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Published: October 7, 2021

Written by: Stoyan Todorov

Loot boxes have often been a contentious point for video gamers. On the one hand, they were introduced as a source of new and original content that often could set you apart from your peers (provided you spent enough, and sometimes not even that helped). But over the years, loot boxes became a thorn in the sight of regulators, parents, and even video gamers who felt the compulsive need to open one box after another.

Today, we examine what loot boxes are and what impact they have on video games and the people who play them. Many countries around the world are beginning to look at loot boxes as gambling, which brings up the question if our children are safe playing their favorite video games.

What Are Loot Boxes?

Loot boxes are considered in-game purchases or a form of microtransaction. Essentially, they are designed to encourage more spending, so for all intents and purposes, we can describe loot boxes as a form of monetization. The loot box itself could be bought directly in the game, or it may be awarded to players who then need to purchase keys to open the loot boxes.

Dota 2, for example, originally used loot boxes that were won over time and that you could unlock via keys. Most games today use a game currency that is bought with real money to allow you to salvage the box for a chance at a randomized award. Some companies are trying to circumnavigate regulation by displaying the percentages of “drop chance” for each item on each loot box.

Loot boxes appeared in the 2010s when the free-to-play model was becoming popular, and they were immediately adopted as a way to enhance one’s gaming experience and generate extra revenue for the company. However, as game purchases started to increase, so have more people turned to use these boxes and, on some occasions – excessively.

Types of Loot Boxes Rewards and Prizes

Loot boxes usually come in two forms. They can be purely cosmetical or performance-enhancing. Some loot boxes focus on the distribution of character and weapon/item skins which allow you to introduce small flourishes that set you apart from the rest of the community.

Many of these cosmetics are desirable, but they do not have a direct impact on the gameplay. They are still attractive to casual gamers who don’t mind spending the occasional buck but are hardly inclined to dwell too much on purchases.

The other type of rewards you can find in-game are loot boxes that have content performance-enhancing qualities. They tilt the gameplay slightly in favor of the person who holds them and are generally more desired by regular gamers. Understandably, they often cost more. Some publishers have chosen to go with both kinds, while others have stuck with just one.

Criticism against Loot Boxes Over the Years

Loot boxes started modestly in the early 2010s, but they gradually turned out to be an issue for gaming communities, regulators, and parents. Loot boxes were perceived as a “cash grab” by some, but they were successful as they led to better engagement with gaming communities. This may have continued to be the case had it not been for Star Wars Battlefront II, a game that leveraged loot boxes so greedily that it was immediately dubbed “pay-to-win.”

The idea that loot boxes have been used to solely generate revenue has been common criticism. In the early days of their adoption, developers were enticed at the prospect of simply enjoying a robust source of revenue. Microtransactions soared, and gaming communities stuck with a game that offered loot boxes much longer.

Image credit: EA

Yet, Star Wars Battlefront II misused loot boxes so badly that you could have been spending hundreds of dollars with little chance of finding something that would have even made a dent in your gameplay. The increased spending that loot boxes in some games encouraged came under scrutiny by regulators and concerned parents. Battlefront dropped its loot boxes eventually, but there were lasting effects.

Gamers developed gambling addiction over loot boxes (not necessarily because of Battlefront II), and sometimes those gamers were as young as in their teens. Spending money on loot boxes became a compulsory behavior that made headlines. Today, the same criticisms continue, and some countries around the world have outlawed loot boxes completely.

The Overwatch Loot Box Bonanza

Many video games have benefited from loot boxes. In fact, it’s difficult to imagine that there are games today that do not leverage this mechanic. Yet, Blizzard’s fantasy shooter Overwatch really showed how successful loot boxes can be in purely financial terms.

The game managed to rake in $1 billion in revenue in 2017 alone, with loot boxes a significant chunk of that amount. Emboldened, Blizzard quickly leveraged Overwatch as a franchised league and a competitive ecosystem. Individual slots sold for as much as $40 million, according to reports.

Blizzard’s success story was on the whole ethical. It did not offer skins that changed the gameplay, and it did not introduce weapons or skills that could have been game-breaking, upsetting the community. However, one issue people had with the way loot boxes were added was that it was still all down to purely random chance.

You couldn’t purchase individual skins in 2017. You had to buy a loot box and beg the gods of random chance to get your coveted reward. Game purchases soared for Blizzard that year because the game was new, and it was done well, in true Blizzard fashion, to be honest. By 2019, Overwatch’s loot boxes alone had generated $1 billion in in-game purchases making it one of the biggest revenue generators for the company.

You Can Do Loot Boxes Right, and You Can Do Them Wrong

The first game to actually take game loot boxes on a massive scale was Valve’s Team Fortress 2. The cartoony first-person shooter bringing together unique classes and a unique feel to gaming was successful from the start. Yet, loot boxes were introduced as a Hail Mary at the time. By 2010, the game’s popularity had started to decline.

The concept of esports was very new at the time, and Valve didn’t think it worthwhile to invest in the game as a competitive title but rather develop it as a casual shooter offering a lot to its player base. That is when Valve turned the key and made Team Fortress 2 a free-to-play title and introduced “crates,” that is loot bodes.

However, Valve chose to go a different approach than the much greedier EA with their now-notorious Battlefront II. What the company did was an “ethical” loot boxing, whereby you could spend real money to obtain rewards quicker, but you could also grind them through regular progression. There was no real incentive to buy UNLESS you wanted to significantly expedite the process.

The crates were awarded upon achievements and levels and after games, and the only thing you needed was to purchase keys to unlock each chest and see what was inside. Gabe Newell, the owner and founder of Valve, said that the company saw TF2’s population increase by a factor of five, which beckoned to other game developers in the industry.

In fact, shortly after, Valve decided to bring more game items to Counter-Strike. Well, not completely. The loot boxes that were ushered in Global Offensive were purely cosmetical, but they still fetched a hefty price. The most expensive weapon skins reached over $2,400 per individual skin.

The Underbelly of CS: GO Skins and Underage Gambling

Skins and loot boxes thrived in CS:GO bringing Valve dividends as players kept on buying the boxes in a bid to secure a rarer skin. However, things became murky when the first skin betting websites appeared. There, you would be able to connect your Steam account and “trade” your skin(s) for a chance to win even more. The way this worked was you would bet on a CS:GO team winning a game against another.

It was a thriving gambling market with over $2.3 billion wagered in skins by mid-2017. Then, in 2017, Valve issued a cease-and-desist letter warning websites to discontinue accepting skins as a virtual currency. The company was responding to a class-action lawsuit brought against Valve by the parents of players who had spent unreasonable amounts of money on these digital purchases.

After Valve issued its letter, it started homing in on individual websites, and those that operated legally, openly, and ethically immediately chose to close down. The company fought the lawsuit and argued that it had, in no way, encouraged underage gambling in any form and that children were not the target groups of its loot boxes.

The case was settled, and since then, skin gambling – through loot boxes or otherwise – has been mostly limited. Some rogue websites continue to operate, but they are not options that you wish to explore. In a word, Valve got loot boxes more so than most other publishers.

Are Loot Boxes Legal Where You Live?

Yes, most likely. There are many governments around the world that are now taking a much more serious look at loot boxes. Not everyone likes what they see. As it turns out, numerous studies have been commissioned in Australia and the United Kingdom, and even the United States, where legislators are increasingly aware that loot boxes have some grave shortcomings when it comes to children protection.

But back to the question of whether loot boxes are regulated and legal where you live, this depends entirely on the game you are playing. When the Netherlands and Belgium ordered EA to suspend loot boxes in FIFA, it took the company some time to react (it was arguably adjusting the game’s framework to allow the suspension).

Image credit: EA

Yet, the Netherlands and Belgium have not been debating whether loot boxes constitute gambling. They have ruled out against them on the spot in a bid to protect children from irresponsible gaming practices. Interestingly, in Belgium, gamers appeared to be very supportive of the measure finding it appropriate.

However, the aforementioned countries are the only place in the world where video game loot boxes have been fully outlawed, although they have stirred controversy in Germany, the United States, Australia, and elsewhere as already established. In fact, many governments re-regulating their gambling industry have similarly chosen to also take aim at loot boxes as well.

Problem Gambling and Loot Boxes – Is There a Connection?

One of the big debates about loot boxes today is their association with problem gambling. According to concerned parents and NGOs, loot boxes are related to the higher incidence of problem gambling in youths and underage individuals. While there have been numerous discussions about the nature of loot boxes as gambling, most governments still agree NOT to classify them as an outright form of gambling.

However, scrutiny over loot boxes has increased exponentially, with more regulators paying a closer eye to what these game purchases entail. Studies have shown, time and again, that there is an actual connection between loot boxes and problem gambling.

One of the most compelling arguments about the omnipresent nature of these digital containers comes from GambleAware, a UK-based charity organization that carried out some extensive research. In April 2021, the organization published the results of a survey that indicated that 40% of the children who played video games in the country had opened loot boxes in the surveyed period.

Even more disconcertingly, 5% of all children generated the total spent on loot boxes, meaning that companies profiteer from players who have access to money but aren’t necessarily of the appropriate age to handle microtransactions responsibly. According to the study, the biggest spenders were players who contributed at least $100 on loot boxes each month.

The research had failed to specify how many of the children who had opened loot boxes had developed a problem gambling behavior, though, which is one of the weaknesses of the cited evidence. Exposure to randomized risk-reward features, though, does strike as a little irresponsible, especially when it encourages a desire in underage players who may be inclined to act rashly and without giving a purchase a proper thought.

Odds in Loot Boxes: Adding Excitement or Gambling?

One of the biggest problems with loot boxes is that it randomizes the rewards. Odds are introduced to give an idea of what you can expect on getting back if you spend enough, but there is no definitive way to know if you would get what you desired even if you did. Essentially, there is a gambling element where you both know and don’t know what to expect.

Some companies chalk odds up to adding excitement to their loot boxes and offering players more enjoyable and fulfilling experiences opening these digital containers, which is precisely their point after all. People enjoy the RANDOMNESS of the reward. However, developers were not always keen on disclosing probabilities as it made some players less keen on opening certain boxes.

In 2019, for example, the Entertainment Software Association (ESA) chief counsel Michael Warnecke commented that the trade body he represented had negotiated with several big companies to begin including the chances of an item dropping from a box. The companies that had agreed to the move included Activision Blizzard, Bungie, Electronic Arts, and Wizards of the Coast, among others.

That alleviated a part of the problem as it forced sellers to establish a more transparent way in which loot boxes and their rewards are distributed among players. Yet, the addition of such metrics still added a feeling that these containers were indeed a form of gambling.

What Will Governments Do about Loot Boxes?

Each government will have to decide individually how to treat loot boxes. Research may not have been able to definitively prove that loot boxes are a form of gambling, nor that it introduces big spending on the part of players, but what such papers have done is to prove that there is a game of chance element in opening loot boxes not unlike in casino games, for example.

With this in mind, governments will have to decide how to act next. Parents are naturally concerned, and countries such as Belgium and the Netherlands seem to have stood together in completely obliterating loot boxes. Other governments seem either reluctant or not familiar enough with loot boxes to yet discuss them in earnest.

However, the re-regulation of gambling laws in Germany and the United Kingdom has come with a big focus on loot boxes, with more people asking legislators to pay attention to in-game items and purchases and factors in player behavior. Age restrictions are also possible, but a blanket ban on loot boxes is not immediately expected.

Loot Boxes: A Final Thought

Loot boxes show a lot of similarities and likeness to games of chance that we can ascribe to gambling activities. Whether they lead to gambling addiction is another matter. Mounting evidence suggests a correlation and this is understandable in light of the fact that people are already diagnosed with gaming disorders and an excessive amount of time spent in gaming worlds.

It remains paramount that governments and regulators continue to monitor the use and proliferation of loot boxes and ensure that consumers, who are in many cases underage, are protected from predatory in-game purchases and practices.

Loot Boxes FAQs

Are loot boxes a form of gambling?

No. Loot boxes share similarities with games of chance that are traditionally understood to be a form of gambling. However, for the time being, most regulators do not classify loot boxes as gambling. Some research has shown likeness between gambling and loot boxes, however.

How much do people spend on loot boxes?

The percentage of total spending on loot boxes varies. Children and adults are said to be on track to be generating $20 billion in purchases for companies by 2025, based on a report by Juniper Research. Some consumers spend just a few dollars, but others tend to spend much more, with the numbers reaching $100 on average every month.

Are loot boxes game purchases bad for your children?

Yes and no. Loot boxes may be purchased by anyone, but as parents, you must make sure that your children are not overspending on loot boxes. Some games offer in-game restrictions, but ultimately you want to make sure that your kid does not spend too much. There are proposals to restrict underage individuals from purchasing loot boxes.

Why do developers add loot boxes in the first place?

Developers are keen to extract better engagement from players. Loot boxes are linked to higher customer bases response. Not least, loot boxes generate robust revenues for the companies that offer them.

Can I buy loot boxes legally in the United States?

Yes, you can purchase loot boxes legally in the United States. Should any regulatory change occur, companies will introduce the necessary changes, such as restricting loot box sales to underage individuals in their games.

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