Loot boxes are mystery boxes purchased through video games, and they are a multi-billion dollar industry. But are they gambling and should they be legal?

MARY LOUISE KELLY, HOST:

In the last few years, a new, unregulated and lucrative game of chance has popped up. It is tempting kids and confounding regulators around the world. We are talking about loot boxes. They are embedded in video games. Ben Brock Johnson from our Planet Money podcast explains.

BEN BROCK JOHNSON, BYLINE: You know that little box from the seminal Nintendo game “Super Mario Brothers,” the one with a question mark on it? When busted open, it would give Mario special abilities…

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JOHNSON: …Like growing into a giant version of himself or shooting fireballs at his enemies. This might have been the video game ancestor of the modern loot box, and these days loot boxes are a key part of an exploding video game business. Video games blew past global box office sales in 2018, part of a nearly 20% growth in the video game industry year over year. Loot boxes are part of that growth and projected to increase to a $50 billion annual business by 2022. In the game, “Overwatch,” which boasts a reported 40 million players around the world, a loot box costs about the same price as your average lottery ticket.

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JOHNSON: Nine ninety-nine will get you a pack of 11. Open one up – you might get a new outfit, called a skin, or a catchphrase for your avatar to say.

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UNIDENTIFIED ACTOR: (As character) Catchphrase.

JOHNSON: Players buying loot boxes can get all kinds of digital tchotchkes. They can also get addicted. Gamers have reported spending thousands of dollars on these mystery in-game purchases, and regulators are starting to take notice. In May, Republican Senator Josh Hawley introduced a bill that would ban the sale of loot boxes to minors. Here he is in a video posted to Twitter.

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JOSH HAWLEY: They need to be upfront about what their games are actually doing, and they need to stop practices that intentionally exploit children.

JOHNSON: Belgium and the Netherlands have already moved to ban the sale of loot boxes in games like “Overwatch” and “FIFA 18.” Australian regulators have recommended making games that include loot boxes rated R. But it’s far from game over for loot boxes, and that’s because lawmakers are having a hard time deciding if popping open imaginary boxes is really gambling. Lawmakers generally draw a line between games of chance and games of skill when it comes to defining what is and isn’t gambling. Lia Nower is the director of the Center for Gambling Studies at Rutgers University.

LIA NOWER: Somebody in a position of regulatory or legislative authority has got to really clearly start to define these boundaries.

JOHNSON: Nower and colleagues at Rutgers conducted a study on the correlation between loot boxes and gambling.

NOWER: Forty-six percent of those who played video games also bought loot boxes, and among the loot box players, they were significantly more likely to also have gambling problems and-or problems with video gaming.

JOHNSON: As loot boxes have become more controversial, video game companies are adjusting their business models anyway. Electronic Arts, a game-maker who faced a horde of angry gamers after making loot boxes a central part of its 2017 “Star Wars Battlefront II” game, changed the video game to be less focused on loot box sales. Other gaming companies have changed their loot box policies and design as well. Whether or not regulators in the U.S. will eventually make a call one way or the other on whether loot boxes are gambling, it’s a bit of a mystery all its own.

For NPR News, I’m Ben Brock Johnson.

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