Over the last several years in California, there have been several lawsuits over loot boxes.
Loot boxes are mystery boxes or chests available for purchase within video games. Users can buy them with real money or with tokens or gems. The boxes contain random items that can be used in the game.
A district court in the Northern District of California dismissed the latest lawsuit on loot boxes. It ruled the plaintiffs lacked standing to sue. But the court reiterated that loot boxes are not illegal under California law.
Loot boxes not illegal under California law, courts rule
California online gambling isn’t legal yet. It’s these laws that entities cite when they bring suits over loot boxes in games. So far, no court in California has ruled that the random prizes are illegal under state law.
Electronic Arts faced several lawsuits concerning loot boxes in its popular sports games, including Madden football and FIFA soccer games. Plaintiffs argued the player packs (loot boxes) that could be bought or earned for a player to get farther in the game were illegal. In one suit, plaintiffs argued they were illegal under California law. They weren’t.
In another suit, EA was accused of using a technological tool to adjust player levels, making customers more likely to buy player packs to get farther in the games. That suit was dismissed after EA proved it wasn’t using the technology in the games.
A class-action lawsuit was filed against Apple against loot boxes within one of its games. California mother Rebecca Taylor filed the lawsuit, stating that her son purchased $25 worth of virtual in-game currency and used it to buy loot boxes.
The suit was dismissed. US District Court Judge Richard Seeborg said it was up to lawmakers to make changes since loot boxes are legal in California.
Latest suit over loot boxes ends the same as others
The latest lawsuit in California was against video game developer Supercell Oy. Plaintiffs claimed the company’s inclusion of loot boxes in their games “Clash Royale” and “Brawl Star” violated the state’s Unfair Competition Law as well as the Consumers Legal Remedies Act.
The main argument by plaintiffs once again went back to loot boxes being illegal gambling under California law. The court said there was no real injury to the plaintiffs, so they lacked standing to bring the suit. The court also said a loot box is not a “thing of value,” so they are legal under California law.
In short, courts have ruled against the plaintiffs because users receive items from loot boxes just as advertised by the game.
Are loot boxes a form of gambling?
The definition of gambling is to risk something of value with the hope that you will gain something in return, with no certainty. It’s determined mostly by chance, sometimes with a combination of chance and skill. At times you win big, sometimes you win small, and sometimes you lose everything you risk.
The question is whether or not loot boxes constitute gambling.
In the world of gaming, loot boxes promise to return something every time. The question is not whether an item will appear. The question is what type of item will appear. All items found in loot boxes are used in-game. They do not have any sort of monetary value. Players are unable to cash out the items in the loot boxes.
Loot boxes generate billions in revenue
A report published by Juniper Research estimated that loot boxes will generate over $20 billion in revenue by 2025.
In 2020, loot boxes generated around $15 billion in revenue, with around 5% of gamers purchasing them. That comes to around 230 billion gamers across the world.
Here is a look at past and projected consumer spending numbers by the year as per Statista:
- 2020: $15.3 billion
- 2021: $17.8 billion
- 2022: $18.8 billion
- 2023: $19.3 billion projected
- 2024: $19.8 billion projected
- 2025: $20.3 billion projected
During fiscal year 2021, EA estimates it took in around $1.6 billion in revenue from loot boxes alone, according to their company’s annual report. The majority of this revenue actually came from one game: FIFA. Another game called Overwatch also generated over $1 billion.
Other popular games that offer loot boxes include:
- Call of Duty
- Star Wars: Battlefront
- Candy Crush