Newshub Nation: experts warn against unregulated loot boxes in video games

There are serious concerns virtual gambling for digital items in video games is causing real-world harm to impressionable Kiwi youth, but the sector remains unregulated. 

The video game sector is now the most profitable form of entertainment in the world, worth hundreds of billions. 

Seventy percent of Kiwis are now considered gamers, whether they are playing Candy Crush or the latest Call of Duty. 

New Zealand's Government is encouraging the sector, with new subsidies for developers in Budget 2023

While the industry booms, experts are sounding alarms at the convergence of gambling and gaming and the impact it can have on children.

Andrée Froude from the Problem Gambling Foundation (PGF) told Newshub Nation's Finn Hogan "we are seeing games increasingly including simulated gambling or loot boxes that very much resemble gambling.

"It is concerning because it serves to normalise gambling, but it can also be really problematic."

The convergence has been harming real Kiwi families for some time and Newshub Nation spoke Li, who has seen the harm play out within his own family. 

Over lockdown, Li's son began using his parents' credit card to purchase loot boxes in a game. 

Li said his son spent "some thousands… I don't know how much".

When Li tried to stop his son, things took a dark turn.

"He became angry," Li told Newhsub Nation. "He would throw things and punch himself and hurt himself."

Loot boxes enable players to spend real money on digital prizes and, for some, their allure is addictive. 

"We get parents calling us who are at [a] crisis point because their child is gaming and they've discovered this spending lots of money on loot boxes, microtransactions, whatever it might be," Froude said.

Kelly Feng from Asian Family Services agrees the problem is surging.

"Since 2020 and 2021, we are seeing triple the amount of referrals from gaming-related harm as well as young people refusing to go to school," she said.

Feng is also regularly hearing of violent behaviour arising but since gambling in games isn't gambling in a technical sense under New Zealand law, there is no funding for the harm. 

She said she feels like harm-reduction agencies are "competing with the gaming industry".

"The gaming industry has a billion dollars and our NGOs and the Government sector only have a little." 

Advocates also worry gambling in games could be creating a new generation of gamblers who are getting hooked at a young age. 

"We're going to see a whole lot of young people developing problems. 

"There's a pathway between problematic gaming and problem gambling as well," Froude said. 

Arron Drummond, a cognitive cyberpsychologist who lectures at the University of Tasmania, said this is already happening. 

"People who have been purchasing loot boxes, six months later, those people tend to be purchasing traditional gambling products at a higher rate than people who aren't," Dr Drummond said.

The game companies selling these loot boxes argue they don't allow players to sell them for real money and thus, they don't qualify as gambling. 

However, unofficial resell websites can and do exchange real money for digital items. 

Earlier this year, an item in the popular first-person-shooting game Counter-Strike: Global Offensive sold for over half a million dollars. 

This AK-47 'Case Hardened' skin from Counter-Strike: Global Offensive sold in 2023 for $400,000 USD.
This AK-47 'Case Hardened' skin from Counter-Strike: Global Offensive sold in 2023 for $400,000 USD.

The game generates more than US$50 million per month for parent company Valve from the sale of loot boxes, called cases, each month. 

Unlike the regulated gambling industry which has to give a portion of its profits to support community outreach and harm reduction programmes, there is no such expectation for gaming companies. 

Drummond said serious problems arise when "gambling-like mechanisms crash up against underage users". 

"The largest player base still happens to be underage users in Aotearoa, I think that's a serious concern."

Drummond said "regulating those mechanisms in some way in a sensible careful way is something that's really important to consider".

Australia is tackling the problem head-on, drafting a nationwide law that would lead to any game containing loot boxes receiving an M rating.

They would also give any game with simulated gambling an R18 rating.

Belgium has gone a step further by banning loot boxes outright, an approach the NZ industry said goes too far. 

NZ Game Developers Association Chair, Chelsea Rapp, argued that would be "definitely a very heavy-handed move".

However, she said the industry would support "any kind of tool or labelling system that enables parents to make more informed decisions".

"The challenge comes in where those ratings or those classification systems are ultimately making the decisions for the consumer."

Loot boxes have been on the Government's radar for some time, with then Minister of Internal Affairs Tracey Martin telling Newshub Nation back in 2018: "Loot boxes look a lot like gambling… but they just don't qualify because our gambling laws are outdated."

Newshub Nation asked the current minister Barbara Edmonds when Martin's Gambling Act review from 2018 would be completed. 

Half a decade later, her office said the work is still ongoing with no commitment on when we'll see results. 

For Froude, "we need to do something before things really do get out of control.

"Our gambling act is absolutely out of date," he said.

"It's not fit for purpose, so that needs to be addressed and it needs to happen really soon."

Watch the full video for more. 

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