Games-Law – Recent Developments in France: the Position of the French Regulator Regarding Loot Boxes

Loot boxes are boxes that offer random content in some video games. They can be distributed free of charge when the player reaches a certain milestone in the game or can be purchased by the player in a virtual store included in the game, either with a kind of digital currency (collected over time and games) or with real money.

The phenomenon of loot boxes, although not completely new, was not controversial until recently, as these boxes made it possible to finance free games available. However, this model was strongly criticized when in 2017 some video game publishers integrated loot boxes into paid games and made the purchase of such boxes almost mandatory in order to fully enjoy the game.

The gambling regulators of several countries then examined the issue of loot boxes to determine whether they could be considered as disguised gambling.

In France, to be characterized as gambling and to be sanctioned if it has not been allowed, the gambling game must meet a definition based on the combination of three criteria: an offer made to the public, involving a financial sacrifice granted in the expectation of a gain.

  • While the criterion of an offer made to the public does not raise any particular difficulties, it should nevertheless be specified that the fact that the game offer is offered in a language other than French and in a currency other than the euro or that the player does not have his domicile in France is not sufficient to exempt the offer from the requirements of French law, since the game offer can be accepted from the French territory.
  • A financial sacrifice is established even in the presence of a small payment or in the event that the game organizer requires a financial advance from the participants and a subsequent refund is made possible by the game rules. In addition, the existence of a dual channel, one free and the other for a fee, is in practice almost always inoperative, since the two channels are rarely equivalent: the player is motivated by the operator to use the fee-based channel which allows him to win the expected prize more easily or more quickly.
  • A gain may be monetary, in kind, but also intangible when it is likely to result in monetization, i.e. to be sold.

On the basis of these criteria, the French Authority for the Regulation of Online Games (the „ARJEL“), in a report published in June 2018[1], indicated that video games that include loot boxes are in principle exempt from the regulation of gambling, since, while the opening of such a box most often involves a financial sacrifice by the player, it is very rare that the loot consists of a gain that can be monetized. By buying a loot box, in most cases, the player hopes to save time, boost his performance or improve the aesthetics of the game.

The only hypothesis identified by the ARJEL in which video games including loot boxes fall into the category of  gambling is that where „the player has the possibility to resell in real currency prizes won in the form of virtual objects or game levels, either on the site of the game itself, or on a dedicated site“, since there is in this case an expectation of money gain. For instance, the ARJEL raises the case of virtual objects (swords, shields or magic armors) won during participation in video game competitions which can be transferred for a fee on platforms.

Thus, although the cases in which loot boxes can be qualified as gambling within the meaning of French law are marginal, the ARJEL points out that each situation requires a specific examination by its services.

In addition, the ARJEL considers that, even if loot boxes do not necessarily correspond to gambling, they may pose other difficulties, particularly in the field of consumer law, and undermine the objectives of public policy on gambling. In particular, loot boxes are used in games accessible to minors and „give rise to habits and reflexes that make them, for these vulnerable groups, privileged gateways to real gambling”; on the other hand, the player does not know what he is buying and “in the absence of total control, there is no guarantee that the distribution of the prizes will not be based on the player’s behavior, with the aim of encouraging him to play more”.

On the basis of this observation, 18 European and American gambling regulators decided to act and signed a Joint Declaration[2], published on 17 September 2018, to warn about the risks posed by the blurring of lines between gambling and other forms of digital entertainment such as video games. Through this Declaration, the signatory regulators committed themselves to work together to analyze the characteristics of video games and social games and to engage in a dialogue with video and social game publishers to ensure the efficient implementation of national laws and regulations. The summary of this work will be presented at the annual meeting 2019 of the Gambling Regulators European Forum.

[1] Rapport d’activité 2017-2018 de l’ARJEL

[2] http://www.arjel.fr/IMG/pdf/20180917CPEN.pdf