All I Want for Christmas is Loot [Boxes]

As video games started to become more popular and accessible, game developers began to incorporate the “freemium” model into their games – the strategy of making games free to play but charging money for additional features or in-game items. My first experience with a freemium game was in 2012 when I was procrastinating in the D.B. Weldon library as an undergraduate at Western University, trying to build a virtual Springfield in the Simpsons: Tapped Out on my iPhone 4. I knew that I needed to spend dozens of hours completing in-game tasks to build up enough in-game currency so I could buy the virtual items to build my Springfield. I realized that these items were also available for purchase with real currency as a way to skip some of the in-game tasks, but unluckily (or luckily?) for me, I was on a student budget so I didn’t have the disposable income to spend $50.00 USD to purchase the Lard Lad Donut Factory. Unfortunately, I couldn’t compete with players with deep pockets, so my dreams of having the world’s best virtual Springfield died a quick, painless death as I moved on to Flappy Bird, with my (real) wallet no worse for wear. 

A few years later, I heard about this phenomenon called a “loot box” which is another type of in-game transaction that differs from a 1:1 purchase. Instead, games such as FIFA, Counter-Strike: Global Offensive, and Call of Duty started to offer virtual mystery boxes where players could pay as low as $3.00 USD for a chance to own a coveted in-game item, with the catch that the contents contained in a loot box were randomized.1 Players wouldn’t know if they purchased something extremely valuable or bunk until after they’ve paid money. Given that loot boxes contained consideration, chance, and a prize, different jurisdictions around the world started to take the view that selling and purchasing loot boxes is a form of gambling, no different than playing a real-world slot machine. This blog will look at some of the different approaches to loot boxes around the world, Canada’s approach to loot boxes (so far), and suggestions for how game developers may be able to stay on the right side of Canada’s laws.

Loot Boxes Around the World 

The country with the strictest restrictions on loot boxes is Belgium, where the Belgium Gaming Commission has held since 2018 that loot boxes violate the country’s gambling legislation since loot boxes involve a bet that can lead to profit or loss by chance.2 In March 2023, an Austrian court also ruled that loot boxes violate the country’s gambling laws but for different reasons. Instead, the Austrian court determined loot boxes to be gambling due to players’ ability to sell items purchased in loot boxes on a secondary market, which thereby gave loot boxes some real level of value.3  

On the other side of the spectrum, a Dutch court ruled that loot boxes did not violate its country’s gambling laws, taking the view that purchasing and opening loot boxes is not a standalone activity, but rather part of a game of skill which happens to add an element of chance to the game.4 This decision paid special attention to Electronic Arts’ (“EA”) FIFA Ultimate Team Mode, where the goal of the game is for a player to create their own team, so the court concluded that purchasing loot boxes was merely an aspect of a game of skill. I’m not so sure the Dutch court would reach this conclusion if it examined loot boxes that had purely aesthetic utility, which is perhaps why the Dutch government has since lobbied for a ban on loot boxes across the entire EU.5 

Loot Boxes in Canada

There have been a number of lawsuits that have been filed in Canada – specifically in Québec and British Columbia – that have sought redress for game developers’ use of loot boxes. Some of the most prominent game developers in the world have been named as defendants in class actions, including Epic Games, Activision Blizzard, Take Two Interactive, EA, and Niantic.6 Each of the cases makes similar allegations against the game developers, in particular, that loot boxes (1) violate the Criminal Code of Canada’s (the “Code”) provisions related to unlawful gaming, and (2) loot boxes violate consumer protection laws for deceptive marketing practices by concealing the odds of the items within the loot boxes. 

So what is an “unlawful game” according to Canadian law? 

In order to be considered an unlawful game, a game must satisfy the elements of an unlawful game prescribed in the Criminal Code (the “Code”) and common law. The Code defines a “game” as a game of chance, or a game of mixed chance and skill.7 Examples of games of chance are slots and roulette, while examples of games of mixed chance and skill are poker and blackjack. Under the common law, chance, consideration, and prize are held to be essential elements of gaming.8 Therefore, for a game to violate the Code (i.e. as a game of chance or mixed chance and skill), it must contain all three of the elements of chance, consideration, and prize.9 Games that are only skill-based do not violate the Code. 

In addition to chance, consideration, and prize, the Supreme Court of Canada in Di Pietro v. The Queen (“Di Pietro”)10 also held that wagering is an essential element of gaming.11 Wagering is not defined in the Code, however, the court in Di Pietro stated that wagering means having a chance of both winning and losing money or money’s-worth.12

In March 2023, as part of an application to certify a class action on behalf of loot box purchasers, the Supreme Court of British Columbia considered whether loot boxes constituted unlawful gaming (“Sutherland”).13 The Plaintiff argued that purchasing loot boxes should be considered wagering because (1) loot boxes are available for purchase using real money or virtual currency, which gives them real-world value like a “casino chip,”14 and (2) loot boxes have intrinsic value (i.e. money’s-worth) outside of video games because the contents within a loot box can be resold for virtual currency within the games’ in-house auctions and for real currency on third-party marketplaces.15 

The Court disagreed with the Plaintiff’s argument that loot boxes had intrinsic value. The Court noted that there is no prospect of gaining or losing anything of real-world value through EA’s auctions since loot boxes can only be resold for virtual currency, and they cannot be cashed out like a casino chip.16 Further, the Court noted that EA did not actually promote or sell loot boxes on third-party marketplaces, so even though the class members could have technically re-sold the loot boxes they purchased, EA did not engage in such practice so they could not have engaged in unlawful gaming.17  

Nevertheless, the Court concluded that the class action could proceed on the basis that loot boxes may violate consumer protection laws for misleading and/or deceptive marketing practices.18 The judge accepted the Plaintiff’s argument that EA misled class members by:19 

1. Failing to disclose that the chances of obtaining valuable items by purchasing loot boxes was nearly impossible; and

2. Promoting the purchase of loot boxes as a way to improve game performance and enjoyment. 

The Plaintiff was granted leave to amend its pleadings on behalf of the class members and make further submissions, so it will be interesting to see if the Sutherland action proceeds or if EA settles before the case advances. Notably, Epic Games settled a similar lawsuit in October 2022, however, there was no discussion or analysis from the court on whether loot boxes constituted unlawful gaming or contravened consumer protection laws to compare to the Sutherland decision.20  

Observations and Implications