3 April 2023
Loot Boxes provide players with the opportunity to pay to open a “mystery box” and acquire in-game items of unknown quantity and quality for use within the game. They encourage players to spend real money for a chance at obtaining virtual valuables, more often than not leaving players with nothing to show, except a desire to continue gambling for better items.
Given the similarity to gambling, in 2017 the debate around Loot Boxes and their potential harmful effect started, leading to countries like Belgium and the Netherlands outlawing Loot Boxes. In Austria it was, until a recent court decision, highly debated whether Loot Boxes are considered “illegal” gambling.
In order to understand the decision, it is important to know that in Austria there is a federal gambling monopoly, meaning in order to offer certain games of chance, an according license – which is nearly impossible to acquire – is necessary. In case no such license is in place, the “gambling contract” is void and the players can ask for their money back.
The court had to decide whether (i) Loot Boxes are considered illegal gambling under Austrian Law, (ii) the selling of virtual coins, whose only purpose is to buy Loot Boxes, qualifies as operating gambling under Austrian Law and (iii) intermediaries are also liable.
Given that the contents of Loot Boxes are randomly generated, and therefore cannot be influenced by skills of the player, the court considered Loot Boxes as games of chance under Austrian Law. However, not every game of chance is “illegal” gambling: In order to fall into this category, the stakes have to be acquired with real money and the winnings need to be worth real money. The fact that you can buy Loot Boxes or virtual coins with real currency and the contents acquired from the Loot Boxes are worth actual money, although only through the existence of a third-party market, was enough for the court to qualify Loot Boxes as “illegal” gambling. Even the defendant’s argument that it is not allowed under the T&Cs of the game to sell contents from Loot Boxes for real money was not enough, as the court explicitly stated that the main point is that the content has an actual market worth, with no regard to whether the market is operated by the defendant or if it is merely a “black market”.
Furthermore, the court ruled that the accompanying audio-visual stimuli when opening Loot Boxes, there being no limit for the amount of Loot Boxes that can be purchased, and their importance for succeeding in the actual game, constitutes that these Loot Boxes do not fall under the exception of permissible “recreational games”.
Liable for the organization of the “illegal” gambling is the operator. In order to be considered as an operator of a game of chance, a company (or natural person) has to provide the required facilities and objects for the implementation and make them accessible to the participants. Given that the intermediary in question provided a store where the participants could buy virtual coins which are used to buy Loot Boxes in games, the court decided that under such circumstances, the intermediary can be seen an operator of a game of chance too and, therefore, is liable according to the law and has to refund the stakes.
Given the small value of dispute there is no possibility of review of the decision by the Supreme Court. Therefore, the final decision is with the Appellant Court, but the decision shows a direction which is generally in-line with the player-friendly gambling case law of the Supreme Court. Furthermore, process funders started with their preparations to find possible claimants.
Video game companies should check the audio-visual display of Loot Boxes and make sure that the Loot Boxes are not necessary for the games progress. In addition they should not offer them in exchange for real money.
by Erik Steiner