The Battlefront II Debate: Possible Unregulated Gambling in Video Games
Electronic Arts (commonly known as EA), sparked controversy in 2017 with the announcement of their long-awaited Star Wars: Battlefront II videogame. Fans of the series, who believed this game to be another shooter with Han Solo, Luke Skywalker, or Leia versus The Sith, were surprised to find a new addition to the popular franchise: microtransactions in the form of “loot boxes.” Although Battlefront II did not create the forum for the discussion of these additions to video games, many have asked “what are microtransactions?” as a result of the overwhelming controversy. In short, microtransactions are a business model where users can purchase virtual goods for a micropayment. This type of business model is not a new phenomenon, although their technology and popularity have grown significantly over the last ten or more years. For example, the average non-gamer is familiar with transactions costing anywhere between $.99 to $5.99 on the popular mobile game Candy Crush to get more lives and perhaps rare candies. The micropayments that are done to complete a microtransaction, such as those in Candy Crush, are exactly what they appear to be: a small payment typically no more than $5.00. Microtransactions come in many forms, but this article will focus on the type within videogames known as “loot boxes.”
Unlike Darth Vader or Emperor Palpatine, this new addition to the Star Wars game was never meant to be seen by players as something bad to players of the game. Rather, loot boxes were intended as another means of economy for the game developers and to keep players engrossed in their game. Originally, Loot boxes were primarily created to be a fun, modern, and innovative part of video games, with economic gain being a bonus or secondary concern. During an enthralling game-play, players can find some loot boxes that provide cosmetic-type items such as: a new helmet/hat/belt, new skin for your gun, and new clothes/shoes/hair for your main character. While others provide more functional-type items such as: weapons, healing items, and key items (like maps or keys). This aspect of the game is completely based on chance. Meaning that once the player obtains a loot box and unlocks it, they do not know what item(s) they will receive.
The issue that many gamers have expressed concerning Battlefront II’s microtransaction loot boxes, is that players – who are more likely to be minors – are subtly being coerced to make microtransactions to obtain items that are only found in loot boxes. A lot of these items are not only unavailable for free in the game play, but they are essential items that are needed to be successful in the game. The items that were still available for free during game play, would take weeks or months to obtain versus the little to no time via several mircotransactions and chance. Microtransactions of this nature, are said by critics to give people with the time and financial fortitude an unfair advantage over those who ordinarily cannot afford to make several micropayments. Fearing that their reputation and the integrity of the Battlefront franchise were at stake, EA decided to temporarily remove this form of microtransactions when the game was released in November of 2017. Amidst the backlash, however, citizens and lawmakers alike began to stop conjecturing and have a serious discussion on whether microtransactions are a clever veneer for gambling. More notably, Hawaiian state representative Chris Lee stated that “these kinds of loot boxes (or predatory gaming) and microtransactions are explicitly designed to prey upon and exploit human psychology in the same way casino games are so designed.” He, and many others around the world, are beginning to make the shift toward a new wave in gambling law.
This academic paper seeks to illustrate that the current definition of what constitutes gambling in the American Legal System may be inept to address potential gambling concerns in videogames. Current gambling laws could be sheathed within the surging technological age, because “loot boxes” – a type of microtransaction in videogames – are largely unrecognized under the law as potentially being a form of gambling. More specifically, this paper will also address the concerns as to whether these games contain what should be legally recognized as a “prize or something of value.” To adequately address and solve this growing legal concern, Congress and the Courts alike, should reevaluate existing policy concerns and precedent and possibly consider regulating videogames (whether mobile, online, or console) that contain microtransactions or loot boxes.
b. Traditional Games Permeate U.S. Legal Gambling
Two leading scholars on Gaming Law wrote that “the most successful forms of legal gambling have always used the technology of their time.” Yet, the United States as a whole only recognizes traditional games as a form of gambling despite the changes of technology taking place in our culture. The first online gambling site (PlanetPoker) was launched in 1998, and since then more sites have been created. In 2010, the online gambling industry made an astounding $29.3 billion in revenue. But this figure includes sites that allow users to play games that resemble traditional, in-person gambling games. Although not considered to be a leading state on gambling law, Texas’s gambling statute provides an illustration of a gambling definition that only recognizes the more traditional in-person gambling games. The state of Texas’s gambling statute states, in relevant part:
(4) "Gambling device" means any electronic, electromechanical, or mechanical contrivance not excluded under Paragraph (B) that for a consideration affords the player an opportunity to obtain anything of value, the award of which is determined solely or partially by chance, even though accompanied by some skill, whether or not the prize is automatically paid by the contrivance. The term:
(A) includes, but is not limited to, gambling device versions of bingo, keno, blackjack, lottery, roulette, video poker, or similar electronic, electromechanical, or mechanical games, or facsimiles thereof, that operate by chance or partially so, that as a result of the play or operation of the game award credits or free games, and that record the number of free games or credits so awarded and the cancellation or removal of the free games or credits; and
(B) does not include any electronic, electromechanical, or mechanical contrivance designed, made, and adapted solely for bona fide amusement purposes if the contrivance rewards the player exclusively with noncash merchandise prizes, toys, or novelties, or a representation of value redeemable for those items, that have a wholesale value available from a single play of the game or device of not more than 10 times the amount charged to play the game or device once or $5, whichever is less.
In other words, Texas only recognizes games that reflect the traditional games of poker, bingo, sports betting, lottery, roulette, etc., when it comes to gambling done on “electronic devices.” And Texas is not alone in how they view gambling via the internet or an electronic device. Gaming scholars have stated that “any form of gambling that exists in the real world also exists in hyperspace.” The recognized sentiment appears to be that only games recognized as gambling in the real world be recognized as such when played on an electronic device or on the internet.
Consider also the state of Nevada, a state that is more recognized as a leading authority of what constitutes gambling. There, they give a much more exhaustive definition of gambling and use of electronic devices than the state of Texas example illustrated above. However, it too appears to refer to what is traditionally recognized as gambling in the physical world. Their gambling statute states, in pertinent part, that:
“Game” or “gambling game” means any game played with cards, dice, equipment or any mechanical, electromechanical or electronic device or machine for money, property, checks, credit or any representative of value, including, without limiting the generality of the foregoing, faro, monte, roulette, keno, bingo, fan-tan, twenty-one, blackjack, seven-and-a-half, big injun, klondike, craps, poker, chuck-a-luck, Chinese chuck-a-luck (dai shu), wheel of fortune, chemin de fer, baccarat, pai gow, beat the banker, panguingui, slot machine, any banking or percentage game or any other game or device approved by the commission, but does not include games played with cards in private homes or residences in which no person makes money for operating the game, except as a player, or games operated by charitable or educational organizations which are approved by the board pursuant to the provisions of NRS 463.409.
“Gaming” or “gambling” means to deal, operate, carry on, conduct, maintain or expose for play any game as defined in NRS 463.0152, or to operate an inter-casino linked system.
1. “Interactive gaming” means the conduct of gambling games through the use of communications technology that allows a person, utilizing money, checks, electronic checks, electronic transfers of money, credit cards, debit cards or any other instrumentality, to transmit to a computer information to assist in the placing of a bet or wager and corresponding information related to the display of the game, game outcomes or other similar information. The term does not include the operation of a race book or sports pool that uses communications technology approved by the board pursuant to regulations adopted by the commission to accept wagers originating within this state for races or sporting events.
2. As used in this section, “communications technology” means any method used and the components employed by an establishment to facilitate the transmission of information, including, without limitation, transmission and reception by systems based on wire, cable, radio, microwave, light, optics or computer data networks, including, without limitation, the Internet and intranets.
"Gaming device" defined. "Gaming device" means any object used remotely or directly in connection with gaming or any game which affects the result of a wager by determining win or loss and which does not otherwise constitute associated equipment. The term includes, without limitation:
1. A slot machine.
2. A collection of two or more of the following components:
(a) An assembled electronic circuit which cannot be reasonably demonstrated to have any use other than in a slot machine;
(b) A cabinet with electrical wiring and provisions for mounting a coin, token or currency acceptor and provisions for mounting a dispenser of coins, tokens or anything of value;
(c) A storage medium containing a control program;
(d) An assembled mechanical or electromechanical display unit intended for use in gambling; or
(e) An assembled mechanical or electromechanical unit which cannot be demonstrated to have any use other than in a slot machine.
3. Any object which may be connected to or used with a slot machine to alter the normal criteria of random selection or affect the outcome of a game.
4. A system for the accounting or management of any game in which the result of the wager is determined electronically by using any combination of hardware or software for computers.
5. A control program.
6. Any combination of one of the components set forth in paragraphs (a) to (e), inclusive, of subsection 2 and any other component which the Commission determines by regulation to be a machine used directly or remotely in connection with gaming or any game which affects the results of a wager by determining a win or loss.
7. Any object that has been determined to be a gaming device pursuant to regulations adopted by the Commission.
As used in this section, "control program" means any software, source language or executable code which affects the result of a wager by determining win or loss as determined pursuant to regulations adopted by the Commission.
While it is evident that this statute has room for inclusion of new potential forms of gambling such as loot boxes, the language still suggests that gambling law recognizes electronic forms of the more traditional in-person games. However, Nevada’s law does appear to set the tone for more inclusion with language stating that interactive gaming involves “[any recognized electronic form of payment] to transmit to a computer information to assist in the placing of a bet or wager and corresponding information related to the display of the game, game outcomes or other similar information.” With a definition as expansive as that, as opposed to the restrictive one given in the Texas law, lawmakers and interpreters could reasonably include loot boxes and other microtransactions that have a purely virtual existence.
So, what about games that otherwise meet the elements of gambling that only exist in the virtual world like Star Wars: Battlefront II? It would be hard, for example, to fathom people in the physical world stopping in the middle of a busy freeway to pay someone for a loot box, to break that loot box, and then gather the valuables that were randomized just so law makers could recognize this as a form of gambling. But with the way that technology is evolving, gambling law may need to expand to include games that have a purely virtual existence.
An Analysis of Potential Legal Hurdles
a. The “Value” Issue
Another cause for concern that is evidenced in the Texas statute example above, is the reluctance to recognize a reward or value that is “noncash merchandise.” This illustrates the largest hurdle that law makers across the country may have in attempting to regulate internet, online, and even gambling done via electronic devices that do not resemble traditional games. Under well-recognized gambling law and principles, the elements of gambling are consideration, chance, and value. There is a debate within the gaming legal community over whether the player receives actual value (value element) when they pay for the loot box (consideration element) and have items randomized in a way that is not based on skill (chance element).A paramount issue is whether the element of “value” can ever be legally satisfied. In other words, can virtual items that are obtained and solely used in a videogame be considered “valuable”?
Bitcoin-Gate and Virtual Gold
A case illustrating a reluctance to consider virtual items as something of value is the Espinoza case decided by the Circuit Court of Florida’s Eleventh Judicial Circuit. Although concerning a different type of microtransaction (Bitcoin as opposed to loot boxes), attorneys have stated that “this ruling could go as far as dissuade similar cases in the future as well.” Similar cases, as evidenced in this article, would be the regulation of loot boxes. In this case, Federal agents and Florida state agents decided to investigate potential illegal activity concerning virtual currency and crypto-currency. They discovered a website where people could buy and sell Bitcoin, and make a lucrative business out of it. Essentially, the users would choose to sell or buy their bitcoins online or in-person in a way that resembled a Craig’s List advertisement. While venturing the website, the agents found a user by the name of “Michelhack” (or the defendant Espinoza), and studied his advertisement profile. Espinoza was available 24/7, would only meet with potential customers in person, and would only accept cash payment. Espinoza also required other forms of proof to add to the overall legitimacy of the transaction. The agents felt as though they had found the conspiracy they were looking for, and began having conversation with Espinoza about meeting to engage in a Bitcoin transaction. The first transaction involved a sell of .40322580 Bitcoin for $500, and another transaction involved 1 Bitcoin in exchange for $1,000. On the first transaction, Espinoza made a profit of $83.67 and explained that he purchases the Bitcoin at 10% below market-value and sells it for 5% above market value. After meeting to engage in a “third transaction” Espinoza was arrested and charged with various charges under the Florida statute involving the illegal sell and distribution of “money” or “currency.”
The opinion penned by Judge Pooler represents a sentiment that is shared between his court and the United States legal system in general. The esteemed judge interpreted the plain language of the statute and determined that it “does not account for bitcoin and digital currencies.” In other words, a Bitcoin which could sell for $1,000 or more of real money was not seen as something of value under the Florida statute as well as other related statutes. Within the opinion, Judge Pooler elaborated on what a Bitcoin was and potentially highlighted the reluctance of law makers to recognize this type of microtransaction as being something of value:
Bitcoin may have some attributes in common with what we currently refer to as money, but differ in many important aspects. While Bitcoin can be exchanged for items of value, they are not a commonly used means of exchange. They are accepted by some but not by all merchants or providers. The value of Bitcoin fluctuates wildly and has been estimated to be eighteen times greater than the U.S. dollar. Their high volatility is explained by scholars as due to their insufficient liquidity, the uncertainty of their future value, and the lack of stabilization mechanism. With such volatility they have a limited ability to act as a store of value, another important attribute of money.
Yet, Judge Poole acknowledged that this decision was based on the archaic Florida statute that only recognized traditional forms of money or currency. Shortly after describing the issue with recognizing the Bitcoin as a form of value, the Judge stated that “the Florida Legislature may choose to adopt statutes regulating virtual currency in the future. At this time, however, fitting Bitcoin into a statutory scheme regulating money services businesses is like fitting a square peg in a round hole.”
Can one be considered a “loser” or “winner” of money when it involves virtual gold, virtual chips and other virtual resources? The case that attempted to answer this byzantine question are the Mason v. Machine Zone, Inc. case. The case involves a popular “free-to-play” mobile game known as Game of War (GoW) created by Machine Gun, Inc. In this game, players train their virtual armies and build virtual empires with other players to conquer the virtual world. Although it is free to download GoW, the player pays actual money to purchase virtual gold within the game which is then used to enhance their virtual towns and progress more successfully in the game. The virtual gold is also used in a part of the game known as the GoW Casino. The player uses the virtual gold to obtain virtual chips, and inserts those chips into a casino-type machine. Once this is done, the player spins a virtual wheel and is given virtual resources that are then used within the game (such as wood, stone, or more virtual gold or chips). Accounts that contain a lot of rare and coveted virtual prizes obtained from this virtual casino, can be sold on a secondary market for actual money. The Plaintiffs each filed class action suits alleging that they “lost [a lot of] money” in an unlicensed or illegal gambling device purchasing this virtual gold and receiving “less valuable” items when they engaged with the virtual casino.
The courts in both cases, although in separate states, similarly reasoned that the Plaintiffs did not “lose” any money. First, the courts determined that in order for one to be a “loser” for gambling purposes another one would have to be a “winner.” Here, Machine zone was not a winner because they neither gained or lost anything from the Plaintiffs using virtual gold to play the virtual casino. Although the virtual gold had to be purchased, Machine Zone would receive that payment regardless of whether Plaintiff got the coveted rare items or not. Second, the courts found that the use of virtual gold to “pay for” the virtual chips used in the game did not constitute money or value under their respective statutes. Particularly, the Machine Zone court concluded that “there was no basis in the text of Maryland's Loss Recovery Statute for applying the term "money" to include virtual gold and other virtual resources that plaintiff received while interacting with the video game casino because the statutory term "money" was unambiguous and did not encompass virtual resources available and used only within the video game.”
As evidenced by the precedent cited above, gambling in the virtual world has real life consequences that have been undermined. How much harder, then, would it be to recognize the prizes and items found in loot boxes to contain an item of value? As seen in the Espinoza and Machine Gun cases, Bitcoin and virtual gold can be sold for real money even though it is solely used virtually. Also, as evidenced with the “Skinning Scandal”, skins used on weapons within shooter videogames (some of which are obtained via loot boxes) can be gambled and sold for hundreds and thousands of dollars. In 2016, $7.4 billion worth of skins were wagered on secondary market sites like Valve.
As gaming attorney Marc Whipple stated in his podcast interview with video game attorney Ryan Morrison:
“It does not have to be money, it just has to be something of value. Value doesn’t necessarily mean that you like it and want it. Value means that ‘it has value.’ If you can sell it to somebody, if you can transfer it to somebody, and exchange it for some form of consideration or payment, I would argue that under most gambling statutes that it almost certainly something of value. If you can’t, that doesn’t mean that it isn’t something of value, it just means it’d be harder to prove.”
Majority of the rare items (whether cosmetic or functional) can be sold or exchanged for some form of consideration. Thus, United States gaming law should reflect the fact that items that only exist virtually can have real world relevance and value.
b. Other Jurisdictions Consider Loot Boxes Gambling
This modern phenomenon with loot boxes is not unique to the United States. Other progressive countries are highly considering altering their gambling laws to adjust to growing technology. For example, Sweden is looking to classify loot boxes as gambling as early as 2019 due to their current laws failing to account for loot boxes. This would subject them to more stringent legislation, especially as it concerns minors. When interviewed about this potential legislative change, Prime Minister of Public Administration Ardalan Shekarabi stated that “it is obvious that there are many people suffering from gambling addiction, who also get stuck in this type of gambling and lose money because of it.” Further, the Prime Minister added that they “are working to regain control of the gambling market as soon as possible, and to make sure that Swedish consumer protection laws apply to all actors which conduct gambling activities.”
The Belgium Gaming Commission and Belgian Minister of Justice Koen Greens, has called for a “complete ban on loot boxes” and is furthering its investigation to bring forth those efforts. German government officials are considering new regulations to better handle online purchases and advertisements which one of Germany’s representatives states “included loot boxes.” A noteworthy study done by the German University of Hamburg says that “videogames are increasingly embracing elements of gambling.” That study coupled with media outcry in Germany concerning loot boxes is definitely said to influence future legislation. As of February, The German Youth Protection Commission is planning to introduce a ban on loot boxes due to the University of Hamburg study. Their overall concern is that loot boxes “normalize gambling for young and vulnerable people.” Australia is definitely not hiding “down under” on this issue. There, the Victorian Commission for Gambling and Liquor Regulation (VCGLR) analyst has stated that “loot boxes are gambling.” They are currently analyzing Victorian law to see how to correctly solve this issue. However, the UK Gambling Commission’s Executive Director Tim Miller has taken the archaic approach similar to the examples we’ve seen from the U.S. by stating that “if in-game items whose acquisition is based on chance can be “considered money or money’s worth”, then these constitute gambling. However, if such items cannot be cashed out and can only be used within the game, then it is more difficult for their obtaining to be considered a form of gambling.”
A few states within the United States have joined the discussion and began advocating for an alteration of our country’s gambling laws. The State of Hawaii introduced four bills that will prohibit the sale of loot boxes to anyone under the age of 21, taking a stance akin to the legal drinking age. Two Indiana senators, Ronald Grooms and Jon Ford, have called upon the US Attorney General to study the issues surrounding loot boxes and to make a recommendation on whether it should be considered gambling in Indiana. Even senators from Washington State have introduced a bill concerning loot boxes in video games and apps. The senator of New Hampshire, Maggie Hassan, has even called the Entertainment Software Rating Board (ESRB) to determine a more “ethical and transparent way” in handling games with loot boxes. In response to this and the loot box outcry heard around the world, the ESRB have decided to slap a band-aid on a brooding, festering, infectious, and open wound by stating that it will begin labeling games with these type of microtransactions with “In-Game Purchases” and provide a website for Parents (ParentTools.org) to bring “awareness of [current and existing] helpful tools that help parents monitor their child’s spending habits.” Many prominent and notable gaming sites have called out the ESRB for “not listening” and for using a “vague and ambiguous label” to protect the interests of gaming companies who want to continue to withstand the legal backlash loot boxes are receiving. This ambiguity is also apparent when considering that games that do not contain loot boxes, will nonetheless receive the label of “In-Game Purchases” because they include downloadable content for purchase. This “downloadable content”, however, adds a new form of gameplay or a bonus round and does not have characteristics that resemble gambling like loot boxes such as video game of the year Legend of Zelda: Breath of the Wild.
Star Wars: Battlefront II provided a forum for very important dialogue concerning loot boxes and whether gambling law should account for them. Now that the opportunity has presented itself, the United States legislature may need to consider a new wave in gambling law. Doing this, would better assist courts in interpreting cases that contain loot boxes and virtual items that solely exist online. Many voices both nationally and internationally have spoken concerning the legal status of loot boxes and the United States should join the discussion and implement the necessary changes. If it is determined that loot boxes should be regulated, legislature should consider having an age requirement (such as 21 and older) because a study shows that 4% of teenagers have a gambling addiction. Even still, adults 21 and older are just as susceptible to this latent form of gambling with over 3% of the population struggling with the clinical disorder known as pathological gambling. In sum, the virtual world does result in tangible and lasting consequences in the real world and those tangible and lasting consequences deserve effective redress.