Is LB system gambling?
YES AND NO: IT’S BEEN CLASSIFIED AND REGULATED IN SOME COUNTRIES
EU is considering taking steps to regulate it as a game of chance.
What if gambling covered more than just a chance at winning a tangible prize? Does South African law recognise the possibility of gambling for virtual items?
In recent years the video game industry has come under fire for the use of the “loot box (LB) system”. The LB system entices a consumer to purchase a virtual container in a video game. A consumer is then rewarded with a randomised virtual item selected from a range that will enhance the gaming experience or merely modify the look of the video game.
Many people, especially in the European Union, believe the LB system should be classified as gambling and be regulated.
If it constitutes gambling, it would be worrying as the gaming industry targets children.
Should this classification exist in SA? There are two pieces of legislation that regulate gambling in South Africa: the Lotteries Act and the National Gambling Act.
Section 1 of the Lotteries Act defines a lottery as: “Any game, scheme, arrangement, system, plan, promotional competition or device for distributing prizes by lot or chance and any game, scheme, arrangement, system, plan, competition or device, which the minister may by notice in the Gazette declare to be a lottery.”
Based on this definition, it seems the LB system may be classified as a lottery. Some argue though that the video game and the system form one indivisible product, with the latter dependent on the former. The argument goes that as the video game was developed to entertain gamers rather than allowing them to gamble, the system is part of the entertainment purpose.
Although the system and the video game form part of the same package, it can also be argued that the system is separate from the video game. Following this line of argument, the system was designed for a different purpose and it can operate on a platform that is separate from the video game. The video game can also function without the system, which we saw when the video game developer Activision Blizzard was able to remove the system from its games in Belgium. Therefore, as it is the system that rewards customers through chance, and not the video game, it is possible to classify the system as a lottery.
The actions of Activision Blizzard were in response to the Belgian government declaring the system to be a form of gambling. Similar steps have been taken in The Netherlands. The regulators of the European Union were also considering regulating the system. Sergio dos Santos is a candidate attorney at Webber Wentzel