwhile, American children are gambling with their parents’ hard-earned cash. Even worse, they are learning bad habits that could translate into a lifetime of addictive gaming and addictive spending.
Belgian Loot Crates Controversy
The Belgium Gaming Commission announced last week that it had studied loot boxes and determined loot boxes are a form of gambling. The UK Gambling Commission is studying the issue, too, but has not issued a position paper yet. The UK parliament might end up debating loot crates sometime in mid-2018, because an online petition on loot crates appears as if it might reach the number of signatures which would require such a debate.
Chris Lee Talks to Officials
Lee, who sits in the Hawaiian House of Representatives, said that he and Quinlan have informed Doug Chin, the Hawaiian Attorney General, of the problem. Chris Lee said, “We have already asked the Attorney General to look into this situation. We are also looking at legislation to protect families by prohibiting the sale of games with these gambling mechanisms to those who are underage, or prohibiting these gambling mechanisms altogether.”
The two Hawaiian legislators said they have spoke to lawmakers in other states about investigating loot crates. Lee added, “We know it will give families who have been victims of these predatory practices a sense of pride and accomplishment to have worked to prevent future exploitation and we have been working both with them and legislators in other states who are also considering ways to address this important issue.”
Michael Pachter: “It Isn’t Gambling”
Michael Pachter, a Wall Street analyst for Wedbush Securities who has a large follow on Twitter, responded to a tweet from a follower wondering whether the loot crate controversy would envelop the entire gaming industry. Pachter tweeted, “It can’t and the legislators are morons. ‘Gambling’ requires a wager to win something of tangible value. If the thing won can’t be sold or monetized, it isn’t gambling. Period. Morons. Should resign immediately.”
The problem is, Pachter has his facts wrong. Third-party operators use the in-game economies of popular video games to launch gambling sites with loot. Counter-Strike: Global Offensive saw that last year, when skin-gambling sites popped up involving the skins (weapons) in CS:GO. Children as young as 13 in the United States and Australia gambled tens of thousands of dollars of real money on the skin-gambling sites. Parents filed lawsuits against Valve, the parent company of Steam, for encouraging their children to gamble.
Valve’s 23 Cease-and-Desist Letters
Valve argued they had no connection to the skin-gambling sites, which touted themselves on YouTube with commercials made to look like regular game enthusiasts winning skins on their websites. Because third-party skin-gambling operators increased interest and participation in Counter-Strike: Global Offensive, and because the gambling activities spurred children to buy an increasing number of skins on Steam, the commission determined that Valve was profiting (via gambling) by setting up the in-game economy. Children would lose skins on CSGO Lotto, go back to Steam to buy more skins (loot boxes), and Steam/Valve profited from the gambling.
Eventually, the Washington Gaming Commission held Valve responsible. The WGC told Valve it had to take actions against the skin-gambling sites or risk fines or lawsuits filed by the commission, so Valve sent 23 cease-and-desist letters to the skin-gambling sites. While Michael Pachter technically is right that EA and the Walt Disney Company have not monetized loot crates outside the game, anyone with familiarity with loot crates know that a popular game creates a market where illegal third-party operators do monetize loot crates in the real world. That is a potential legal and political risk for game designers and those who license their properties for video games.
EA Suspends In-Game Purchases
Electronic Arts sees the risk. On November 16, EA announced it was turning off all in-game purchases for the time being, until it could design a safer way to handle loot crates. In a blog post, an EA spokesperson wrote, “It’s clear that many of you feel there are still challenges in the design. We’ve heard the concerns about potentially giving players unfair advantages….Sorry we didn’t get this right. We hear you loud and clear, so we’re turning off all in-game purchases.…The ability to purchase crystals in-game will become available at a later date, only after we’ve made changes to the game.”
