LET'S STOP PLAYING GAMES: WHY BETTER CONGRESSIONAL INTERACTION IS REQUIRED TO PROTECT YOUNG GAMERS

Brooklyn Journal of Corporate, Financial & Commercial Law Brooklyn Journal of Corporate, Financial & Commercial Law

Volume 15 Issue 2 Article 9

5-18-2021

LET'S STOP PLAYING GAMES: WHY BETTER CONGRESSIONAL LET'S STOP PLAYING GAMES: WHY BETTER CONGRESSIONAL

INTERACTION IS REQUIRED TO PROTECT YOUNG GAMERS INTERACTION IS REQUIRED TO PROTECT YOUNG GAMERS

Dominick Tarantino

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Dominick Tarantino,

LET'S STOP PLAYING GAMES: WHY BETTER CONGRESSIONAL INTERACTION IS

REQUIRED TO PROTECT YOUNG GAMERS

, 15 Brook. J. Corp. Fin. & Com. L. 543 (2021).

Available at: https://brooklynworks.brooklaw.edu/bjcfcl/vol15/iss2/9

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LET’S STOP PLAYING GAMES: WHY BETTER

CONGRESSIONAL INTERACTION IS

REUIRED TO PROTECT YOUNG GAMERS

ABSTRACT

This Note addresses the predatory nature of video game

microtransactions, the serious risks they pose, and why an improved plan of

legislative intervention is necessary to protect young, vulnerable video game

consumers. With loot box microtransactions driving a flourishing industry

that has reached unprecedented levels of success, adequate consumer

protection cannot properly be achieved through self-regulation. Senator Josh

Hawley’s Protecting Children from Abusive Games Act is a step in the right

direction, but its broad language will result in unintended consequences that

can cripple the entire industry. Revising the bill’s language will protect the

intended young consumer and allow for other forms of microtransactions that

do not harm consumers.

INTRODUCTION

The video game industry is in the midst of a controversy unlike any it has

seen before.

Since the inception of world-renowned classics like Atari’s

Pong in 1972 or the Nintendo Entertainment System in 1985, the culture

surrounding the industry has shifted dramatically.

The days of minimalist

budgets to create impactful games are long gone.

Now, industry titans

dedicate capital that exceeds half a billion dollars to commercialize their

games and make them critically acclaimed darlings.

With the video game

industry’s revenue surpassing the likes of cinema, music, and sports,

developers are now entertaining creative ideas to maximize profits and get

their share of this competitive industry’s pie.

1. Kevin Anderton, The Ongoing Controversy of Microtransactions in Gaming, FORBES (Mar.

7, 2018), https://www.forbes.com/sites/kevinanderton/2018/03/07/the-on-going-controversy-of-

microtransactions-in-gaming-infographic/#14dca9291d9c.

2. Jeff Tyson, The History of Video Games, HOW STUFF WORKS (Oct. 16, 2000),

https://electronics.howstuffworks.com/video-game2.htm.

3. Why Video Games Are So Expensive to Develop, ECONOMIST (Sept. 25, 2014),

https://www.economist.com/the-economist-explains/2014/09/24/why-video-games-are-so-

expensive-to-develop; See also Taylor Danielle, GTA V: How Much Did It Cost to Make,

TWINFINITE (Dec. 18, 2017), https://twinfinite.net/2017/12/gta-v-cost-make-how-much/ (Grand

Theft Auto V, one of the most expensive video games ever made at the time, cost approximately

$265 million to develop and market).

4. Why Video Games Are So Expensive to Develop, supra note 3.

5. Wallace Witkowski, Videogames are a bigger industry than movies and North American

sports combined, thanks to the pandemic, MARKETWATCH (Jan. 2, 2021), https://www

.marketwatch.com/story/videogames-are-a-bigger-industry-than-sports-and-movies-combined-

thanks-to-the-pandemic-

11608654990#:~:text=Global%20videogame%20revenue%20is%20expected,North%20American

%20sports%20industries%20combined.; See also Devin Coldewey, Free to Play Games Rule the

Entertainment World with $88 Billion in Revenue, TECH CRUNCH (Jan. 18, 2019),

544 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

Enter microtransactions and loot-box systems: an industry defining

monetization mechanic that has left developers with deep pockets, parents

perplexed, and gamers paying significantly more money for games than they

initially intended.

Microtransactions first infiltrated the video game industry

through the “freemium”

model, which has dominated the mobile games

market with games such as Candy Crush Saga and Clash of Clans.

The

theory behind the “freemium” model is that it provides monetary incentives

for developers to keep improving their free games while players will keep

returning and making in-app purchases.

Sean Plott, a video game designer

and former professional E-sports player, proclaimed in 2015 that it was

possible for traditional console games to utilize the “freemium” model for

multiplayer games to bring in substantial revenues from microtransactions.

Fast-forward to 2018 and the theory that Sean Plott proffered has become

the new reality. Fortnite, a free-to-play (F2P) game and cultural

phenomenon, signaled an alarming indicator of the robustness of the

microtransaction model when it generated revenues of $2.4 billion in 2018.

As game developers see the profitability of the microtransaction model first-

hand, it appears that this will be the future of the industry moving forward.

Yet, while game developers have seen a significant increase in revenue from

microtransactions, it has not been without controversy.

Video game consumers and politicians alike have objected to the use of

microtransactions by claiming that these transactions employ predatory

https://techcrunch.com/2019/01/18/free-to-play-games-rule-the-entertainment-world-with-88-

billion-in-revenue.

6. Prateek Agarwal, Economics of Microtransactions in Video Games, INTELLIGENT

ECONOMIST (Apr. 10, 2019), https://www.intelligenteconomist.com/economics-of-

microtransactions/.

7. The popular television show South Park was nominated for a Primetime Emmy Award for

their episode called “Freemium Isn’t Free.” The episode “links addiction to freemium games to

other addictions, including alcoholism and gaming addiction, and their possible genetic

predisposition.” Freemium Isn’t Free, SOUTH PARK ZONE, (last visited Feb. 28, 2021),

https://southparkzone.blogspot.com/2015/12/freemium-isn-free.html.

8. Harrison Jacobs, Gaming Guru Explains Why ‘Freemium’ Is Actually the Best Business

Model for Multiplayer Video Games, BUS. INSIDER (Mar. 19, 2015), https://www.

businessinsider.com/sean-plott-explains-why-he-thinks-freemium-games-are-the-best-business-

model-for-both-players-and-developers-2015-3; See also Daniel Nations, What Are Freemium

Games, LIFEWIRE (Sept. 16, 2019), https://www.lifewire.com/what-is-freemium-1994347

(Discussing the positive aspects of F2P gaming, such as placing an emphasis on longevity for

gamers by premium content constantly being added).

9. Jacobs, supra note 8.

10. Id.

11. Brittany Vincent, Digital Games Saw 12% Growth to $113.4 Billion in 2018, VARIETY (Jan.

16, 2019), https://variety.com/2019/gaming/news/superdata-2018-year-in-review-results-1203109

940/.

12. Ethan Levy, Why Microtransactions Aren’t Going Away Any Time Soon, KOTAKU (Dec. 23,

2014), https://kotaku.com/why-microtransactions-arent-going-away-any-time-soon-1674260827.

13. William Lim, Blood in the Water: A History of Microtransactions in the Video Game

Industry, MEDIUM (Aug. 15, 2018), https://medium.com/@williamlim3/blood-in-the-water-a-

history-of-microtransactions-in-the-video-game-industry-e5bf9e3de4da.

2021] Let’s Stop Playing Games 545

tactics and target especially vulnerable young video game consumers.

viral video of Jack Black as a guest on The Tonight Show Starring Jimmy

Fallon opened the public’s eye to the potential pitfalls of microtransactions.

During the interview, Jack Black spoke about how his eight-year-old son

racked up approximately $3,000 worth of in-app purchases in a F2P game.

A primary reason for the success of microtransactions, specifically the

loot box subset, is the psychological science behind it.

The loot box

mechanic draws criticism because of its striking resemblance to casino-style

gambling’s non-guaranteed outcomes; it takes advantage of the body’s

dopamine system, which enjoys unpredictable rewards.

The opening of a

loot box is akin to pulling a lever at a slot machine in a Las Vegas casino,

especially when developers use bright colors and audio cues to elevate the

excitement.

Due to developers’ efforts to make loot boxes as addictive as

possible in attempts to maximize revenue, young gamers have spent millions

of dollars to get video game cosmetics

and advantages.

With the predatory nature of microtransactions coming to the forefront,

countries around the globe took action. For instance, Belgium’s Gaming

Commission declared that video game loot boxes were in violation of its

gambling legislation.

This declaration caused huge video game

publishers—such as Electronic Arts (EA) and Activision Blizzard—to

potentially be subject to criminal sanctions if they continued providing loot

box mechanics in Belgium.

When Belgium took this giant leap forward in

the war against microtransactions, the U.S. Legislature took notice.

In May

of 2019, U.S. Senator Josh Hawley introduced the Protecting Children From

14. Id.

15. Mark Brown, Jack Black’s Son Spent $3,000 on a Free to Play Game, POCKET GAMER (May

6, 2015), https://www.pocketgamer.com/articles/065202/jack-blacks-son-spent-3-000-on-a-free-

to-play-game/.

16. Agarwal, supra note 6.

17. Id.

18. Id.

19. Video game cosmetics and advantages are a topic of discussion that is later addressed in this

Note. As a quick overview, video game cosmetics are an “in-game file that modifies the appearance

of a character or item,” while advantages are purchased upgrades that make a player’s character

stronger in-game; How on earth is trading virtual items in video games a $50 billion industry?,

WAX IO (Dec. 11, 2017), https://medium.com/wax-io/how-on-earth-is-trading-virtual-items-in-

video-games-a-50-billion-industry-5972c211d621.

20. Agarwal, supra note 6.

21. Tom Gerken, Video Game Loot Boxes Declared Illegal under Belgium Gambling Laws,

BBC NEWS (Apr. 26, 2018), https://www.bbc.com/news/technology-43906306; See also James

Vincent, EA Will Stop Selling FIFA’s In-game Currency in Belgium Because of a Ban on Loot

Boxes, VERGE (Jan. 30, 2019), https://www.theverge.com/2019/1/30/18203399/ea-fifa-fut-pack-

points-banned-belgium-loot-box (explaining the impact from Belgium’s ruling on loot boxes has

forced industry giants such as Electronic Arts to stop selling loot boxes in the country).

22. Gerken, supra note 21.

23. Jason Schreier, U.S. Senator Introduces Bill To Ban Loot Boxes And Pay-To-Win

Microtransactions, KOTAKU (May 8, 2019), https://kotaku.com/u-s-senator-introduces-bill-to-ban-

loot-boxes-and-pay-1834612226.

546 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

Abusive Games Act (Loot Box Bill) that would ban loot boxes and pay-to-

win

microtransactions in games “played by minors.”

The Loot Box Bill

has yet to be voted on, but it was the first act by Congress to regulate a rising

video game industry that had been abusing the psychological vulnerability of

young children.

Employing legislation to adequately protect consumers is

held up by two pillars: (i) an industry that is flourishing due to the robustness

of the microtransaction model cannot be expected to satisfactorily regulate

itself, and (ii) loot box microtransactions are strikingly similar to casino-style

gambling, meaning that young consumers should be entirely barred from

engaging in the practice, just as they would not be allowed to pull the lever

at a slot machine in Las Vegas.

Part I of this Note introduces the history of microtransactions, the

predatory nature of the mechanic due to the psychological science

surrounding it, and the immense spikes in revenue driving its widespread

adaptation. Part II will address global and local responses to the

microtransaction epidemic with a particular focus on Belgium’s response to

show how it has impacted video game culture. Part III addresses the

jurisprudential landscape concerning video games and how previous rulings

have failed to protect consumers. Part IV focuses on Senator Hawley’s Loot

Box Bill’s genuine intentions to protect young consumers. However, its

current assembly is overly broad and pointlessly outlaws harmless conduct.

Finally, Part V proposes improved language to the Loot Box Bill that would

properly protect young consumers and allow conduct that does not harm

them.

I. MICROTRANSACTIONS: WHAT THEY ARE AND HOW

THEY STARTED

The microtransactions fiasco has generated great controversy in the video

game industry but can hardly be considered clear cut. The term

‘microtransaction’ encapsulates a multitude of different payment mechanics

but can simply be boiled down to “anything [the gamer] pays extra for in a

video game outside of the initial purchase.”

The name derives from the idea

that a “microtransaction purchase is small in price and function, typically no

more than $10.”

However, lower-priced microtransactions do not compose

24. Pay-to-win microtransactions are discussed in greater depth during a later portion of this

Note. The basic idea is that pay-to-win games offer gamers the option to purchase in-game abilities

that “give [them] a leg up on the competition” by making their in-game character more powerful.

Natalya Pomerty, Effort Alone Isn’t Enough for Victory with the Pay-to-Win System, STUDY

BREAKS (Jan. 30, 2018), https://studybreaks.com/culture/pay-to-win/.

25. Schreier, supra note 23.

26. Id.

27. Eddie Makuch, Microtransactions, Explained: Here’s What You Need To Know, GAMESPOT

(Nov. 20, 2018), https://www.gamespot.com/articles/microtransactions-explained-heres-what-you-

need-to/1100-6456995/.

28. Id.

2021] Let’s Stop Playing Games 547

the entire revenue stream, as extremely popular franchises such as EA’s FIFA

allows gamers to purchase Ultimate Team points for up to $99.99.

In classifying different categories of microtransactions, Touro University

analyzed various tactics that games employ to generate revenue via

microtransactions.

Through this study, they recognized four distinct

microtransaction categories, detailed below.

A. IN-GAME CURRENCIES

The most popular type of microtransaction is in-game currency, which

involves virtual in-game money purchased with legal tender.

By purchasing

in-game currency, the gamer has the ability to acquire a wide variety of

options, ranging from extra lives in a game like Candy Crush to a new

character skin that changes the player’s appearance in Fortnite.

In-game

currency allows developers to “[hide the] true value of what players may

purchase” and make larger quantities of in-game currency seem like the

“better deal.”

Riot’s League of Legends, an extremely popular F2P game that derives

all of its revenue entirely from microtransactions, allows players to purchase

virtual currency called Riot Points.

Riot Points allow gamers to buy skins,

which are “different aesthetic choices for the in-game character,” or unlock

entirely different playable characters.

All of these items can be unlocked

without the use of real money, but microtransactions often offer a shortcut to

29. FIFA 18: Ultimate Team FIFA Points 12000 – Xbox One [Digital Code], AMAZON,

https://www.amazon.com/FIFA-18-Ultimate-Points-Digital/dp/B075JZWH1X?th=1 (last visited

Feb. 3, 2021); See also Dustin Bailey, Ultimate Team Made Up 28% of EA Revenue Last Year,

PCGAMESN (July 22, 2019), https://www.pcgamesn.com/fifa-ultimate-team-revenue (providing

insight into how much EA relies on microtransactions in their popular FIFA franchise for revenue).

30. Gabe Duverge, Insert More Coins: The Psychology Behind Microtransactions, TOURO

UNIV. (Feb. 25, 2016), https://www.tuw.edu/psychology/psychology-behind-microtransactions/.

31. Id.

32. Id.

33. See Blake Montgomery, Here’s Who Drops The Most Cash On Candy Crush And Clash Of

Clans, BUZZFEED (Feb. 14, 2017), https://www.buzzfeednews.com/article/blakemontgomery/heres

-who-drops-the-most-cash-on-candy-crush-and-clash-of-cl; See also, Asmir Pekmic, Epic Games

unveils new way to get cosmetic items in ‘Fortnite Battle Royale’, BLASTINGNEWS (Oct. 26, 2019),

https://us.blastingnews.com/gaming/2019/10/epic-games-unveils-new-way-to-get-cosmetic-items-

in-fortnite-battle-royale-003006487.html.

34. Duverge, supra note 30.

35. Mike Colagrossi, How Microtransactions Impact the Economics of Gaming, INVESTOPEDIA

(Oct. 17, 2018), https://www.investopedia.com/articles/investing/022216/how-microtransactions-

are-evolving-economics-gaming.asp.

36. Id.

548 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

players by saving them dozens of hours of video game “grinding”

and

allowing them to buy the items they want.

Due to the microtransaction model, Riot’s League of Legends was the

most profitable F2P game in 2017 with over $2.1 billion in revenues.

the surprise of many analysts in the industry, revenues for the game declined

to $1.4 billion in 2018, a far cry from the $2.1 billion earned in the previous

year.

Although this was a shocking decline in revenue for one of the titans

of the industry, many industry evaluators credit this to new competitors

entering the F2P landscape.

Even with this decline in revenue for Riot’s

League of Legends, the fact that a F2P game can generate well over a billion

dollars is a good indicator of the robustness of the in-game currency model.

B. RANDOM CHANCE PURCHASES

Speak with any casual gamer and they would most likely refer to random

chance purchase mechanics as “loot boxes,” a term that now dominates the

industry lexicon. When a game utilizes the loot box mechanic, it “presents

players with a mystery bag of goodies that could potentially be worth much

more than the price of admission.”

Loot boxes have proven to be extremely

profitable for developers, but they prey on psychological vulnerabilities and

offer “deals” that make loot box openings appear to be discounted.

Ben

Thompson, Art Director for Activision Blizzard and the enormously popular

F2P game Hearthstone, believes that loot boxes capture that “moment of

excitement [where] anything’s possible,” and that “successful games build

on anticipation and release.”

This formula has been a goldmine for

37. Grinding is a videogame term that refers to the “playing time spent doing repetitive tasks

within a game to unlock a particular game item”, and mostly involves “killing the same set of

opponents over and over in order to gain experience points.” Gamers usually do not find the process

of grinding enjoyable, but consider it a necessary evil. Grinding, TECHOPEDIA,

https://www.techopedia.com/definition/27527/grinding (last visited Feb. 3, 2021).

38. Colagrossi, supra note 35.

39. Tanner Dedmon, League of Legends Tops Free-to-Play Revenue Charts in 2017,

COMICBOOK (Jan. 30, 2018), https://comicbook.com/gaming/2018/01/30/league-of-legends-top-

free-to-play-revenue-charts-in-2017/.

40. Alissa McAloon, Analyst: PUBG Out-Earned Every Other Premium PC and Console Game

in 2018, GAMASUTRA (Jan. 17, 2019), https://www.gamasutra.com/view/news/334636

/Analyst_PUBG_outearned_every_other_premium_PC_and_console_game_in_2018.php.

41. After seeing the success of free to play games, many developers wanted to enter the space.

These include massive games such as Fortnite, Apex Legends, Call of Duty: Warzone, and more.

42. The Decline of League of Legends – Is the World’s Biggest Esport Reaching Its Demise?,

GINX ESPORTS TV (Aug. 21, 2018) https://www.ginx.tv/en/league-of-legends/the-decline-of-

league-of-legends-is-the-world-s-biggest-esport-reaching-its-demise.

43. Duverge, supra note 30.

44. Id.

45. Alex Wiltshire, Behind the Addictive Psychology and Seductive Art of Loot Boxes,

PCGAMER (Sept. 28, 2017), https://www.pcgamer.com/behind-the-addictive-psychology-and-

seductive-art-of-loot-boxes/.

2021] Let’s Stop Playing Games 549

Hearthstone as the game took in an estimated $165 million in worldwide

revenue in 2018.

Loot boxes are consistently compared with traditional gambling due

primarily to the idea of a “win state.”

This idea revolves around the notion

that a gamer purchases a loot box intending to obtain a particular cosmetic or

upgrade, even though the chances of obtaining it are completely random.

This form of gambling activates the brain’s pleasure circuits and rapidly

releases dopamine, which acts as a minor high for the gamer.

Common

sense dictates that after repeated failures of opening loot boxes without

obtaining the prized item, a gamer would cease to spend money and continue

playing the game. However, video game developers are shrewd enough to

recognize the five cognitive fallacies a person experiences that will lead them

right back to gambling.

These consist of (i) chasing; (ii) the gambler’s

fallacy; (iii) self-correcting and fair; (iv) cheating the system; and (v) the

entrapment effect.

Chasing losses occurs when an individual continues gambling “with the

hope of recovering what [they have] already lost,” leading to increases in

total losses.

When a gambler chases losses, the gambling process is no

longer enjoyable and justifying it revolves around rationalizing the losses.

The most recognizable on the aforementioned list is the gambler’s fallacy,

which is the “misconception that something that has not happened for a long

time has become ‘overdue.’”

This means a loot box purchaser essentially

believes they are closer to their desired cosmetic than they actually are due

to the recent run of bad luck they have experienced, which ultimately harms

gamers.

46. Oliver Yeh, Hearthstone’s Mobile Players Spent $165 Million Last Year, Up 5% After a

2017 Slump, SENSOR TOWER (Jan. 30, 2019), https://sensortower.com/blog/hearthstone-mobile-

revenue-2018; See also Natalie Clayton, Hearthstone Hits 100 Million Users as Mobile Revenue

Reportedly Passed $660m, POCKET GAMER (Nov. 6, 2018), https://www.pocketgamer.biz/

news/69406/hearthstone-has-hit-100-million-users/.

47. Dr. Natalie Coyle, The Psychology of Loot Boxes and Microtransactions,

PLATINUMPARAGON (June 6, 2018), http://platinumparagon.info/the-psychology-of-loot-boxes-

and-microtransactions/.

48. Id.

49. David J. Linden, Ph.D., Video Games Can Activate the Brain’s Pleasure Circuits,

PSYCH.TODAY (Oct. 25, 2011), https://www.psychologytoday.com/us/blog/the-compass-pleasure/

201110/video-games-can-activate-the-brains-pleasure-circuits-0; See also Chirlien Pang,

Understanding Gamer Psychology: Why Do People Play Games, SEKG (Jan. 31, 2017),

https://www.sekg.net/gamer-psychology-people-play-games/.

50. Coyle, supra note 47.

51. Id.

52. How to Avoid Chasing Losses?, SMART GAMBLING EDGE (Dec. 03, 2018),

https://www.smartgamblingedge.com/2018/12/how-to-avoid-chasing-losses.html.

53. Id.

54. Nick Valentine, The Gambler’s Fallacy – Explained, THE CALCULATOR SITE (June 23,

2019), https://www.thecalculatorsite.com/articles/finance/the-gamblers-fallacy.php.

55. Coyle, supra note 47.

550 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

The next fallacy revolves around gambling being a self-correcting and

fair game. Daniel Kahneman, an Israel-American psychologist and

economist,

wrote in Thinking, Fast and Slow that “chance is commonly

viewed as a self-correcting process in which a deviation in one direction

induces a deviation in the opposite direction to restore the equilibrium.”

However, these subpar loot box items are not “corrected,” which may lead a

gamer to believe that the next deviation will be a “correcting” box and have

a big reward due to the gamer’s run of subpar loot boxes.

The cheating the

system fallacy is similar to gambling being considered a self-correcting and

fair game. Here, gamers may become “delusional” while opening loot boxes

and feel they have figured out the “trick” to get what they want from the

random chance.

The final fallacy, known as the entrapment effect, occurs when a gambler

is “motivated to maintain a course of action having already invested so much

[money] to date.”

This effect results in gamers feeling obligated to continue

purchasing loot boxes because of the potential loss of ability to spend their

virtual currency.

C. IN-GAME ITEMS: PAY TO WIN MODEL

The next type of microtransaction concerns purchasing in-game items

that allows a gamer to directly purchase new characters, upgrades, or

cosmetics that reflect that gamer’s personality.

Numerous video game

publishers have recently employed the tactic of making specific in-game

items unlockable without paying money while making the required playing

time to unlock them realistically unfeasible.

No game has received more backlash for employing this tactic than EA’s

Star Wars: Battlefront II, which allowed gamers to receive powerful in-game

items for “free” with the only cost being “dozens if not hundreds of hours”

of the gamer’s time.

This left an extremely sour taste in the mouths of

56. Daniel Kahneman, Daniel Kahneman Biographical, NOBEL PRIZE (2002),

https://www.nobelprize.org/prizes/economic-sciences/2002/kahneman/biographical/.

57. Mental Model: Misconceptions of Chance, FARNAM ST., https://fs.blog/2015/08/

misconceptions-of-chance/ (last visited Feb. 3, 2021).

58. Coyle, supra note 47.

59. Id.

60. Debra Rickwood, et al., THE PSYCHOLOGY OF GAMBLING 16 (last visited Apr. 2, 2021),

https://www.psychology.org.au/publications/inpsych/2010/december/gambling/.

61. Id.

62. Patricia E. Vance, What Parents Need to Know About Loot Boxes (and Other In-Game

Purchases), ESRB (July 24, 2019), https://www.esrb.org/blog/what-parents-need-to-know-about-

loot-boxes-and-other-in-game-purchases/.

63. Ethan Gach, Unlocking Heroes in Star Wars Battlefront II Could Take A Long Time,

KOTAKU (Nov. 12, 2017), https://kotaku.com/players-are-trying-to-calculate-how-long-it-takes-to-

un-1820373111.

64. Gene Park, How a Star Wars Video Game Faced Charges that it was Promoting Gambling,

WASH. POST (Nov. 18, 2017), https://www.washingtonpost.com/news/comic-

riffs/wp/2017/11/18/how-a-star-wars-video-game-faced-charges-that-it-was-promoting-gambling/.

2021] Let’s Stop Playing Games 551

millions of gamers and industry personalities alike.

EA even earned itself a

notorious spot in the Guinness World Record for being the most downvoted

comment in Reddit history following a post by an EA Community Team

member responding to the backlash.

Many individuals refer to the Star

Wars: Battlefront II controversy as a prime example of the “pay-to-win”

system, meaning that those “who have the money available can instantly buy

their way to an advantage over others.”

To prove that Star Wars: Battlefront

II employs a pay-to-win system, YouTuber XfactorGaming purchased $90

worth of microtransactions in order to unlock different abilities and upgrade

weapons for multiplayer, resulting in him “dominating the competition.”

Yet, the Star Wars: Battlefront II controversy has done little to dispel the

robustness of the in-game microtransaction model.

Epic Games’ world-

renowned F2P Battle Royale

game Fortnite generated over $2.4 billion in

revenue in 2018, with all revenue coming from in-game cosmetic purchases

that give players no competitive advantage.

Fortnite prides itself on

offering an “assortment of purchasable skins … intended to offer visual

distinction and nothing more,”

which lends credence to the idea that strictly

cosmetic in-game items can be extremely profitable.

In 2015, Activision Blizzard filed Patent #9789406, which outlined an

online matchmaking system designed to “drive microtransactions in

65. Aaron Mamiit, EA Sets Dubious World Record for Battlefront II Reddit Comment, DIGIT.

TRENDS (Sept. 8, 2019), https://www.digitaltrends.com/gaming/ea-star-wars-battlefront-ii-loot-

boxes-most-downvoted-reddit-comment/.

66. Id.

67. Justin McKinney, The Rise of Pay to Win in Video Games, ODYSSEY (Dec. 13, 2017),

https://www.theodysseyonline.com/the-rise-of-pay-to-win-in-video-games.

68. Kellen Beck, YouTuber Spends $90 in ‘Star Wars: Battlefront 2’ and Proves that it’s still

Basically Pay-to-Win, MASHABLE (Nov. 9, 2017), https://mashable.com/2017/11/09/star-wars-

battlefront-2-pay-win/.

69. Games and interactive media earnings rose 12% to $139.9B in 2020, SUPERDATA (Jan. 6,

2020), https://www.superdataresearch.com/blog/2020-year-in-review.

70. Battle Royale games have recently become extremely popular, as the primary hook is to drop

a significant number of players in a large-scale free-for-all deathmatch, with the ultimate goal of

being the last player alive. Gamers are only afforded one life and lose when they die in-game. See

Alessandro Fillari, Battle Royale Games Explained: Fortnite, PUBG, And What Could Be The Next

Big Hit, GAMESPOT (Apr. 21, 2019), https://www.gamespot.com/articles/battle-royale-games-

explained-fortnite-pubg-and-wh/1100-6459225/.

71. Patrick Shanley, ‘Fortnite’ Earned $2.4 Billion in 2018, HOLLYWOOD REP. (Jan. 16, 2019),

https://www.hollywoodreporter.com/heat-vision/fortnite-earned-24-billion-2018-1176660; See

also Steven Wong, PUBG Mobile made over $1 billion in revenue, GAMING ST. (Sept. 23, 2019),

https://gamingstreet.com/pubg-mobile-made-over-1-billion-in-revenue/ (PlayerUnknown’s

Battlegrounds is an extremely popular F2P game that is one of Fortnite’s biggest competitors and

has seen significant financial success through in-game cosmetic purchases).

72. Alex Avard, Can Fortnite Battle Royale’s Cosmetics Provide Competitive Advantages? The

Answer Isn’t So Simple, GAMES RADAR (May 3, 2018), https://www.gamesradar.com/can-fortnite-

battle-royales-cosmetics-provide-competitive-advantages-the-answer-isnt-so-simple/.

552 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

multiplayer video games” and “influence game-related purchases.”

The

patent describes a number of matchmaking algorithms that a “game could use

to encourage players to purchase additional in-game items.”

This is just

further proof that publishers are privy to the revenue associated with in-game

purchases and that they are actively constructing algorithms to influence

purchase rates in online games.

D. EXPIRATION

The final version of microtransaction discussed is expiration, and it has

primarily taken hold in the mobile gaming-sphere, with popular games such

as Candy Crush utilizing this tactic for revenue.

With expiration

microtransactions, a game will have components (usually playable lives) that

“wear out or can only be used a certain number of times in a given period of

time.”

A gamer of Candy Crush can play only a select amount of times for

free daily, with the gamer either having to wait 30 minutes to re-play or pay

$0.99 for a new life.

Expiration as a microtransaction model has had

significant financial success, with total Candy Crush players spending an

average of $4.2 million per day on expiration microtransactions in 2018.

Ultimately, if a player feels their experience is “being cut short,” they will be

more likely to purchase an in-game item to allow their gaming experience to

continue without interruption.

In sum, the microtransaction revenue model has been a huge boom for

the industry by generating profits that video game publishers could not

previously fathom.

Take-Two Interactive (a publishing titan known for

popular games such as Grand Theft Auto, Red Dead Redemption, and NBA

73. Kyle Orland, Activision’s patented method to drive microtransactions with matchmaking,

ARS TECHNICA (Oct. 18, 2017), https://arstechnica.com/gaming/2017/10/activisions-patented-

method-to-drive-microtransactions-with-matchmaking/.

74. Id.

75. See id.

76. Alexis Kleinman, Use This Candy Crush Cheat to Get Unlimited Lives, HUFFPOST (Aug. 6,

2013), https://www.huffpost.com/entry/candy-crush-cheat_n_3712493.

77. Duverge, supra note 30.

78. Kleinman, supra note 76; See also Boston Blake, 15 Games That Were Ruined by

Microtransactions, SCREEN RANT (Dec. 25, 2017), https://screenrant.com/games-ruined-

microtransactions/; Casey Johnson, Clash of Clans Proves That Our Impatience is Worth Billions,

NEW YORKER (June 24, 2016), https://www.newyorker.com/business/currency/clash-of-clans-

proves-that-our-impatience-is-worth-billions (explaining that games such as The Hunter and Clash

of Clans preys on the impatience of gamers by only allowing a specific amount of plays per day,

allowing the gamer to continue playing only if they spend money).

79. Mike Minotti, Sensor Tower: Candy Crush Players Spend an Average of $4.2 Million a Day

in 2018, VENTURE BEAT (Jan. 9, 2019), https://venturebeat.com/2019/01/09/sensor-tower-candy-

crush-players-spent-an-average-of-4-2-million-a-day-in-2018/.

80. Duverge, supra note 30.

81. Keith Noonan, Can Video Game Companies Count on Microtransactions to Drive Growth?,

MOTELY FOOL (Mar. 30, 2018), https://www.fool.com/investing/2018/03/30/can-video-game-

companies-count-on-microtransaction.aspx.

2021] Let’s Stop Playing Games 553

2k) received $338 million in microtransaction revenue during the first fiscal

quarter of 2019.

That $338 million composed 62% of all of Take-Two’s

first quarter revenue.

Similarly, Activision Blizzard generated roughly $4

billion in revenue from microtransactions in 2017, representing 57% of their

revenue for that year.

Supercell, the creator of the Clash of Clans franchise,

generated revenues of $1.6 billion in 2018, which is monumental considering

it is a “free” game.

Fortnite generated revenues of $2.4 billion in 2018,

which is “the most annual revenue of any game in history.”

These

staggering numbers suggest that microtransactions are a permanent revenue

source for publishers who should not be trusted to self-regulate due to the

massive potential for abusive behavior.

II. WORLDWIDE AND LOCAL RESPONSES TO

MICROTRANSACTIONS

A. GLOBAL RESPONSE

The response to microtransactions from gamers and numerous

governmental bodies has been less than stellar. Although many gamers

clearly enjoy the benefits that come from microtransactions (proven by the

large revenue numbers they generate), much of the gaming community and

the public-at-large have expressed concerns.

A legitimate criticism that

many gamers have expressed is that microtransactions make a “game feel

incomplete by default,” because it “forces people to constantly shell out

money just to play the full game” they thought they already purchased.

Many gamers find it frustrating to purchase a newly released game for $60

only to find out that, in order to compete in that gaming space, more money

must be spent on in-game microtransactions.

82. Jeff Grubb, Microtransactions, DLC Make Up 62% of Take-Two’s First Quarter Revenues,

VENTURE BEAT (Aug. 2, 2018), https://venturebeat.com/2018/08/02/microtransactions-dlc-make-

up-62-of-take-twos-first-quarter-revenues/.

83. Id.

84. Noonan, supra note 81.

85. Dean Takahashi, Supercell Revenues Take a Big Dip in 2018 – to $1.6 Billion and Profits to

$635 Million, VENTURE BEAT (Feb. 12, 2019), https://venturebeat.com/2019/02/12/supercell-

revenues-take-a-big-dip-in-2018-to-1-6-billion-and-profits-of-635-million/.

86. Tom Hoggins, Fortnite Earned Record $2.4 Billion in 2018, the ‘Most Annual Revenue of

Any Game in History’, TELEGRAPH (Jan. 17, 2019), https://www.telegraph.co.uk/gaming/news

/fortnite-earned-annual-revenue-game-history-2018/.

87. Dave Smith, I Miss the Days When I Only Had to Pay Once for a Video Game, BUS. INSIDER

(Apr. 22, 2015), https://www.businessinsider.com/microtransactions-are-ruining-video-games-

2015-4.

88. Id. (As a gamer myself, I can provide credence to this by saying I have bought multiple $60

games, only to feel compelled to purchase microtransactions in order to feel like I am getting the

‘complete’ game).

89. Christopher Darling, Are All Microtransactions Bad?, CULTURE GAMING (Feb. 18, 2018),

https://cultureofgaming.com/are-all-microtransactions-bad/.

554 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

The biggest public outcry has come from the implementation of loot

boxes as a result of their predatory and psychological nature.

The issue has

become such a hot-topic that Andrew Yang, New York City mayoral

candidate, weighed in on the controversy when he stated that Congress

should “be able to empower players to express their economic preferences up

front” by requiring game developers to be more transparent with the odds of

receiving specific items in a loot box.

Additionally, he talked about his

belief that video game addiction is a genuine and underreported problem that

requires the creation of an assistance program.

Recently, the Federal Trade Commission (FTC) held a public workshop

“to examine consumer protection issues related to video game ‘loot boxes’,”

which provides support for the idea that the public, and more specifically the

government, has taken notice of the issue.

One of the primary justifications

for the workshop was that “concerns have been raised about techniques used

to market loot boxes” and that these tactics may lead to minors becoming

addicted to in-game purchases.

The workshop was open to the public, but

also was comprised of a variety of stakeholders such as industry

representatives, academics, consumer advocates, and governmental

officials.

Belgium threw a gigantic wrench into the battle between the public and

leaders of the video game industry by declaring video game loot boxes

illegal.

On April 25, 2018, Belgium’s former Minister of Justice, Koen

Geens, posted a press release discussing Belgium’s Gaming Commission’s

investigation into “loot boxes” in video games.

The Gaming Commission

investigated four video games: Star Wars: Battlefront II, Overwatch, FIFA

18, and Counter Strike: Global Offense.

Aside from Star Wars: Battlefront

II, Belgium’s Gaming Commission found these games’ loot box mechanics

90. Paul Lilly, FTC to Investigate Predatory Loot Box Practices Sweeping Gaming Industry,

HOT HARDWARE (Nov. 28, 2018), https://hothardware.com/news/ftc-investigate-predatory-loot-

box-practices-gaming-industry.

91. Gene Park, Andrew Yang Weights in on Loot Boxes, Hong Kong and Video Game Addiction,

WASH. POST (Oct. 23, 2019), https://www.washingtonpost.com/video-games/2019/10/23/andrew-

yang-weighs-loot-boxes-hong-kong-video-game-addiction/.

92. Id.

93. Press Release, Fed. Trade Comm’n, FTC to Hold Workshop on Consumer Issues Related to

Loot Boxes (Apr. 5, 2019), https://www.ftc.gov/news-events/press-releases/2019/04/ftc-hold-

august-workshop-consumer-issues-related-loot-boxes.

94. Id.

95. Id.

96. Ethan Gach, Belgium Says Loot Boxes in Games Like Overwatch are Illegal, KOTAKU (Apr.

25, 2018), https://kotaku.com/belgium-says-loot-boxes-in-games-like-overwatch-are-ill-

1825533879.

97. Press Release, Koen Geens, Loot Boxes in Three Video Games in Violation of Gambling

Legislation (Apr. 25, 2018), https://www.koengeens.be/news/2018/04/25/loot-boxen-in-drie-

videogames-in-strijd-met-kansspelwetgeving (This Press Release was translated from Dutch to

English for the purposes of this Note).

98. Id.

2021] Let’s Stop Playing Games 555

to be a “game of chance,” thus subjecting it to Belgian Gaming Law.

The

Gaming Commission defines a “game of chance” as a game with a “a game

element” where “a bet can lead to a win or a loss and chance has a role in the

gameplay.”

100

The press release discusses how minors utilizing the loot box mechanic

is “disturbing” and that if there is a lack of proper intervention, games of

chance in video games will cause “great damage to people, family and

society.”

101

Peter Naessens, the Director of the Gaming Commission, stated

that “paying [for] lottery tickets are not an innocent part of video games” and

that loot boxes seduce and mislead gamers—a harsh statement directed at the

industry’s largest publishers.

102

With Overwatch, FIFA, and Counter Strike:

Global Offense being susceptible to Belgian Gaming Law, game developers

are now subject to prison sentences and fines of up to €800,000 ($974,605).

103

Video game publishers were understandably upset with Belgium’s

position on loot boxes. EA took a public stand against the ruling and even

threatened to take the issue to court.

104

It asserted that loot boxes were not a

form of gambling and that its games were “developed and implemented

ethically and lawfully around the world.”

105

However, EA released a

statement shortly thereafter in early 2019 stating that “after further

discussions with the Belgian authorities, we have decided to stop offering

FIFA Points for sale in Belgium.”

106

Other publishers like Activision

Blizzard, Valve, and Take-Two also admitted defeat and removed

microtransactions from their games released in Belgium.

107

Due to the publicity that resulted from Belgium’s position on

microtransactions, other countries took notice. Neil McArthur, Chief

Executive of the Gambling Commission in the United Kingdom (UK), told

Parliament that loot boxes are not considered gambling under current UK

99. Id.

100. Id. (emphasis added).

101. Id.

102. Id.

103. Gach, supra note 96.

104. Paul Tassi, EA Surrenders in Belgian FIFA Ultimate Team Loot Box Fight, Raising Potential

Red Flags, FORBES (Jan. 29, 2019), https://www.forbes.com/sites/insertcoin/2019/01/29/ea-

surrenders-in-belgian-fifa-ultimate-team-loot-box-fight-raising-potential-red-

flags/#1f4b1a243675.

105. Id.

106. An Update on FIFA Points in Belgium, ELEC. ARTS (Dec. 2018), https://www.ea.com/en-

ca/news/fifa-points-belgium.

107. Hunter Miche, EA Belgium Microtransactions Will Stop as EA Kneels to Belgian

Authorities, SEGMENTNEXT (Jan. 30, 2019), https://segmentnext.com/2019/01/30/ea-belgium-

microtransactions-will-stop-ea-kneels-belgian-authorities/; See also, Brandon Russell, Mario Kart

Tour Not Available in Belgium Due to Loot Boxes, IMORE (Sept. 27, 2019),

https://www.imore.com/mario-kart-tour-not-available-belgium-due-loot-boxes (discussing how

Mario Kart Tour, an extremely popular F2P Mobile Game, has been banned in Belgium due to most

of the games revenue coming from loot box mechanics).

556 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

law.

108

To be subject to the Gambling Commission’s jurisdiction, a “prize has

to be either money or have monetary value,” and loot boxes have no official

way to monetize what is inside them.

109

However, McArthur expressed

“significant concerns” about loot boxes and their popularity with minor

children, saying that gambling laws in the UK need to adapt in order to reflect

reality.

110

McArthur’s analysis found wider support in the UK as Claire Murdoch,

the Director of the UK’s National Health Service, said that loot boxes were

“setting kids up for addiction by teaching them to gamble.”

111

This prompted

the Department for Digital, Culture, Media, and Sport (DCMS) to launch an

investigation in June 2020 seeking to obtain evidence on “consumable in-

game devices found in popular video-game titles.”

112

Observers expect

DCMS to reclassify loot boxes as gambling, although the investigation has

yet to conclude.

113

China was one of the first countries to acknowledge the pitfalls of loot

boxes—likely because of how big the gaming culture is throughout the

country.

114

In 2016, China’s Ministry of Culture released a new set of rules

governing online games in the country.

115

A component of these new rules

requires video games that feature random loot boxes “to reveal the odds of

players receiving items.”

116

The success of this new ruling was quite high as

multiple Chinese developers began revealing the drop rate for specific items

in loot boxes which provided gamers with more transparency.

117

108. Owen S. Good, UK Regulator: Loot Boxes Fall Outside of Current Gambling Law,

POLYGON (July 25, 2019), https://www.polygon.com/2019/7/25/8930207/loot-boxes-gambling-

regulation-banned-uk-law-controversy.

109. Zoe Kleinman, FIFA Packs and Loot Boxes ‘Not Gambling’ in UK, BBC NEWS (July 22,

2019), https://www.bbc.com/news/technology-49074003 (The primary reason that loot boxes fall

outside of the United Kingdom’s gambling jurisdiction as the contents inside the loot boxes have

no monetary value due to them not being able to be sold to third-parties. However, Gambling

Commission Director Brad Enright does talk about the fear of underground markets for loot box

items and how this could be an issue in the future).

110. Good, supra note 108.

111. Philip Conneller, UK Lawmakers ‘Call for Evidence’ Suggests Loot-Box Clampdown

Coming, CASINO (June 8, 2020), https://www.casino.org/news/uk-lawmakers-call-for-evidence-

suggests-loot-box-clampdown-coming/.

112. Id.

113. Id.

114. Chaim Gartenberg, China’s New Law Forces Dota, League of Legends, and Other Games

to Reveal Odds of Scoring Good Loot, VERGE (May 2, 2017), https://www.theverge.com/

2017/5/2/15517962/china-new-law-dota-league-of-legends-odds-loot-box-random; see also, Dean

Takahasi, Niko Partners: China Will Surpass 768 Million Gamers and $42 Billion in Game Revenue

by 2022, VENTURE BEAT (May 7, 2018), https://venturebeat.com/2018/05/07/niko-partners-china-

will-surpass-1-billion-gamers-and-42-billion-in-game-revenue-by-2022/.

115. Gartenberg, supra note 114.

116. Id.

117. Id.

2021] Let’s Stop Playing Games 557

B. LOCAL RESPONSE

In the United States, Washington State Senator Kevin Ranker has been

an outspoken proponent of stronger regulation for loot boxes, stating that “it

is unacceptable to be targeting our children with predatory gambling masked

in a game with dancing bunnies or something.”

118

Senator Ranker proposed

a Washington State bill that would legally reclassify loot boxes as a form of

gambling and would have the Washington State Gambling Commission

conduct an analysis into whether minors should have such immediate access

to loot box-centric games.

119

In another attempt to regulate loot boxes on the state level, Hawaii state

legislators introduced House Bill 2686 and Senate Bill 3024.

120

These bills

“seek to prohibit the sale of any games that include loot boxes that can be

purchased with real money to anyone under 21 years of age.”

121

Other

proposed Hawaii state bills (such as House Bill 2727 and Senate Bill 3025)

would require game publishers to “prominently label games that have

randomized purchase systems and disclose the probability rates of specific

loot box rewards.”

122

State Representative Chris Lee justifies the adoption of

these regulations by arguing that the video game industry is beginning to

“exploit people, especially children, to maximize profit.”

123

Unfortunately,

all of these bills either died after failing to meet legislative deadlines or were

amended to completely remove all loot box language.

124

III. UNITED STATES JURISPRUDENCE ON

MICROTRANSACTIONS

With video games being a relatively new phenomenon, US jurisprudence

has been far from conclusive when addressing the predatory nature of

microtransactions. A handful of cases show that laws have not yet adapted to

the new video game landscape.

118. Cal Jeffrey, Washington state to determine if loot boxes are gambling, TECHSPOT (Jan. 25,

2018), https://www.techspot.com/news/72943-washington-state-determine-if-loot-boxes-

gambling.html.

119. Id.

120. Rob LeFebvre, Hawaii legislators want to put age restrictions on loot boxes, ENGADGET

(Feb. 13, 2018), https://www.engadget.com/2018/02/13/hawaii-legislators-age-restrictions-loot-

crates/?ncid=txtlnkusaolp00000603.

121. Id.

122. Id.

123. Id.

124. Michael Brestovansky, ‘Loot box’ bills fail to advance, HAW. TRIB. HERALD (Mar. 24,

2018), https://www.hawaiitribune-herald.com/2018/03/24/hawaii-news/loot-box-bills-fail-to-

advance/. (Senate Bill 30215 was a companion to House Bill 2727, and completely removed all loot

box language in an amended version of the bill).

558 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

A. MASON V. MACHINE ZONE INC.

The Fourth Circuit heard arguments in March of 2017 for Mason v.

Machine Zone, Inc., the most impactful video game microtransaction case

opined thus far.

125

Mason filed a class action complaint against Machine

Zone, Inc., the developer of the extremely popular mobile game, Game of

War: Fire Age.

126

Mason claimed that she and thousands of other users “lost

money participating in an unlawful ‘gaming device,’” which should permit

recovery under Maryland’s gambling loss recovery statute

127

This “gaming

device” consisted of allowing players to spin a virtual wheel within Game of

War to win virtual prizes

128

that can be used within the game.

129

Mason

sought recovery of the financial losses she incurred as a result of spinning the

virtual wheel.

130

In Game of War, players can purchase virtual “gold” from $4.99 for

1,200 pieces of virtual gold to $99.99 for 20,000 pieces.

131

A player can

utilize virtual gold to obtain virtual “chips” that can be used at the Game of

War virtual casino.

132

Game of War developers created an “animated light

[that] rotates around the wheel,” making the gambling process visually

stimulating.

133

Players who spin the virtual wheel have no control over the

outcome of the spin, meaning that “no skill on the part of the player

influences” the virtual prize they receive.

134

Between early 2014 and January

2015, “Mason paid over $100 to participate in the virtual casino”

135

and

claimed that she lost money because she received “prizes that were worth less

than the amount of money she spent to spin the wheel.”

136

Under Maryland’s Loss Recovery Statute, “[a] person who loses money

at a [prohibited] gaming device … may recover the money as if it were a

common debt.”

137

Maryland law defines “gaming device” as “a game or

device at which money or any other thing or consideration of value is bet,

wagered or gambled,” and includes a “wheel of fortune.”

138

The Fourth Circuit acknowledged that the virtual casino in Game of War

is a prohibited gaming device, but concluded that Mason did not “lose

125. See Mason v. Mach. Zone, Inc., 851 F.3d 315 (4th Cir. 2017).

126. Id. at 316–17

127. Id.

128. These virtual prizes may consist of cosmetics for characters, upgrades, and in-game currency

that can be used to purchase specific upgrades that the player deems appropriate.

129. Mach. Zone, Inc., 851 F.3d at 316–17.

130. Id.

131. Id.

132. Id.

133. Id.

134. Mach. Zone, Inc., 851 F.3d at 318.

135. Id.

136. Id.

137. Id. at 319.; See also Md. Code Ann., Crim. Law § 12-110(a) (West 2013).

138. Md. Code Ann., Crim. Law § 12-101(d)(1)(ii), (d)(2) (West 2013).

2021] Let’s Stop Playing Games 559

money” when participating in the virtual casino.

139

The Fourth Circuit

reasoned that for an individual to lose money under the Loss Recovery

Statute, a winner of money must invariably be involved.

140

However, the

money that Machine Zone received from Mason had nothing to do with the

outcome of the virtual wheel, as they “retained the money that Mason paid to

obtain virtual gold regardless of the outcome of Mason’s spin of the virtual

wheel.”

141

The court found that when Mason spun the virtual wheel there

was “no money at stake” because her potential rewards were either virtual

gold or other virtual resources, which are neither real money nor redeemable

for money.

142

In short, “Mason could not have lost or won money as a result

of her participation in that virtual activity.”

143

The Fourth Circuit’s decision does not appear to reflect the current

realities of the virtual world and is a huge blow to consumer protection when

it comes to microtransaction and loot box mechanics. There can be no dispute

that “Machine Zone benefits monetarily from the availability of in-game

gambling.”

144

The Fourth Circuit read Maryland’s statute too narrowly

because while virtual chips are not redeemable for money, they are used for

other critical aspects of the game.

145

Additionally, players with significant

virtual gold deposits for a game such as Game of War sell their accounts on

a secondary market, which proves that virtual gold indeed has monetary

value.

146

Overall, this case shed light on gambling statutes’ inability to

regulate loot boxes and other microtransactions, proving the need for stronger

governmental intervention.

B. MCLEOD V. VALVE CORPORATION

In McLeod v. Valve Corporation, plaintiffs sued Valve Corporation

(Valve), developer of the extremely popular game Counter-Strike: Global

Offense (CS:GO), alleging that Valve allowed “an illegal online gambling

market” to operate through its “Steam platform

147

.”

148

In the complaint,

plaintiffs argued that CS:GO weapon skins (Skins) are equivalent to casino

139. Mach. Zone, Inc., 851 F.3d at 319.

140. Id.

141. Id. (emphasis added).

142. Id.

143. Id.

144. Venkat Balasubramani, Appeals Court Affirms Rejection of Gambling Claims Against

Machine Zone, TECH. & MKTG. L. BLOG (Mar. 18, 2017), https://blog.ericgoldman.org/

archives/2017/03/appeals-court-affirms-rejection-of-gambling-claims-against-machine-zone.htm.

145. Id.

146. Id.

147. Steam is Valve’s greatest revenue producer, operating as “an online platform” where users

can purchase games online and play them from around the world with only their profile. Players of

CS:GO have the opportunity to purchase virtual weapons with different ‘textures’ through Steam,

with prices fluctuating depending on the rarity of the weapon skin purchased.

148. McLeod v. Valve Corp., No. C16-1227-JCC, 2016 WL 5792695, at *1 (W.D. Wash. Oct. 04,

2016).

560 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

chips with “monetary value outside the game itself” because of the ability to

“turn Skins directly into cash through … third-party gambling sites.”

149

the time of the complaint, third-party gambling websites were extremely

popular with “tens of thousands of people [betting virtual] items from CS:GO

on these [websites].”

150

Therefore, the virtual goods that are won and lost in-

game have actual real-world value on Steam.

151

Valve receives 15% on the

sale of each Skin sold through its Steam marketplace, resulting in an

incentive to market these third-party gambling websites as more gamers will

purchase Skins.

152

Plaintiffs claimed that “Valve is aware that rigged third-

party sites are taking money from Valve’s teenage customers” and that

popular YouTube channels “actively [promote] Lotto

153

as a gambling

service,” which helps generate excitement about gambling Skins.

154

Plaintiffs brought their claim under the Racketeer Influenced and

Corruption Organizations Act (RICO), which combats organized crime by

allowing penalties for racketeering activities, including illegal gambling.

155

The elements of a civil RICO claim are: (1) conduct (2) of an enterprise (3)

through a pattern (4) of racketeering activity (5) causing injury to plaintiff’s

business or property.

156

To prove injury under a RICO claim, “plaintiffs must

show proof of concrete financial loss, and not mere injury to a valuable

intangible property interest.”

157

Ultimately, the Ninth Circuit would reject the

plaintiffs’ RICO claim, saying that “gambling losses are not sufficient injury

to business or property for RICO standing.”

158

Although McLeod v. Valve was dismissed, it caught the attention of the

Washington State Gambling Commission.

159

On October 5, 2016, the

Washington State Gambling Commission announced it had contacted Valve

149. Id.

150. Id.

151. Evan Lahti, CS:GO’s controversial skin gambling, explained, PCGAMER (July 06, 2016),

https://www.pcgamer.com/csgo-skin-gambling/.

152. Valve Corp., 2016 WL 5792695 at *1.

153. CSGO Lotto was a “skin gambling” website, where players would connect their Steam

accounts and “use the weapon skins they owned to enter into [gaming contests],” meaning that if

they lost the virtual game, they would lose their skin. These skins, although completely virtual in

nature, would end up having monetary value as they could be exchanged on Valve’s Steam

Marketplace for real cash. See Charlie Hall, CSGO Lotto’s lawyer says it was never a gambling site,

and here’s why, POLYGON (Dec. 18, 2017), https://www.polygon.com/2017/12/18/16782124/csgo-

lotto-lawsuit-gambling-terms-of-use-tmartn; see also Steve Dent, YouTubers avoid fine over Valve

‘CS:GO’ gambling scan, ENGADGET (Sept. 08, 2017),

https://www.engadget.com/2017/09/08/youtube-csgo-lotto-fcc-no-fine/.

154. Valve Corp., 2016 WL 5792695 at *1.

155. Racketeer Influenced and Corrupt Organizations Act (RICO), NOLO (last visited Feb. 13,

2021). https://www.nolo.com/legal-encyclopedia/content/rico-act.html.

156. Valve Corp., 2016 WL 5792695 at *2.

157. Id.

158. Id.

159. See Colin Campbell, Washington Gambling Commission demands end to Valve CS:GO skin

gambling, POLYGON (Oct. 5, 2016, 2:14 PM), https://www.polygon.com/2016/10/5/13176244/

washington-gambling-commission-demands-end-to-valve-cs-go-skin.

2021] Let’s Stop Playing Games 561

to “immediately stop allowing the transfer of Counter-Strike: Global

Offensive virtual weapons for gambling activities” through Steam.

160

Valve’s

legal counsel Liam Lavery fired back that “Valve is not engaged in gambling

or the promotion of gambling,” and that the company does not “facilitate

gambling.”

161

However, Valve eventually admitted defeat following public

backlash and sent cease and desist notices to third-party gambling websites

asserting that “utilizing Steam to facilitate [third-party gambling] services

does not comply with its user agreements.”

162

C. UPCOMING LITIGATION

At the end of 2020, a class-action lawsuit was filed against EA in the

United States District Court for the Northern District of California alleging

that EA’s games “are programmed to adjust the difficulty of games based

upon individual gamers’ skills level.”

163

Because of this, the gamers argue

that they are forced to “purchase more ‘loot boxes’” in order to compete in

that gaming space.

164

A big point of emphasis will be whether the District of

California enforces EA’s arbitration agreement, which all gamers must

accept when playing games published by EA.

165

If arbitration is not enforced,

a precedent will be set that allows gamers to potentially file class actions

against other businesses offering games of chance.

166

This lawsuit is

currently in its infancy but may have far-reaching consequences.

IV. CONGRESS ATTEMPTS TO PROTECT CHILDREN WITH

ABUSIVE GAMES ACT

With the deficiency of legal jurisprudence on the subject and legislation

lacking the relevance required to connect itself with video games, more must

be done to protect young consumers. On May 23, 2019, Senator Hawley

formally introduced the Loot Box Bill to ban the sale of loot boxes to

children.

167

The Loot Box Bill seeks to “regulate certain pay-to-win

160. Id.

161. Id.; See also Mark Jansen, $5 Billion Spent on CS:GO Skin Gambling in 2016, TECHRAPTOR

(Jan. 25, 2017), https://techraptor.net/gaming/news/5-billion-spent-on-csgo-skin-gambling-in-2016

(discussing how Valve has a lot of money at stake when it comes to CS:GO skin gambling).

162. Jacob Wolf, Valve prohibits online gambling through Steam for Counter-Strike and Dota 2,

ESPN (July 13, 2016), https://www.espn.com/esports/story/_/id/17058219/valve-prohibits-online-

gambling-steam-counter-strike-dota-2.

163. Andrew J. Silver, An Imperfect Storm Has Sports Betting Operators Watching The EA Class-

Action Lawsuit, FORBES, (Dec. 10, 2020), https://www.forbes.com/sites/andrewjsilver

/2020/12/10/an-imperfect-storm-has-sports-betting-operators-watching-the-ea-class-

action/?sh=4e9d4561fa22.

164. Id.

165. Id.

166. Id.

167. Makena Kelly, Bill to ban the sale of loot boxes to children presses forward with bipartisan

support, VERGE (May 23, 2019), https://www.theverge.com/2019/5/23/18636535/loot-boxes-josh-

hawley-markey-blumenthal-privacy-video-games.

562 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

microtransactions and sales of loot boxes in interactive digital entertainment

products, and for other purposes.”

168

Section 1(a)(1)(a) of the bill would

hinder a game developer’s ability to market microtransactions to minors by

making it “unlawful for a game publisher to publish a minor-oriented game

that includes pay-to-win microtransactions or loot boxes.”

169

Senator Hawley

may have genuine intentions with the Loot Box Bill, but the language of the

bill shows a true lack of video game sophistication.

170

Section 2(5) of the bill

defines “minor-oriented game” to mean “an interactive digital entertainment

product for which the target audience is individuals under the age of 18.”

171

Section 2(5) outlines a wide range of considerations that can be analyzed to

find whether a game constitutes a minor-oriented game. The FTC can look

into: Section 2(5)(A) the subject matter of the product; (B) the visual content

of the product; (C) the music or audio content of the product; or (D) other

evidence demonstrating that the product is targeted at individuals under the

age of eighteen.

172

By stating “subject matter” can be used to decide whether a game is

minor-oriented, Section 2(5)(A) may cause problems because subject matter

is too broad and subjective.

173

To the masses, video games “generally appeal

to kids,” meaning that subject matter is invariably minor-oriented and thus

implying that almost every game should be subject to the Loot Box Bill’s

conditions.

174

An additional issue derives from Section 1(b)(1)(b), which

states “it is unlawful for a game publisher to publish an interactive digital

entertainment product that is not a minor-oriented game if the publisher has

constructive knowledge that any of its users are under the age of 18.”

175

The

Loot Box Bill does not define constructive knowledge, making it difficult to

discern whether a game publisher falls under the jurisdiction of the bill or

not.

176

Generally, a lawyer evaluating the Loot Box Bill would most likely

conclude from Section (1)(b)(1)(b) that “if a publisher or distributor should

have known that a single user of a game was under eighteen years old, and

that game contained loot boxes or prohibited micro-transactions, they would

be liable for penalties.”

177

This might cause microtransactions to be outlawed

168. Protecting Children From Abusive Games Act, LYN19247, 116

Cong. § 1 (2019).

169. Id. (emphasis added).

170. See Brandon Huffman, FAQ on a bill (S1629) proposing The Protecting Children from

Abusive Games Act, GAMASUTRA (May 31, 2019), https://www.gamasutra.com/blogs/

BrandonHuffman/20190531/343658/FAQ_on_a_bill_S1629_proposing_The_Protecting_Children

_from_Abusive_Games_Act.php.

171. Protecting Children From Abusive Games Act, supra note 168.

172. Id. The examples provided are not completely inclusive, as the Loot Box Bill provides a

multitude of other ways to prove that a game is oriented towards minors.

173. See Huffman, supra note 170.

174. See id.

175. Protecting Children From Abusive Games Act, supra note 168.

176. Huffman, supra note 170.

177. Id.

2021] Let’s Stop Playing Games 563

on a scale much wider than gamers would appreciate due to the fact that

nearly every video game is played by gamers under the age of eighteen.

178

An even deeper dive into the definitions of Section 2(5) sheds light on

the potential problems that could be associated with the Loot Box Bill.

179

The

Entertainment Software Rating Board (ESRB) is responsible for providing

the public with ratings on specific games, and in-turn these ratings assist

parents with knowing whether their child is mature enough for a specific

game.

180

The three most common ratings are:

a) Everyone – “Content is generally suitable for all ages. May

contain minimal cartoon, fantasy or mild violence and/or

infrequent use of mild language.”

b) Teen – “Content is generally suitable for ages 13 and up. May

contain violence, suggestive themes, crude humor, minimal

blood, simulated gambling and/or infrequent use of strong

language.”

c) Mature – “Content is generally suitable for ages 17 and up. May

contain intense violence, blood and gore, sexual content and/or

strong language.”

181

Under the Loot Box Bill’s definition of minor-oriented games, games

that have received a Mature rating would be under the Bill’s jurisdiction.

182

This may be a significant issue because such Mature-rated games, often

played by adults, will now be deemed minor-oriented under the Loot Box

Bill.

183

This means that there would be very few (if any) scenarios where a

video game could be seen as not minor-oriented, which could potentially

eradicate the entire microtransaction model.

184

Adult gamers “should have

the right to make in-game purchases or gamble with loot boxes if they so

please,” and the broad reach of Section 2(5) may make that reality

unattainable.

185

Section 2(7)(A) defines “pay-to-win microtransactions” as “an add-on

transaction to an interactive digital entertainment product that eases a user’s

178. See id.

179. Jason Schreier, U.S. Senator Says His Anti-Loot Box Bill Has The Video Game Industry

Worried, KOTAKU (May 21, 2019), https://kotaku.com/u-s-senator-says-his-anti-loot-box-bill-has-

the-video-1834905639.

180. Charlie Hall, A brief history of the ESRB rating system, POLYGON (Mar. 3, 2018),

https://www.polygon.com/2018/3/3/17068788/esrb-ratings-changes-history-loot-boxes.

181. All definitions come from ESRB, Ratings Guide, ESRB, https://www.esrb.org/ratings-

guide/ (last visited Feb. 3. 2021).

182. Olivia Richman, Congress’ infamous “loot box bill” will hurt the industry, UPCOMER (June

4, 2019), https://upcomer.com/lol/story/1419025/loot-box-bill.

183. See id.; See also Steven Chung, Senate Bill Could Mean Game Over For Microtransactions

And Loot Boxes, ABOVE L. (May 29, 2019), https://abovethelaw.com/2019/05/senate-bill-could-

mean-game-over-for-microtransactions-and-loot-boxes/?rf=1.

184. Richman, supra note 182.

185. Id.

564 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

progression through content otherwise available within the game without the

purchase of such transaction.”

186

This section is especially crucial if the Loot

Box Bill is to gain widespread support from the gaming community, as

having a broad definition of pay-to-win microtransaction may open the

floodgates to games being liable for microtransactions that are not considered

predatory in the industry.

187

Wedbush Securities analyst Michael Pachter

sheds light on the pitfalls of a broad definition of pay-to-win

microtransactions, saying that Senator Hawley calls Candy Crush, “whose

average player is a 48-year-old housewife, as being a game that targets

minors with its $150 bundles.”

188

Under the Loot Box Bill’s frequently asked questions webpage, a

primary question is whether it will ban all downloadable content.

189

The

answer provided is a resounding “no,” however, this question drastically

misses the mark. The question that should be asked is “[does] this bill ban

more games than is needed to accomplish the goal of protecting kids from

predatory monetization practices?”

190

As shown by the broad scope of

Section (1)(b)(1)(b) and Section 2(5), the answer should be “yes,” because

games that are primarily played by mature audiences will be subject to the

jurisdiction of the Loot Box Bill due to its “very broad definitions of minor-

oriented and pay-to-win and constructive knowledge standard.”

191

In sum,

the Loot Box Bill might have genuine intentions, but its broad scope could

have severe inadvertent consequences on the video game industry, and

changes are necessary to properly regulate the games that gamers want.

V. PROPOSED SOLUTION TO RECTIFY LANGUAGE ISSUES IN

LOOT BOX BILL

In order for the Loot Box Bill to gain widespread support from both the

gaming community and Congress, Senator Hawley and his co-authors would

best be served by working hand-in-hand with industry leaders in order to fully

understand the complexities of the video game marketplace.

192

Stanley

Pierre-Louis, CEO of the Entertainment Software Association (ESA), has

said that the Loot Box Bill is “flawed and riddled with inaccuracies” and

186. Protecting Children From Abusive Games Act, supra note 168.

187. Giancarlo Caldes, ‘Zero’ chance it passes: Game analysts break down senator’s anti-loot

box bill, VENTUREBEAT (May 13, 2019), https://venturebeat.com/2019/05/13/zero-chance-it-

passes-game-analysts-break-down-senators-anti-loot-box-bill/.

188. Id.

189. Huffman. supra note 170.

190. Id.

191. Id.

192. See CJ Andriessen, Senator Hawley’s anti-loot box bill is taking a scorched earth approach

to invasive microtransactions, DESTRUCTOID (May 24, 2019), https://www.destructoid.com/senator

-hawley-s-anti-loot-box-bill-is-taking-a-scorched-earth-approach-to-invasive-microtransactions-

554673.phtml.

2021] Let’s Stop Playing Games 565

would “ultimately prove harmful to the player experience.”

193

These flaws

and inaccuracies most likely stem from the fact that Senator Hawley is

admittedly not a gamer,

194

leading to the presumption that he does not

completely grasp how the industry operates. The ESA has offered its support

to the bill’s co-sponsors in helping them fully understand the

microtransaction industry and why the Loot Box Bill would be far too broad

in its scope.

195

The Loot Box Bill must completely overhaul their system of evaluating

minor-oriented games. Abstract categories such as the subject matter of the

game or its visual contents are entirely too broad and could theoretically

encapsulate any video game. The guidelines for determining minor-oriented

games must become more rigid, making it easier for game developers to fully

know whether their game is subject to the jurisdiction of the Loot Box Bill.

Another benefit from adding more rigid guidelines is that only

microtransactions the industry finds predatory will be banned; there is little

to no issue with adults purchasing microtransactions to change their playable

character’s appearance or adding more content to prolong the story of a

specific game.

To improve the rigidity of the Loot Box Bill’s language, the bill’s

cosponsors should rework Section 1(b)(1)(b). Games that receive a Mature

rating are intended to be played by individuals aged 17+, meaning that

Section 1(b)(1)(b)’s language of targeting games played by anyone under

eighteen would capture the entire video game market. The bill’s cosponsors

should use the ESRB’s rating system as a guide. Instead of saying that games

played by anyone under the age of eighteen years old would fall under the

Loot Box Bill’s jurisdiction, Section 1(b)(1)(b)’s language should reflect that

games with an Everyone or Teen rating will be subject to the Loot Box Bill

and closely scrutinized. This will allow games played primarily by adults to

offer forms of microtransactions, while also making clear to developers when

they must comply with the Loot Box Bill.

However, making this change would not go far enough to regulate mobile

games because certain mobile games, like Candy Crush and Clash of Clans,

do not receive ratings by the ESRB.

196

As such, the Loot Box Bill should

have an updated section that deals entirely with mobile games and their

microtransactions. This section should include specific guidelines that help

evaluate whether a mobile game utilizes predatory microtransactions

mechanics that specifically target the vulnerability of young kids. Potential

193. Steve Watts, US Senate Loot Box Bill “Riddled With Inaccuracies,” Says ESA, GAMESPOT

(June 6, 2019), https://www.gamespot.com/articles/us-senate-loot-box-bill-riddled-with-

inaccuracies-/1100-6467222/.

194. See Schreier, supra note 179.

195. Watts, supra note 193.

196. Candy Crush Saga, LEARNING WORKS FOR KIDS, https://learningworksforkids.com

/playbooks/candy-crush-saga/ (last visited Feb. 28, 2021)

566 BROOK. J. CORP. FIN. & COM. L. [Vol. 15

guidelines might include looking into data for mobile games such as the

average age of players, the average amount spent on microtransactions, and

how much time spent per gaming session. Additionally, Congress must be

cognizant that mobile games can greatly differ from one another, and that no

clear objective standard is plausible. Receiving advice from industry experts,

and respecting their views on microtransactions on specific games, would go

a long way in properly classifying predatory games that target young

consumers. With mobile games not receiving ESRB ratings the guidelines

must be more fluid compared to other sections, but what is currently written

under the Loot Box Bill is entirely too broad.

CONCLUSION

The rise in microtransactions has fully entrenched itself as a standard in

the video game community. With young children specifically prone to the

pitfalls associated with microtransactions, especially loot box purchases, a

problem has arisen where young gamers spend excessive amounts of money

on in-game purchases. Many countries have taken notice. Belgium took a

significant step by completely outlawing all forms of loot box

microtransactions. In the United States, there have been multiple attempts to

solve the loot box crisis through legal jurisprudence. However, due to the

lack of well-formed law in the subject area, consumers have been left

vulnerable. Senator Hawley introduced “The Protecting Children from

Abusive Games Act” in order to protect young gamers from the hazards

linked with microtransactions. Although the bill has genuine intentions, its

broad scope could result in catastrophe for the video game industry. For the

Loot Box Bill to truly protect gamers from the microtransactions most

deemed predatory, a re-drafting of the bill is required to limit its scope and

not completely eradicate the microtransaction model.

Dominick Tarantino

* I would like to thank the Brooklyn Journal of Corporate, Financial, & Commercial Law for

the opportunity to publish this Note. It would not have been possible without the help of the editors

and staff members. Additionally, I would like to give a special thanks to my family, and friends

Zach, Grace, Jack, and Jeremy for being an invaluable support system during this process.