Electronic Arts class-action suit — are loot boxes gambling or gaming?

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loot boxes in online games

The Aug. 13 class-action lawsuit (Kevin Ramirez vs Electronic Arts) reflects the still unanswered questions about online game loot boxes in the U.S. and internationally. For several years, concerns that they may promote gambling rather than gaming have been debated.

Some countries have examined regulating loot boxes. Others are offering policy and implementation recommendations. And some countries are imposing restrictions or bans on loot boxes. 

On Aug. 7, 2019, the Federal Trade Commission (FTC) held a workshop in Washington, D.C., on the implications of video game loot boxes and related microtransactions. The FTC has the matter under review is taking a close look at content creators and the platforms they use. 

Also, the video game industry has engaged in some self-regulation, through the Entertainment Software Rating Board (“ESRB”) rating system, in some cases disclosures of in-game purchase odds and parental control features. 

Pending actions in the US

A class-action lawsuit was filed in the U.S. District Court for the Northern District of California on Aug. 13, 2020. Kevin Ramirez vs Electronic Arts, Inc., is the latest in a flurry of lawsuits, which are challenging the online gaming loot box phenomenon, game developers, platforms and app stores that make them available to consumers.

On June 12 in the Northern District of California, San Jose Division, two separate class-action suits were brought against Google, LLC, as well as, Apple, Inc.

The July 12 filings both cited California legislation Cal. B & P Code § 19801(c) which states: “Gambling can become addictive and is not an activity to be promoted or legitimized as entertainment for children and families.” 

Google and Apple both receive a part of the proceeds from in-app loot boxes in games sold or offered free through “Google Play” and the Apple “App Store.”

The lawsuits claim that these profits are made with “predatory practices enticing consumers, including children to engage in gambling and similar addictive conduct in violation of this and other laws designed to protect consumers and to prohibit such practices.”

Loot boxes: Millions played and billions made

Loot boxes are in-game rewards that contain a random assortment of virtual items. These items usually assist players in advancing in the online game. They may also be items that customize the player’s game dashboard, or avatar. 

Players can pay for a loot box sometimes with virtual currency. But the lawsuits and ongoing disputes are over the loot boxes which are bought with real money. The real money transactions are also known as “micro-transactions” and “in-app purchases.”

The lawsuits claim that games that offer a gamer the opportunity to pay for a randomized chance of obtaining better weapons, player skins, or other in-game features to improve gameplay is arguably operating as a gambling device. 

Loot boxes produce a growing revenue stream for game developers and the platforms on which they are sold. For example, Google Play and the Apple App Store receive 30% of the in-app purchase amount.

The concern is that techniques used to market loot boxes may be addictive. And whether there is a negative impact on minors to these in-game purchases.

There are credible claims that loot boxes create and reinforce addictive behaviors in players, particularly youthful ones.

Loot boxes generated up to $30 to $40 billion in 2018, this amount is expected to increase to about $50 billion by 2022.

Background Kevin Ramirez vs Electronic Arts class-action

The FIFA game series is one of the high earners through their loot boxes. FIFA was developed by Electronic Arts (EA).

EA is a California-based game development company, headquartered in Redwood City. They are the second-largest game company. Activision Blizzard is the largest. In addition to FIFA, some of their best-known game creations include a myriad of hit series games like The Sims, Star Wars Battlefront, Battlefield, Need For Speed, Mass Effect, and many others.

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