Gaming companies have been finding increasingly novel ways of generating extra income from gamers over the past few years, and now they have turned to video games.

The latest trend in the sector is the inclusion of so-called “loot boxes” in games that encourage players to pay a sum of money for the potential of gaining a rare or limited edition add-on for the game.

There is also a practice known as “skins betting” in which players gamble virtual items for the chance to win cash via unregulated websites.

Regulators around the world are assessing how to address the phenomenon, as many regard gaming to be a prelude to gambling by exposing children at such a young age. Gaming companies argue that the practise does not amount to gambling per se.

In the UK and EU

The UK’s Gambling Commission is one of 15 authorities across the globe to have joined together in a quest to combat integrated gambling in games open to youngsters.

The group is planning to lobby its local jurisdiction to introduce regulations to limit the potential harm that can be caused by loot boxes and skin betting.

They will also be calling upon their local consumer protection enforcement bodies to take action against companies that contravene gambling regulations.

Neil McArthur, the UK Gambling Commission’s chief executive, said in a statement: “We have joined forces to call on video games companies to address the clear public concern around the risks gambling, and some video games can pose to children.

“We encourage video games companies to work with the gambling regulators and take action now to address those concerns to make sure that consumers, and particularly children, are protected. We want parents to be aware of the risks and to talk to their children about how to stay safe online.”

The Gambling Commission highlighted evidence from a UK survey last year that found that 11% of children aged 11 to 16 had taken part in skins betting on unregulated websites.

McArthur explained: “Unlicensed websites offering skins betting can pop up at any time and children could be gambling with money intended for computer game products.”

Belgium steps up video games crackdown

Opinions differ around the globe. In Belgium, the Belgian Gaming Commission (BGC) has suggested that Electronic Arts, Valve, and Activision Blizzard should face criminal prosecution for offering loot boxes in their respective games.

In its recent research report on loot boxes, the BGC outlined what it believes gambling is and isn’t, and how popular games such as FIFA 18, Counter-Strike: Global Offensive, and Overwatch contravene the legislation.

The report sets out recommendations for the next steps that should be taken to manage the issue, from the removal of items to prosecution.

As Electronic Arts has yet to remove randomized items from games being used in Belgium, it face the risk of having a lawsuit being brought against the company.

It is hoped that by joining forces, the countries tackling the issue, including the Netherlands, Norway, Poland, and Portugal, can put together a more standardized approach.

US regulators also alarmed

In Minnesota a bill was introduced on Monday to prohibit the sale of video games that offer loot boxes to under-18s. The bill would also enforce a warning label on such games that would read: “This game contains a gambling-like mechanism that may promote the development of a gaming disorder that increases the risk of harmful mental or physical health effects, and may expose the user to significant financial risk.”

Other states, including California, Hawaii, Indiana, and Washington State, have all voiced concerns about the practice, which generates large amounts of income for developers. For example, Activision Blizzard generated $4bn in 2017 from its portfolio of games, including Candy Crush, Call of Duty and Hearthstone – all these offer loot boxes.

In response to the claims that loot boxes should be considered gambling, Dan Hewitt, VP of media relations at Entertainment Software Association, said he did not view loot boxes as gambling because they offer an alternative experience and players are not required to buy them.