Lawful Neutral: Why Josh Hawley’s lockbox regulation Senate bill is dead-on-arrival

    
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Kick it down the road.

There’s a special place in my heart for lootboxes and exploitative monetization, and that place is somewhere below the revulsion I feel for Martin Shkreli or going for a swim with the shit demon from the movie Dogma. Lockboxes and other exploitative monetization mechanics have had a demonstrably negative impact on gamers by relying on psychological manipulation or exploiting pre-existing issues, while publishers utilizing exploitative mechanics in their games continue to amass Scrooge McDuck-style towers of money.

We’ve been waiting for legislators to get off their fannies and deal with this, and as we’ve reported, a recent bill from US Senator Josh Hawley appears to be getting more attention than previous attempts. His bill, the Protecting Children from Abusive Games Act (PCAGA), targets pay-to-win transactions and lootboxes that appeal to children under the age of 18.

Unfortunately, this is not the lockbox bill most gamers are looking for. There are many holes and vaguely defined terms in the bill, such that even if passed, it will likely be overturned.

The PCAGA aims to make it illegal to target pay-to-win transactions and lootboxes at minors. On the surface, this seems like a good thing as it’s children who are most likely to be taken in by manipulative monetization. But the reality is that bill is poorly written, resulting in a vast over-reach that if adopted would result in a chilling effect against manipulative and non-manipulative mechanics across the game-o-sphere.

The scope

The logical place to start is with what games the bull is intended to apply to, and the literal answer from the bill says a “minor-oriented video game.” This brings to mind games like Roblox, Club Penguin, Free Realms, Toontown. But the reality of what games this bill covers is a lot more broad.

“The term ‘minor oriented video game’ means an interactive digital entertainment product for which the target audience is individuals under the age of 18, as may be demonstrated by:
(A) the subject matter of the product;
(B) the visual content of the product;
(C) the music or audio content of the product;
(D) the use of animated characters or activities that appeal to individuals under the age of 18;
(E) the age of the characters or models in the product ;
(F) the present in the product of–
(i) celebrities who are under the age of 18
(ii) celebrities who appeal to individuals under the age of 18
(G) the language used in the product
(H) the content of materials used to advertise the product and the platforms on which such materials appear;
(I) the content of any advertising materials that appear in the product
(J) other reliable empirical evidence relating to
(i) the composition of the audience of the product; or
(ii) the audience of the product as intended by the publisher or distributor of the product
(K) other evidence demonstrating that the product is targeted at individuals under the age of 18.”

I think it’s important to understand just how far-reaching this is. The bill uses the phrase “appeals to individuals under the age of 18,” which as any reasonable person would tell you is relatively meaningless, as that lots of things that are targeted at 18+ crowd appeal to the 18-and-under crowd as well. How does one even identify that the visual content of a game appeals to minors? Or that the game music or audio content appeals to minors? Under this proposal, any video game that contains a model of a child appeals to minors. Putting any celebrity in game means that the game then appeals to minors – because show me a celebrity who isn’t idolized by kids. The scope is so vague that someone could say title screen music appeals to minors therefore falls under the umbrella of this bill.

The entirety of the bill reads as if were written by someone who understands about 50% of the gaming world — enough to be able to ape the language, but not enough to really understand the implications of what’s being said. I think most of the criteria are intended to prevent developers, publishers, and distributors from exploiting loopholes to get around the bill. But instead of plugging loopholes, the terminology expands the scope of the bill so much that nearly every game would be considered minor-oriented.

What qualifies as pay-to-win?

While the MMO community has been debating the term pay-to-win for the better part of two decades, this bill steps in and defines it in a way that manages to be surprisingly problematic given how games monetize today. The bill defines pay-to-win as any add-on transaction that eases a user’s progression through content, assists a user in accomplishing an achievement, or receiving an award that is otherwise available without purchase of the add-on transaction.

The key phrase here is that all of these things allow you speed up content that is already available in the game, without the add-on transaction. I’d wager that the majority of gamers are generally OK with pay-to-win or consider it fair as long as the items in question are obtainable through regular gameplay. But the bill’s understanding of pay-to-win actually turns that whole concept on its head. We’d consider an item not-pay-to-win if it’s available through regular gameplay, but Hawley’s idea is that being obtainable through regular game play is exactly what makes it pay-to-win.

Other things that would be legally qualified as pay-to-win under this definition are things like levels boosts, experience potions, speed potions, infinite harvesting items (for example, in Guild Wars 2), the ability to skip the main story quest (for example, in FFXIV), and purchasable teleport tokens.

Additionally, any purchase that allows the user to access game content that had previously been accessible to the user but has been made inaccessible after a time or a limited number of gameplay attempts is also pay-to-win. By our reading, that means purchasing past seasons’ old living story content in Guild Wars 2 is P2W. If you could buy a pass to limited part of the game that was once generally accessible, it’s P2W.

Finally, in competitive games or in competitive elements of games, any purchase that gives you an advantage over someone who didn’t make a purchase is P2W. This is what most people think of when they think of P2W. In a competitive environment, making a purchase gives you an advantage over someone who didn’t make a purchase. We often hold up examples of cash shops that sell best-in-slot or near-best-in-slot items as P2W. The bill agrees, but seemingly only as an afterthought.

There are a few exclusions for P2W in the bill, such as new difficulty modes, cosmetic alterations that affect only the user’s visual representation, and additional game content as long as it doesn’t violate any of the previous P2W criteria. Game expansions are not considered P2W as long as they don’t do anything to ease the player through existing content. That means that the last several World of Warcraft expansions that came with a level boost for pre-ordering make the expansion P2W, whereas without the level boost they otherwise wouldn’t be.

The lockbox section itself is surprisingly boring. The bill defines lootbox in such a way that it’s hard to find much fault with it: as an add-on transaction that in a “randomized or partially randomized fashion unlocks a feature of the product or add to or enhances the entertainment value of the product.”

The second definition is a little bit more confusing: It adds anything that allows the user to make one or more additional transactions that she could not have made without the first transaction and the content of which is unknown to the user until after she’s made the first transaction. The best example I can think of for this part is using real money to buy in-game currency, which you then use to buy the lockbox. I think. In all honesty, this section is confusing and I’m not entirely clear what use-case Hawley’s bill-writers are trying to address here.

So what’s the damage?

The bill is overly inclusive in its definition of “minor-oriented.” It’s not easy or clear to define something as minor-oriented as done here, even for those us who spend all of our free-time in video games. The enumerated definitions of “minor-oriented” actually increase the over-inclusiveness of the bill as opposed to limiting it. The net effect is that there is no reliable way to say something is not “minor-oriented” as the vagueness would allow anyone to say that a part of the game appealed to minors. We can refer back to the Supreme Court video game case Brown v. EMA, where Justice Alito opined that “violent video game” is impermissibly vague. “Minor-oriented video game” is similar enough to “violent video game” that we could expect the same standard to be applied.

Additionally, there’s an argument to be made about whether monetization is protected speech. It sounds a bit ridiculous, but a developer could argue that his P2W implementation or lootboxes are part of content of the game, so restricting it therefore restricts the designer’s First Amendment right. A studio has a reasonable chance of succeeding with the “monetization as content” argument because quite honestly, we don’t have a good reason as to why it’s not content, and therefore it’s protected speech.

And Brown v. EMA already established that video games are protected speech. As a result, limiting the content of video games requires that the bill pass strict scrutiny. The issue addressed in the bill has to be a compelling government interest and is narrowly drawn to serve that interest. We’ve already established that “minor-oriented video game” is not narrowly drawn, so the bill fails that requirement. Barring that, Hawley and friends would need to demonstrate the problem they are solving and show that only through government intervention can the problem be solved, which is a standard that they won’t meet. They won’t be able to clearly define a problem they are trying to solve, nor show that the only solution is through the limiting of the content of the game – and therefore limiting speech.

The PCAGA is (probably) a bill with its heart in the right place, but it has fatal issues that I think make it dead-on-arrival, despite all the publicity around it. It’s too broadly defined, impacting developers far outside of the mass-market “save the children” appeal they are making. There’s also an argument to be made that limiting a monetization model based on age violates the First Amendment as video games are protected speech.

Monetization is getting increasingly exploitative and we absolutely need to put guardrails on how video games can monetize their games, and that includes gambleboxes. But this bill isn’t going to get us there, and it’ll be lucky if it manages to hobble out of the legislative gate before it face-plants.

Every other week, Andy McAdams braves the swarms of buzzwords and esoteric legalese of the genre to bring you Massively OP’s Lawful Neutral column, an in-depth analysis of the legal and business issues facing MMOs. Have a topic you want to see covered? Shoot him an email!
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Fenrir Wolf

Eh. China and places in Europe have already instated far more restrictive laws against exploitative microtransactions. They’re already on the way out. Whether America has any role to play in it at this point is largely irrelevant.

If Europe and Asia can mostly agree to outlaw them, it doesn’t make the remaining regions worthwhile enough to design exploitative MT systems just for them and them alone. The wheels are already in motion, it really is just a matter of time.

Besides, America is too busy renaming things (like natural gasses) to have the word Freedom in them, somewhere, with the upper-case F. Far more important. (This is actually true, look it up.)

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Mr.McSleaz

People say that Digital Goods have No real world value?

There’s PLENTY of websites that sell Digital Goods from games for REAL MONEY.

As an example, Path Of Exile, There’s websites that sell anything that drops in that game for REAL MONEY.

If I can pay REAL MONEY for Digital Goods then those Digital Goods have A Real World Cash Value.

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Arktouros

None of those websites are officially supported by the games. If their accounts are known/found out/etc they get banned. For example a few months ago Quin69 got temp banned for even showing a RMT website for Path of Exile on his stream for a few seconds. People who RMT in games like Path of Exile get banned on a regular basis. Every game would be 100% OK with going after those 3rd party websites and shutting them down. If you talk to any game developer they will tell you that every single one of them are basically a scourge on their business because they require an immense amount of resources and dedication to go after and it still rarely solves the problem.

That also brings up the other issue of who actually owns what in games. If players owned what they have in games that makes it very difficult to do things like ban them. At that point even if a player is breaking the rules you’re taking away access to their property they bought and paid for which is stealing. However you also can’t just give them their Path of Exile currency out of the context of the game and send you about on your way. What are they going to do? Send you an email with some JPEGs of some currency? Your property only has value within the context of their virtual world. You can’t take the virtual goods out of the virtual world and have them retain their value. Thus it gets argued it has no real world value. However that’s assuming you do actually own what you think you own, which if I’m not mistaken in most games you don’t actually own anything.

The issue just isn’t that simple.

KodaiRyu
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KodaiRyu

Afaik My.com and aeria allows those.

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Arktouros

Yes and there’s the CS:GO Skinconomy and other examples as well.

This doesn’t invalidate the point that any game that does ban the practice of RMT means that items have real world value because RMT happens around the game rules.

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Anton Mochalin

What’s the difference between a lootbox and a loot chest with random loot we see in most MMORPGs? The difference is clear, you’d say, you pay real money for the former and you don’t pay real money for the latter. But aren’t the same psychological laws at work in both cases? So aren’t regular random loot drops just the same psychological manipulation as well?

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starbuck1771

No because the one you pay money for is technically gambling. Why? Because you losing real money on a game of chance. Which in a way using children for this bill is a step in the right direction. If you can’t play casino games until you’re 21 they can use gambling law’s to target developer’s for violating law’s already on the books.

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Arktouros

Technically, legally speaking it’s not gambling.

According to most gambling laws in most countries gambling is defined by wagering something of value for a chance at something else of value. Where the distinction is drawn for virtual goods is that virtual goods have no real world value. If you listen to any person from the video game industry talk about the matter they repeatedly state the goods in the games you’re buying have no real world value. It’s like going to a casino and cashing in money for chips but you can never (legitimately) cash out your chips for money. I can’t take my loot box Overwatch skins down to the pawn shop and cash them out for example.

Where countries have been differed so far was that Netherlands and Belgium. In Netherlands they recognized that services such as the CS:GO “skincomony” where you can sell goods gained from loot boxes in a market gave them real world value. So in that country they ruled if you can sell it after the fact, then it has real world value, and thus falls under gambling. However something like Overwatch where you can’t isn’t considered gambling. Where Belgium differed is they said so long as the goods in the boxes were desirable they had value and thus would fall under the gambling laws. This is a very odd finding because on the one hand are they stating everything desirable in a game has real world value or just what comes out of a loot box? If I get banned playing a game and they delete my account can I sue them for recompense of my property that they are denying me since it now has real world value?

This legislation is going way above that and talking about the psychological practices used to lure children into spending money. As Anton pointed out correctly games also use these same psychological tricks and design elements in order to keep players in the games and playing. In fact part of this Bill (Section 5) is to require the FTC to do a study on loot boxes, game design and the impact both have on audiences of all ages.

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starbuck1771

Yes however it can be counter argued that if said virtual good has no innate value then by setting a cash value to purchase said items give it value or constitutes fraud. However the gambling comes in on the loot boxes because you don’t know what you’re going to get just like a pull on a slot machine. The state of Kansas used to have video poker machines in gas stations where you could win cash then they got banned so they tried to skirt the law and put in trivia machines where you could win gift or phone cards. It didn’t work. LOL

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Arktouros

I’m certainly not a lawyer, this topic is really just a big hobby for me, but if I’m not mistaken when we play these games the wording goes that we don’t actually own anything we’re just sort of licensed what we have in the games. Think of it like paying a ticket to enter the amusement park and then paying additional money to play the ball toss game that we all know is bullshit cause of the convex baskets.

I 100% get what you’re saying with lock boxes being like gambling. Mechanically speaking, it’s almost identical. However legally speaking it isn’t identical at all nor does it meet the criteria and it’s the legal definition of gambling you’re after in order to be regulated by gambling laws. Going back to our amusement park example, it would be like any prizes you won on that shitty, rigged ball toss game couldn’t be taken outside of the amusement park. So even if you won the big stuffed teddy bear, you only have it within the confines of that amusement park. If that amusement park disappears or you can no longer access it your teddy bear is effectively gone entirely. What real world value can that teddy bear have if you can’t take it outside of that amusement park?

Your Kansas examples both fall under that legal criteria. In the first instance, you’re gambling something of value (money) for a chance at something else of value (more money). In the second scenario you’re gambling something of value (money) for a chance at a gift that has real world value (phone cards, etc).

Peter Murphy
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Peter Murphy

It adds anything that allows the user to make one or more additional transactions that she could not have made without the first transaction and the content of which is unknown to the user until after she’s made the first transaction.

Some lockboxes contain special currency in randomized amounts that can be used to purchase additional lockboxes. Also, this would prevent games selling randomized amounts of an in-game currency. It also likely targets things like Lobi crystals in Star Trek Online – you can’t purchase from the Lobi Store without getting crystals, the only reasonable way to acquire crystals is through lockboxes, and the amount of crystals you’ll get from your purchase is not known until after you’ve made the transaction.

I believe this additional provision is to avoid any loopholes where companies try to skate around the rules by using an indirect but still gambling-based purchase system. To use STO as an example again, they make all lockbox items purchasable with Lobi crystals instead of drops from lockboxes, and let you buy lockboxes with random amounts of crystals in them instead. The additional provision would prevent them from doing this – instead they could only sell boxes with fixed amounts of crystals so you know exactly what you’re getting.

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McGuffn

The second definition is a little bit more confusing: It adds anything that allows the user to make one or more additional transactions that she could not have made without the first transaction and the content of which is unknown to the user until after she’s made the first transaction. The best example I can think of for this part is using real money to buy in-game currency, which you then use to buy the lockbox. I think. In all honesty, this section is confusing and I’m not entirely clear what use-case Hawley’s bill-writers are trying to address here.

Giving them the benefit of sanity, what I think this could most apply to is hiding additional content behind the original product with the added proviso that they don’t know about it until after purchase.

Ordinarily this wouldn’t apply to much, other than maybe a slick salesman or ad flyer selling a printer for 20 bucks and then finding out that the ink is 5x the price.

But the reality is, in the video game space, there are places like steam where, say, the full range of ESO’s cash shop bloat is entirely hidden from the buyer. I can see how it would also apply to the claims that, until recently, Ubisoft was selling a gimped version of Rainbow 6 Siege that required abysmal amounts of grinding so you had better buy the more expensive version.

By the same token, yes, you could buy Star Citizen for a “box” price but when it finally launches it turns out you’re at a distinct disadvantage compared to someone that spent 1000s of dollars on cash shop crap, then that would apply too. This danger is obviously heightened by the early access nature of the game.

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Arktouros

It’s a lot broader than just the latest WOW expansion that raises the level cap when it comes to game expansions. The language reads that anything that makes the previous content easier. So if a game like GW2 comes out with a new specialization, character masteries, items, or class that could be argued as power creep or makes the base game easier then that would fall under the definition of p2w as well. This is important in games like GW2 or ESO where difficulty has been “normalized” as the additional features that make for a superior experience fall under this bill’s definition of P2W.

However the way they define kids game could mean anything and doesn’t really work. Is WOW’s cartoony graphics style considered appealing to kids or is just a stylized version of their art style established since Warcraft started decades ago? Do we consider TERA appealing to teens with half naked lady characters frolicking and jiggling around?

But most importantly if you take the time to actually read the Terms of Service for most games almost all of them state when you agree to it that you’re 18+ already or your parent is creating it for you and only if they’re legally allowed to. It’s going to be real simple to remove that last bit and state that only adults can play their respective games and boom now you’re not selling to children. If you have a child who sneaks in then ban the account for being in violation of TOS and problem solved.

The real shame is the study they want conducted in Section 5 of the bill. It would be a good actual, factual and scientific study on these topics. So far everyone passes off these nonsensical surveys as science and they’re basically meaningless. We need real science getting done and real studies to be made so we can see the actual results and see what’s actually happening. Seems a bit silly that won’t happen without legislation going in place first. Bit like banning it first, then doing a study if it needs to be banned second.

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McGuffn

The real creepy thing is what would happen if the age rating slapped on the front cover is applied, as it probably would be.

r1plakish
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r1plakish

Evil game companies can’t take advantage of innocent children because minors can’t legally be held to a contract or banks would be issuing minors credit cards as soon as they could walk. Since the purchases can only be made from the account or device authorized by an adult then it’s their responsibility to monitor their kids actions. The truth is that the name should be changed to “Protecting Lazy Parents from Abusive Games Act” but then I doubt it would get much support.

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Dug From The Earth

Its a baby step

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Anstalt

I’m mostly OK with all the issues you listed, apart from the over-reaching of the “minor-orientated” which I agree could become a bigger issue.

Whilst trying to claim that the bill is aimed at protecting children is probably a good way to raise awareness, the truth is that these gambling mechanics hurt adults more (because we have more money to lose and bigger consequences to losing it).

So, in my opinion, drop the children arguement from the bill altogher. Simply acknowledge that paid-for-lootboxes ARE gambling and then subject them to normal gambling regulations. All games that would contain them instantly become 18+, and if they shoved a massive sticker on the box that said “this game is funded through gambling” or something similar, that would turn off a hell of a lot of potential buyers.

On the pay-to-win front, I take a simple view. First, identify the “win” scenarios as set out by the developers themselves. This would include winning in combat, completing the storyline, completing your gear sets, successful crafting etc. Then, anything you can pay money for that helps you win any of these scenarios is thus pay-to-win.

With all that said, I’ll just be blunt. I hate paid-for-lootboxes and exploitative monetisation and I want to see them gone. I’ll support any argument or legislation that helps us get there, even if they’re a bit sketchy. Until the legislation arrives I’ll continue to vote with my wallet and avoid all games that include it. Ive never spent money in a cash shop, let alone bought a lootbox. I just wish more people were like me and avoided them too, then developers might take note!

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Fervor Bliss

Great people should have a say in what society they live in. Just because your a CEO does not make you King. Our elders have died in wars for our representation. We the people.