Loot boxes: Has pay-to-win become pay-to-gamble?    

A legal perspective 

Loot boxes are an integral part of most contemporary video games. They are imaginary packages, presented in animated form, which have hidden content and can be purchased by users. After opening the boxes, users win prizes that can be used in the video game in which the boxes are sold. Studies show that worldwide revenue generated from loot boxes is expected to exceed $20 billion by 2025.[1]

The popularity of loot boxes has led regulators in many countries around the world, such as Belgium[2], the United Kingdom[3]  and the Netherlands[4], to pay special attention to them and investigate whether they are a form of gambling that is not only carried out without a license but is also offered to minors.

To date, this issue has not been studied in Bulgaria, hence, the legal status of loot boxes remains unclear. However, the Bulgarian Gambling Act (GA) establishes a definition of gambling similar to the definitions in many other countries. Its interpretation leads to the conclusion that the elements of gambling are: bet/wager, a factor of chance, which determines the outcome of the game and win/loss possibilities.

The price against which the player buys a loot box can be treated as a bet/wager within the meaning of the applicable Bulgarian legislation, as it meets the legal definition of payment for the purpose of participating in a game with winnings. The requirement of chance is also satisfied due to the fact that the contents of loot boxes are initially hidden, so it is not clear what exactly the consumer will receive for his money. At the same time, the player can in no way influence, through their knowledge and skills, the outcome of opening the box, which is entirely dependent on a pre-set algorithm which is unknown to them. The possibility of winning is the main consideration that encourages gamers to make such purchases. The fact that video game prizes are neither monetary nor material is irrelevant, as the GA itself does not set such a condition in terms of gain.

Thus, it remains to be seen whether the game of opening loot boxes hides the risk of losing the wager. This controversial question is being answered in various ways in different countries where the problem has already been raised. The Bulgarian legislation does not provide a definition of the term "loss", which at first glance seems unambiguous. In the context of loot boxes, however, the issue proves to be problematic. A characteristic feature of loot boxes is that after opening them the user always receives something – irrespective of the usefulness of the prize within the game or of its subjective value for the individual user. Assuming that even such content is a win, the criterion of "possibility of losing the wager" would not be satisfied and the game of opening loot boxes should not be treated as gambling.

However, if it is considered that the opening of loot boxes hides the possibility of losing the wager, the gaming companies operating on the Bulgarian market would be at risk of sanctions in the amount of millions in their capacity as organisers of gambling games without the necessary license. The problem for the sector would be even greater, as in accordance with the current wording of the GA, the types of gambling games are numerus clausus and it is not clear to what extent loot boxes could qualify as any of them at all. At the same time, gambling games which are not regulated by the GA cannot be organised. This means that gaming companies are likely to be forced to cease this particular activity, which generates a significant part of their total revenue and is used to create new products.

There is still no unambiguous solution to the issue of loot boxes on a global level. At the same time, its importance in Bulgaria is increasing and a timely discussion and clear positions on the matter are required for the sake of legal certainty in the country. Especially so by the competent authority in the field - the National Revenue Agency. Insofar as the current version of the GA does not contain a specific regulation of the phenomenon of "loot boxes", it is a possible scenario that in the future amendments may be necessary in order to reflect current problems in the field of gambling.   

[1] Hunt, N., Moar. J. (2021). In-game Gambling & Loot Boxes: Legislation, Market Evolution & Forecasts 2021-2025. Juniper Research.

[2] Belgian Gaming Commission, 'Research Report On Loot Boxes' (2018)

[3] UK Gambling Commission, 'Virtual Currencies, Esports And Social Casino Gaming – Position Paper' (2017)

[4] Dutch Gaming Authority, 10 April 2018, 'A study into loot boxes - A treasure or a burden?'