I have a soft spot for paranormal horror. I love movies about demons, ghosts, hauntings, possessions. There’s one particular movie from the early aughts called The Possession. The movie takes a Jewish myth about the “dybbuk box,” a powerful evil spirit that takes possession of people to do bad things that exists in a wine box. As far as horror movies go, it was pretty good, but for whatever reason, it stuck with me. And now, whenever I think about lockboxes, my mind immediately goes to the dybbuk box: a seemingly innocuous little box with fun things inside that actually houses a great evil that will ultimately destroy you.

That last bit might have been a bit of hyperbole. Maybe.

The question of whether lockboxes are gambling has been batted around the gaming-sphere for years. I don’t just mean a few years, either. We first started formally naming and shaming them in MMORPGs at least as long ago 2012, and we’ve been right there with you complaining about them and their gambling ways ever since, even as AAA gaming publishers have worked overtime to soften them as “lootboxes.” MMORPG players familiar with the way gacha mechanics were seeping into western online games a decade ago saw this industry crisis coming a long way away.

In the last couple of years, we’ve seen increased scrutiny of lockboxes across the world, with varying degrees of success. But what does it actually mean for lockboxes to be gambling? Why might they be considered gambling? What legislation is in place across the globe to counter lockboxes? How is the argument shaping up in 2020? It’s been a few years since our last in-depth guide to this mess, and much has changed in the political landscape since that piece, so in this week’s Lawful Neutral, we’ll take a quick overview of gaming’s dybbuk box. I mean, lockbox.

Why are lockboxes bad?

Let’s take a second to explore why lockboxes are bad. In short, they use the same mechanics that other forms of gambling do to exploit and manipulate player into spending more money in a game than they would have otherwise. Developers will often design the best and shiniest and most powerful items as lockbox exclusives, and gamers will then spend more money (often far more) on lockboxes attempting to get the exclusive items. The effect is amplified when you have a player with a predisposition to gambling, or when the real odds of winning are obscured in some way.

Based on how widespread the mechanic is, we can safely make one key assumption: Lockboxes generate more revenue than just selling items directly. The developer doesn’t have to provide any additional value to the player, but it can generate more money.

Lockboxes work because they manipulate gamers using the same tools and techniques as casinos do, but they aren’t regulated like casino. This allows developers to have their proverbial cake and eat it too. They also use in-game currencies, which helps confuse gamers and prevents them from realizing exactly how much they are spending. In-game currencies, as we’ll learn later on, also help developers avoid being classified as gambling. Worse, because of the lack of regulation, the developer doesn’t even have to disclose the odds of winning with lockboxes – and if it does, it could lie and likely never be caught or held accountable in any meaningful way.

How do we define lockboxes/lootboxes?

We have to start with how exactly we are defining a lockbox. The term lockbox – or lootbox or gamblebox, depending on how pithy you’re feeling – refers to items that you can purchase in video games that contain other items, from junk that’s more or less useless to exclusive weapons, armors, pets. Generally, players acquire lockboxes by purchasing in-game currency with real, legal tender and then using that in-game currency to purchase the lockbox, although some games hedge their bets by giving locked boxes away like candy and then selling the keys, while others dispense occasional freebies in the hopes you’ll be hooked enough to buy more.

According to one infamous company, these are totally ethical tactics, as gamers love these super fun surprise mechanics. After all, who wouldn’t want to open an unmarked bag hoping for a diamond ring only to find a steaming piling of fertilizer? That’s a fun experience, right?

How do we define gambling?

Gambling laws vary wildly based on country; in the US, they’re based on individual state regulations. So we’ll be approaching this from a common law perspective as most laws and regulations in the US are based on the common law understanding of gambling. Gambling has three primary characteristics or pillars: consideration, chance, and prize. For something to be considered gambling under common law, it needs to satisfy all three characteristics.

Consideration is your bet – that’s how much money you put toward something. The heart of gambling is that the value of your consideration is smaller than the value your prize. The most important aspect of consideration for us in the gaming world is that for most laws currently, your consideration has to have legal value. (For a recap on legal value, check out this Lawful Neutral, where we discussed that in detail.)

Chance is exactly what it sounds like: Gambling must contain an element of chance, and in most cases, chance has to be the dominant factor as opposed to skill. The character of the game has to be chance, that player skill has a small impact on the prize.

Finally, we’ve come to the prize. What do you get from your consideration if your “chance” factor pays off? Here again, we have the element of something of legal value. In most cases this is represented by the ability to turn whatever the prize is back into legal tender.

How is legal gambling different?

There’s an important distinction here I want to make, and that’s the difference between gambling mechanics and the legal definition of gambling. In the few cases where lootboxes have been been adjudicated before the courts in the US (we’ll get to those in a minute), the judges went out of their way to make it clear that lockboxes do use gambling mechanics. Functionally, lockboxes are gambling – full stop. They take consideration, they are characterized by chance, and they have a prize. But so far, judges have stopped short of legally defining them as gambling because they wouldn’t make the legal leap to assign legal value to either the consider, the prize, or both.

This brings us to the reason that in-game currency is incredibly important. When our “consideration” for games is in-game currency, it fails the consideration test under common law gambling because it lacks legal value. If you could purchase the lockboxes directly with money without the in-game currency mediator, it’s feasible that they could pass the consideration test.

In fact, in Soto vs. Sky Union, the courts did consider the in-game currency to have legal value because of the specific way a state law was phrased. For the prize, the legal litmus test that the judges assigned was whether the prize could be turned back into legal tender. Funnily enough, in both Soto v. Sky Union and Kater vs. Churchill Downs, there was a secondary market (not unlike the CSGO skin market that allowed you turn the prizes from the game back into real money). However, in the end, both courts ruled that because use of those markets violated the Terms of Service for the game, the gambling items didn’t actually constitute value.

(And of course, the game companies in both cases, surely benefiting greatly themselves from users violating their Terms of Service, made no attempts to curtail or stop the illegal trading. We’ve covered this sort of laundering before.)

Regulation in the US and Internationally

In the US we’ve had no substantial legislation to date regarding lockboxes. We’ve had handful of hamfisted attempts to regulate lockboxes in the US, none of which has amounted to anything more than stern scoldings from Senate committees and promises from the gaming industry to self-regulate that haven’t actually materialized. However, the international community has stepped up and started putting pressure on game developers regarding lockboxes. In no particular order:

• China has increasingly regulated lockbox sales to children over the past four years, resulting in Blizzard and several other gaming companies adjusting their lockbox strategy in the country.
• Japan banned “complete gacha” mechanics by stating that virtual items are considered “prizes” under previous legislation. Several Japanese companies also attempted to self-regulate, but the attempt failed.
• South Korean developers also attempted to self-regulate with limited success, and while there was a huge fine leveled against Nexon, it was only tangential to the use of lockboxes.
• Across the world in Europe, the UK has been making a lot of noise about lockboxes, but without any legislation being passed yet.
• The Netherlands forced Valve and several other developers to change their sale of lockboxes.
• Belgium declared lockboxes gambling and companies have been slowly either pulling games or changing their lockbox implementation in Belgium.

This is just a highlight of the action being taken across globe — across at least 14 nations. And yet in spite of insufficient legislative pressure in the US, companies like EA, one of the most egregious offenders, still released Star Wars Jedi: Fallen Order completely without lockboxes or micro-transactions, which may signal a shift in corporate approach – or at least a desire to shift the spotlight to someone else.

Are there downsides to legislating lockboxes?

Opponents of legislation have highlighted concerns like the rising costs of making games necessitating funding through lockbox-esque mechanics, arguing that regulating lockboxes will kill industry jobs as developers go under. If we legislated lockboxes in the US, it’s fair to assume we would see some developers that are particularly reliant on these types of mechanics close their doors. But which ones and how many is speculation.

There are other “slippery slope” arguments too – the idea that legislating lockboxes would eventually necessitate the regulation of every chance-driven event in video games. Personally, I think this is hyperbole; while excessive regulation is always a concern, in this case it’s incredibly unlikely to happen because of the legal gambling definitions we’ve just talked about. Companies can fall back on dominant factor requirements mentioned above or argue that the purchase of the game includes all items attainable in the game, for some just some off-the-cuff examples. As out-of-touch as our legislators tend to be, even they understand the inherent need for chance in games.

Putting this dybbuk to bed

This is just a brief overview of lockboxes. Just based on MOP’s years of coverage of the science and politics of lockboxes alone, I think I could write a 15-part series, but I don’t want to write that, and I don’t think anyone wants to read that.

The point is that the future of the lockbox is pretty dark. As the games industry faces increasing legislation across the globe, the lockbox is likely to face the ignoble death that it deserves. I can’t think of a single positive that the lockbox has had on the industry — and lots of negatives. I think our industry, and our genre in particular, has suffered because of lockboxes. While developers will absolutely find a new loophole in legislation to exploit for their own benefit to the detriment of their players, I’ll be happy to finally put this dybbuk box behind us.

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!