Loot Boxes: Are They the Slot Machines of the Gaming World?

Loot boxes are virtual items in video games that reward players with “loot”. The rewarded items vary from cosmetics, weapon skins, music kits, sprays, to restricted weapons and more. Most of the time, loot boxes are received by the players for free in video games the support the feature. But, to open a loot box and claim its prize, players often have to use a token, key, or in-game currency, which is purchasable with real money.

Loot Boxes’ Continuous Evolution

Currently, there is no accurate research that can definitively prove when exactly loot boxes were introduced to the gaming world. It is known that many free-to-play video games in the period 2004-2007 have initiated the use of these boxes. While loot boxes were initially criticized for awarding overpowering items or, in other words, a “pay to win” way to experience the game,  these boxes have since evolved.

One of the games that contributed significantly to the breakthrough of the loot box is Team Fortress 2. Back in 2010, the game introduced the ‘crates and keys’ update, which is the games verison of a loot box.

A mobile equivalent that made millions in revenue from these boxes is Farmville which, back in 2011, reported more than $250 million in revenue per quarter. Since then, loot boxes have only increased their popularity with hundreds of mobile and PC games adding the option to win and open various digital containers.

With the evolution of loot boxes, many game developers have tried recplaing the previously criticized “pay to win” model with a new one that doesn’t impact the gameplay, but rather adds a unique experience and more fun for the players.

Opening the Loot Boxes

Why have governments across the globe looked into loot boxes and their influence on the younger audience? One of the reasons why is because to open a loot box, you can use real world currency to open and purchase them.

Furthermore, many games support the ability to trade or exchange the looted items for real currency. In other words, although the item is received in a game of chance, it can be traded with other players for other items that hold real money value. Often, looted items can be sold to other users on markets that support such transactions.

Another reason why more government officials are looking into loot boxes is the mechanism of “looting”. Although players pay a fixed price to access a “crate” or a “loot box” the items which they receive are random and can be less valuable than what they initially paid.

Many games do not limit the ability to receive the same item over and over again. This means that players can pay $1.99 for a loot box key and receive a digital item the online market value of which is $0.03.

However, many players that open these boxes expect bigger prizes such as “legendary”, “epic” or “rare” items which are of great value for the players and can be used even for showing off. So the urge for “looting” is one of the main reasons why more governments and researchers are investigating the link between gambling and loot boxes.

Is Opening a Loot Box Gambling?

These boxes award players an item in a game of chance. And while many researchers and studies try to tie gambling to loot boxes, if we look at the legal side of things, most countries across the globe do not classify the opening of a loot box as a gambling activity. The main reason is that players voluntarily choose whether to open a loot box or not.

Furthermore, the items which the players receive, although through paying with real money, hold value only online. In other words, even if a player receives an item that may cost $500 at an online trading market, for example, they can trade the item for multiple other items at an equal or greater value, but cannot “withdraw” or sell this item legitimately for real money. This is one of the main reasons why loot boxes do not fall under the same regulation as gambling in many countries around the globe.

In contrast, some countries have taken rather firm measures when it comes to loot boxes. One such example is Belgium, where the video game loot boxes were declared illegal under Belgium gambling laws back in 2018. Elsewhere, in the UK, the Department for Digital, Culture, Media, and Sport launched research for the analysis of loot boxes in video games in June this year. In July, the UK House of Lords Gambling Committee released a report outlining that loot boxes need to be reclassified as gambling products.

The Resemblance of Loot Boxes and Slot Machines

As noted, loot boxes in most countries are not classified as a gambling activity. But what is the resemblance of loot boxes with gambling? The mechanics which lay in the core of loot boxes are quite similar to the ones used in the classic slot machines.

In other words, both loot boxes and slot machines use an RNG (random number generator). This basically means that players use real currency in a game of chance while in exchange they receive a random reward.

However, as we described previously, the awarded item and its digital value can often be lower than the initial paid amount. And the classic slot machines operate similarly. Using slot machines, gamblers may place a bet and receive a “prize” which is lower than the bet itself.

This method is known as “losses disguised as wins” (LDWs). Similar to slots, loot boxes do use visual and sound effects when a player wins a valuable item or nearly misses one. According to researchers, this is one of the features of loot boxes which may trigger players into playing continuously, similar to slot machines.

How Does the U.S. Feel about Loot Boxes?

Similar to the United Kingdom, loot boxes and their classification remains a controversial topic in the United States as well. Back in May 2019, Senator Josh Hawley introduced a bill, aiming to ban video game loot boxes.

According to the proposed Protecting Children from Abusive Games Bill, children under the age of 18 needed to be protected from video game loot boxes. In the proposed bill, the U.S. senator wrote:

“When a game is designed for kids, game developers shouldn’t be allowed to monetize addiction.”

Furthermore, Senator Hawley stressed that when kids are playing games they shouldn’t be pushed by “compulsive micro-transactions“.

Although loot boxes have seen some legal opposition in the United States, they remain highly popular among gamers. But the topic regarding the classification of loot boxes is a sensitive one if we look at it from the developers’ point of view. Sometimes loot boxes are added to games even when the initial game release did not feature such functionality. However, this proves to be a way for developers to continue working on the game while at the same time contributing to the fan base.

The Player’s Choice

So far, the bill proposed by Senator Josh Hawley is yet to make progress. Currently, loot boxes in the United States remain a popular form of entertainment which is a part of many video games. But you might ask, are the loot boxes the slot machines of the gaming world?

We think that loot boxes are a form of online entertainment. Although they operate in a similar way to the slot machines, after all, it is up to the player to decide whether to pay for opening loot boxes or just enjoy the game without the additional incentives.