Since the beginning of mass-marketed video games in the 1970s, players would go to the store to buy a game like Pong, Super Mario Brothers or Call of Duty, contained on a cartridge or disc.
But in the last several years, video games have moved their games online, charging gamers for downloads -- and additional downloadable content.
A proposal moving through the Illinois General Assembly would require video game developers to warn players of the financial and psychological risks of a particular in-game microtransaction — “loot boxes”.
“Loot boxes” are randomized digital items that either improve a player’s gameplay, like unlocking weapons, or alter a player’s aesthetics.
However, State Rep. Barabara Hernandez (D-Aurora) believes many younger players may not realize the virtual currency they use to purchase additional content like loot boxes are tied to real money, and as a result kids can run up substantial bills.
“Sometimes the parents are not aware of this and they get charged more than a hundred [dollars]...or sometimes thousands of dollars,” Hernandez said.
Hernandez has proposed adding a warning label about loot boxes to both physical video games purchased at brick-and mortar stores and video games bought on online marketplaces or smartphone app stores. The label would read:
Attention Parents: A Loot Box System exists in this game that permits an unlimited amount of REAL MONEY to be spent without any age restriction. REAL MONEY is exchanged for random digital items. This process has been linked to REAL LIFE GAMBLING ADDICTIONS in both children and adults. Please regulate your own spending as well as your children's spending.
The message would appear each time before a player purchases a loot box.
Industry Response
In August 2019, the Federal Trade Commission held a panel discussion on the rise of random prize options and other microtransactions in video games and whether these practices were deceptive.
In a staff-perspective report released last August, the FTC detailed the suggestions of individual panelists who called on distributors to self-regulate and clearly disclose to players the exchange rates between real money and virtual money and the probability of winning valuable prizes.
Last April, the Entertainment Software Rating Board — a “non-profit, self-regulatory body that assigns age and content ratings for video games” such as “E” for everyone and “M” for mature — added warning labels to games that incorporate loot boxes.
Unlike Hernandez’s proposal, the ESRB warning does not appear multiple times in-game and does not reference a player’s tendency to become addicted, only that items purchased from loot boxes are random.
Tara Ryan, Vice President of State Government Affairs at the Entertainment Software Association — a video gaming trade association that represents major distributors like Activision Blizzard, Bethesda, Capcom, Electronic Arts, and Epic Games — said the proposed Illinois-specific warning label is unnecessary and a solution in search of a problem.
Ryan said since the ESRB began placing loot box warnings, only 3% of games still utilize them in their gameplay, and many have become more transparent about the odds of winning a rare prize.
Ryan also said in addition to existing warning labels, many video games already allow for parental controls on loot boxes and other in-game spending.
“Those tools allow parents to set all types of controls for the games, including how much a child can spend, if anything,” Ryan said. “So you can set limits, or you can set a default of zero.”
Ryan was also unsure of how Illinois would be able to enforce such a policy that would only impact Illinois customers, particularly since the proposal makes no mention of financial penalties for distributors who fail to embed the original warning message into their games.
“These are global companies,” Ryan said. “If this passes in Illinois, the companies have to make some decisions about shipping games into Illinois and making those changes or opting out of shipping games into Illinois...if this is something that's going to pop up in the middle of their games, is it something that they think is going to interfere with gameplay?”
According to the ESA, there are over 8,000 jobs in Illinois directly or indirectly connected to the video game industry.
Ryan also pushed back on the notion loot boxes are connected to a gaming addiction.
“It is our belief that there's no research that shows that there's causation between purchasing something like [loot boxes] and addiction,” Ryan said.
However, in the FTC panel discussion, David Zendle, a researcher from York St. John University in England, gave a presentation on a study he conducted that indicated there is a correlation between gambling addictions and loot boxes.
Zendle’s survey based study included a sample size of over 7,000 participants aged 18 years and over.
“We know that one of the main pathways to problem gambling is a process of conditioning, whereby the gambler comes to need and expect the excitement associated with the gambling win,” Zendle said. “So what we think one of the possible explanations for this effect, is a situation in which people are buying a loot box, getting excitement, buying a loot box, getting excitement, buying a loot box, getting that reward, getting that hit...So therefore, spending money on loot boxes, literally causes people to engage in gambling, leading to problem gambling.”
Zendle said although his study could not prove causality, the correlation between gambling addictions and loot boxes is concerning.
Rep. Hernandez said although she does not want to outright ban the practice of loot boxes — a step that certain European countries have taken — she does want parents to know about the potential risks.
“I do want them to be aware that there is in-game purchases hoping to save them from a financial burden, but at the same time that this could be leading to a gambling habit in a young age,” Hernandez said.
Hernandez’s proposal passed out of the House in April and could be heard on the Senate floor later this month.
