[caption id="attachment_4464" align="aligncenter" width="620"]
Video game company Electronic Arts Inc. saw sales plunge below expectations for recently released "Star Wars Battlefront II". Gamers have pushed back against its in-game loot box purchase system. Photo credit: Jennie Book/Shutterstock.com.
[/caption] In the past year, gamer forums have been flooded by the discussion of one of the most controversial aspects of the gaming industry—the use of loot crates. Loot crates, also called loot boxes, are an increasingly common in-game purchase system. Players use real money to buy a box full of virtual items, without knowing exactly what the box contains. Depending on the game, the items can range from a simple new outfit for a character to a valuable weapon or armor that seriously boosts gameplay ability. And players can spend hundreds of dollars trying to win an item they have a minuscule chance of actually receiving. This, on top of the fact that many of the boxes look a whole lot like slot machines, has prompted criticism and sparked an international conversation on regulation that could put a big source of revenue for gaming and entertainment companies on ice and cause them to call in the legal department. Overseas, gaming companies that use loot crates are starting to get some pushback. In November, Belgium's Gaming Commission began an investigation into loot crates as a form of gambling. Earlier this year, the United Kingdom decided the boxes were not gambling, but it's still unclear how they'll be regulated. China's Ministry of Culture set rules in 2016 that all loot crates must be transparent about how likely it is that players will win valuable and rare prizes. The conversation came to the United States recently. State Rep. Chris Lee of Hawaii has spoken out alongside local parents and gamers against the use of loot crates in games and called for more regulation, especially for young players. "There’s concerns, especially this time of year when parents are out shopping for their kids. There is nothing that identifies that these games have in-game, chance-based microtransactions that have addictive risks to kids," Lee said in an interview with Corporate Counsel. "We’ve allowed mechanisms that have the same sorts of negative impacts that you see in casinos into the pockets of everybody everywhere." Lee wants games that involve loot crates to be for those over 21. He said he's received calls from government officials from across the United States since speaking out. But the Entertainment Software Rating Board (ESRB), a self-regulating organization that rates games for age appropriateness, hasn't classified loot boxes as gambling. The ESRB said in an October statement that the boxes are different from gambling because players are guaranteed an item every time they purchase one, unlike with a slot machine. This is a common argument against classifying crates as gambling—consumers are getting something out of their purchase. "The analogy is that these are no different from trading cards or baseball cards," said Nicholas Plassaras, an associate at Fenwick & West who works on the firm's games team. "You don't know what you're going to get—that's part of the fun, and loot crates are no different. You will always get something when you purchase. It's just a question of whether or not you will get what you're looking for." Plassaras said another common argument for loot crates is that unlike with gambling, the items you win can't be used to earn more loot crates. At a slot machine, the money you (potentially) win can enable you to play again—that's not the case with crates. That's partially why in the past it's been difficult for plaintiffs to win cases against game companies over practices that seem to resemble gambling. But whether or not loot boxes do eventually become more regulated, Plassaras said GCs and other leaders in the gaming industry need to carefully consider the impact of loot crates on their audience. While in-house lawyers do need to consider potential future changes to the law that could impact their published games, the impact on business is already happening. Many gamers have expressed criticism of loot crates' gambling-like qualities, particularly when items in the crates can be used to unfairly advance gameplay. "Think about as a game company, publisher, what effect you want the loot crates to have on the gameplay experience," said Plassaras. "Gamers today are sophisticated, savvy, and up to speed on how these games work. If they are happy with the business model, that can have a huge boon. But it's really important not to lose sight of the fact that whether or not formal regulation is imposed, consumers know how to vote with their dollars."