Loot box regulation
Upcoming regulation on loot boxes in Spain Carlos Jimenez Ascanio and Santiago Asensi
BACKGROUND As the world of video games has evolved, there has been an emergence of new business models and new products. The traditional model, whereby a player purchases a game upfront, has been substituted wholly or in part by in-play purchases which may see their spending increase dramatically. These developments require urgent regulation, not only in Spain, but also in other jurisdictions. In September 2018, 15 EU gaming regulators as well as the Washington State regulator signed a declaration stating increased concern in relation to “the risks being posed by the blurring of lines between gambling and other forms of digital entertainment such as video gaming.” They also expressed concerns over “controversies relating to skin betting, loot boxes, social casino gaming and the use of gambling themed content within video games available to children”. Recognizing the need for regulation, and after a period of analysis and study, the Spanish Ministry of Consumption (the Ministry) has initiated a legislative process concerning the regulation of the random reward mechanisms associated with interactive entertainment software products, commonly known as “loot boxes”. The law-making process was started in February 2022, when the Ministry opened a public consultation period to obtain views from all interested stakeholders on the regulatory alternatives it might consider for governing loot boxes. The Ministry’s objective is to create an optimal and well-balanced model for the new legal framework for these kinds of products. The General Directorate for Gambling Regulation (the “DGOJ”), under the auspices of the Ministry, asked some specific questions to be evaluated and responded to within the framework of the public consultation. The most important of these was whether the future regulation of loot boxes should be achieved within the framework of the Spanish Gaming Act 13/2011 and its secondary regulations, or alternatively, whether a new regulatory model should be designed for these digital products, that is, a specific regulation separate from those that currently exist. On the 1st of July 2022, after a pause of more than a year, the DGOJ opened a new public consultation. This second consultation concerned a preliminary and specific Bill regulating random reward mechanisms (loot boxes) associated with interactive entertainment software products. From this we can establishe that the decision has been
taken to make a specific regulation because, despite the clear similarities between random reward mechanisms and those regulated under the Gaming Act, there are several key differences. Almost all the questions raised by the DGOJ in the first consultation period have been resolved within this second version of the draft Bill. This is an important step forward, as it creates more legal certainty for loot box products, which have, until now, been deployed through a regulatory loophole in the country. ANALYSIS OF THE MAIN ASPECTS At the outset, the essential definition should be highlighted in this regulatory text as to what should be understood by “random reward mechanisms”, as defined in art. 3.c). As with the definition of gambling in Spain, random reward mechanisms require the existence of consideration or payment for participation and the element of chance. What makes the difference is how the prize component is defined. In this sense the prize obtained from the loot box should have an element of interchangeability. This is specified in points 1 and 2 of art. 3.c) which establishes that the prizes must be given or exchanged between the participants, for money, or for other virtual objects which may be used within the same product. This is a fundamental point which should be analysed and refined as much as possible. The fact that the prize can be exchanged between players or for other virtual objects is quite straight-forward. However, the fact that it can be exchanged for money or other objects related to the same product will give rise to some interesting debates in the future over its interpretation. For instance, it could be interpreted that the item obtained can be exchanged for real money with the same software – or gaming – company that is offering the product. If this is possible, how many times could the player resell items/prizes to the same company that is offering the product? Clearly, the definition of “random reward mechanisms” – in other words, the loot box – is at the heart of this regulatory text and the clearer such a concept is defined the less room there will be for potential misinterpretation. The Bill goes on to list some prohibitions such as the use of loot boxes by minors, as well as a number of rights for the user such as the right to obtain clear and truthful information on the probability of obtaining different items.
36 • IMGL Magazine • November 2022
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