As the line between video games and gambling becomes progressively blurred, partly thanks to the introduction of novel monetisation techniques and the proliferation of mobile gaming, the influence of gambling-style games on children – an obvious target market for publishers – is coming under increasing scrutiny.

A number of recent reports and commentary on the subject of gambling and the treatment of children highlights this well-publicised shift in the expectations of both regulators and industry stakeholders. To the extent it has not already done so, this shift will undoubtedly impact industry as requirements around the protection of children from gambling, alongside other potential online harms, become more stringent. Stakeholders increasingly have to balance aggressive monetisation of a lucrative demographic market against this enhanced oversight.

Treatment of children under the microscope

Both the Gambling Commission and the Children's Commissioner have invested significant resources to highlight their concern around gaming industry practices and their impact on children. In late 2019, the Gambling Commission published a report investigating the impact of gambling on 11-16 year olds in Great Britain. The report singled out the loot box as an example of the blurring of gaming and gambling, finding that 44% of young people who are familiar with in-game items had paid money to open loot boxes in-game. An almost simultaneous report by the Children's Commissioner, 'Gaming the System', identified many additional risks associated with the evolution of gaming on children, including bullying, inequality (who can afford 'skins' and who can't), online safety, aggressive and unpleasant anonymised behaviour, the impact on development and socialisation skills and, increasingly, the link between games and gambling and the risk of addiction.

Taken together, these reports emphasise that it is not just loot boxes that are potentially harmful to children, but a number of other games features, including microtransactions and virtual items that threaten financial harm to children who play games online. The 'Gaming the System' report emphasises that gambling is not allowed and is heavily regulated in children’s offline lives, so its presence in their online lives requires more consideration, particularly, as there is currently little oversight and few controls to mitigate harm. The fact that children can now spend money in games - and are often under pressure to do so from friends and famous gaming YouTubers, or in order to progress faster - marks a significant divergence from a child's normal offline behaviour. Behaviours like spending without any knowledge of what a reward might be (to open a loot box for example), the fact that rewards come in the form of in-game benefits rather than real-world currency and the linked possibility for a child to feel like their money has been 'wasted' (which in turn can lead to children 'chasing losses'), all mirror gambling behaviours that would be regulated and managed in an offline environment.

The Children's Commissioner's recommendations are wide-ranging. They include more appropriate content management, education to equip children with digital resilience, managing screen time, including maximum daily spend limits by default, limiting spending to items which are not linked to performance (ie aesthetics only) and addressing contentious nudge techniques and the detrimental use of data. More particularly, in the gambling regulatory space, the report specifically highlights that the current legal definition of "gambling" (more so, "gaming") under the Gambling Act 2005, remains an obstacle to better protection. The longstanding issue is that because "gaming" means playing a game of chance for a prize, and a prize is defined as money or money’s worth, there is an argument that given the contents of loot boxes cannot officially be exchanged for cash, they are not “money’s worth” and are not subject to gambling regulation. This fails to recognise that items won through loot boxes can be exchanged for money or money's worth in a myriad of ways, including on illegal third party trading sites. As the report comments, the value placed by children on winning certain items (eg due to social pressures or simply to win), even when those items cannot be cashed out for money, can be enough for some children to spend significant amounts.

The report calls for gambling laws to be updated to reflect the reality of children’s experiences of spending money in-game including asking that:

• The Government take immediate action to amend the definition of gaming in section 6 of the Gambling Act 2005 to regulate loot boxes as gambling.
• The Government undertake a wider review into the current definition of gambling in the Gambling Act, to ensure it accurately reflects new forms of gambling, including those found in online games.

While there is a clear emphasis in the Children's Commissioner's report on the need to update gambling laws to reflect the reality of children’s experiences of spending money within games, the general recommendations, both from the Children's Commissioner and the Gambling Commission, highlight the increasing scrutiny of gaming industry practices and their impact on children.

Recognising the need to protect children – recent developments

Regulators have undertaken a number of concrete measures demonstrating their willingness to put their words taking action.

New rules on age verification procedures for online gambling operators

In February 2019, the Gambling Commission issued new rules for remote gambling operators which have applied from 7 May 2019. Holders of remote online gambling licences need to:

• complete age verification before a customer can deposit or gamble online and before they can access any free-to-play versions of a game. This replaced the previous 72 hour timeframe
• obtain customer details and verify their basic identity before allowing them to gamble, and
• inform customers of the types of identification they are going to need to supply before they can deposit funds.

These measures cover off a number of perceived risks and go some way towards a fairer and safer gambling environment, guarding against the risk of children gambling by introducing a check upfront. The Gambling Commission is also now insisting that customers be age verified before they access free-to-play versions of gambling games. While free-to-play games are not technically gambling (because, there is no prize involved), the Gambling Commission does not consider this legitimises making them available to children.

Additional CAP guidance on gambling ads and children

Also in February 2019, the Committees of Advertising Practice (CAP and BCAP) published enhanced guidance for gambling operators on the placement of adverts and use of social media tools and data when targeting gambling adverts. The UK Advertising Codes already required marketers to take all reasonable steps to ensure that advertising is not targeted at under-18s, either through the selection of media or the content of the advert, and they also prevented advertising being directed at adult audiences that could pose a risk to under-18s. The additional guidance builds on those protections by providing greater detail on approaches that are likely to be unacceptable in individual marketing communications.

Of particular note, the revised guidance:

• requires that gambling adverts are not placed in media for children or young people or in media where children or young people make up more than 25% of the audience
• requires marketers to take all reasonable steps to use available data to include or exclude individuals on the basis of their age or other relevant criteria
• prohibits targeting of under-18s or individuals who, due to their online behaviour are likely to be under 18, with gambling adverts
• requires operators to show they have made full use of available tools to help them comply
• confirms that gambling adverts must not be likely to have particular appeal to children, especially by reflecting or being associated with youth culture. Cartoons, fairy tales, celebrities and sports personalities likely to appeal to children or who are or appear to be under 25 should not be used.

While this guidance neither constitutes new rules nor binds the ASA when it considers complaints about a marketing communication, it provides greater detail on the types of conduct that might constitute a breach and puts a clearer focus on the protection of children.

ASA rulings on age-restricted and other gambling ads

The ASA has also made a number of rulings in the past year on age-restricted and gambling ads. Specifically:

• Tombola was found to have breached the CAP Code by placing ads on the 'I'm a Celebrity' app. This ruling potentially went beyond the scope of CAP guidance as it suggests that an age-restricted advert should not be placed unless it can be directed away from an under-18 audience. CAP guidance requires the lower standard that marketers should be able to demonstrate they have taken reasonable steps to exclude a relevant audience.
• Five gambling firms were found to have breached rules on targeting ads at children.
• The ASA also upheld a complaint against Casumo when it targeted gambling ads at people carrying out a google search using the words 'how to unsubscribe from gambling'.

Gambling Commission framework measuring gambling-related harms for children and young people

In April 2019, the Gambling Commission published a framework for measuring gambling-related harm experienced by children and young people. The framework considers not only the impact on childhood and adolescence, but also on future potential. The Commission aims to carry out annual surveys to measure gambling harm to children and young people.

DCMS Committee report on immersive and addictive gaming technologies

The DCMS Committee published a report on issues arising from immersive and addictive gaming technologies in September 2019. Paid-for loot boxes come under particular scrutiny with the Committee effectively asking the government to designate them as a game of chance or justify why it chooses not to. The report also recommends the establishment of a working group to examine the effect of gambling elements in games and recommends that the government advise PEGI to classify paid-for loot boxes as age-restricted gambling content.

Gambling Commission announces new safety measures

On 1 April 2020, the Gambling Commission announced the progress of its initiative across three industry working groups to improve gambling safety, many of which focus on children and vulnerable groups.

• VIP incentives will not be available to under-25s. Suitability checks and an audit trail will be required for all new VIP members. The Commission will consult on the proposals and then amend its licensing conditions to reflect these changes, allowing a three month implementation period.
• Online advertising rules will be strengthened to protect vulnerable groups including by:
  • using a common list of negative search terms and suppression websites
  • using customer data to ensure paid-for ads do not target vulnerable groups on social media sites
  • implementing an approach whereby advertising is only targeted at over-25s in social media and 'pay per click' advertising where platform facilities permit
  • age-gating YouTube channels and content
  • adopting and rolling out to all affiliates a code of conduct which will be regularly amended and updated.
• These measures will be adopted as soon as possible and, following consultation, will be included in the IGRG's Gambling Industry Code for Socially Responsible Advertising. Compliance will be required from July 2020. The working group will continue to develop adtech solutions and work to inform and protect consumers.
• The industry is also working on a code to ensure responsible product and game design. This will include removal of game features which might encourage intensive play such as slam stops and turbo buttons and removal of split-screen slots which have been associated with potential loss of control. This is set to be published in September 2020, following consultation.

In its Business Plan 2020/21 also published on 1 April 2020, the Gambling Commission highlighted its commitment to reducing gambling harm, again with a focus on children and other vulnerable groups.

Protection of children – an industry trend

All this activity underlines that the protection of children from gambling-like activities is, and is likely to continue to be, the subject of regulator review and potential enforcement. At the heart of the tension is the increasing recognition that the more creative monetisation of games and borderline commercialisation strategies bring children closer to gambling.

As more games shift towards free-to-play and/or introduce optional in-game purchases, in part due to the success of games like Fortnite and Apex Legends, protection of children will continue to be top of the regulatory agenda. While up to now the Gambling Commission has largely limited its activities to liaising with games publishers or operators informally (on the basis that, under the current regulatory regime, loot boxes are not "gambling" because there is no official way to monetise what is inside them) this feels increasingly likely to change. With MPs leading calls for a ban on loot boxes being sold in video games, the pressure for real change is only growing, with the head of the group of MPs Damian Collins commenting: "Loot boxes are particularly lucrative for games companies but come at a high cost, particularly for problem gamblers, while exposing children to potential harm."

As the pressure for action grows, 2020 may bring about the start of a more proactive approach from regulators as opposed to the, until now, relatively light touch approach of self-regulation. In mainland China we have already seen a robust response to children's use of games, as the authorities seek to limit the number of new online games, restrict playing time and develop an age-restriction system.

Ultimately the games industry will need to appreciate this changing environment and work to strike a balance in its products. Many games are, at their core, designed to be addictive, promote spending and increase screen time. However, this approach may no longer be sustainable in light of the growing criticism from both an advertising and gambling regulatory perspective. The Children's Commissioner's report found that although children rarely say that their only hobby is online gaming, they describe feeling that it is an inescapable part of their lives, given how popular it is with their peers, and they sometimes worry about becoming addicted to it. As the report notes, a successful game will make children want to keep playing, but should not cross the line to a point where a child feels out of control – this is where the balance needs to be established if the industry is to thrive and move forward.

There is clearly growing self-awareness in this space from the games industry. As recently as February 2020, Tim Sweeney, Epic Game's co-founder, called for the end of pay-to-play loot boxes in video games, despite being behind Fortnite, the most successful game to have used this strategy, although it no longer does so. He argued in his keynote speech at the Dice Summit in Las Vegas that such practices were putting both players and the industry at risk. "We have to ask ourselves, as an industry, what we want to be when we grow up … Do we want to be like Las Vegas, with slot machines or do we want to be widely respected as creators of products that customers can trust? I think we will see more and more publishers move away from loot boxes."

This call to the industry could represent the start of a movement towards a more conscious and mindful approach of the impact of video games, particularly gambling-style games, on the lives of children.