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A recent decision of an Austrian court on the qualification of loot boxes as gambling might lead to dangerous consequences for the videogaming sector.
Since the first supreme court rulings concerning gambling and the prevailing Austrian monopoly in 2016, Austrian courts have been swamped with lawsuits from players seeking to recover their gambling losses from foreign gambling operators (not having a national license). This also leads further plaintiffs and courts to assess – in addition to reclaiming casino gambling losses –the recoverability of stakes in so-called loot boxes in video games.
Concerns have been raised across Europe about whether loot boxes should be classified as games of chance. Confirming this would presumably lead to the applicability of national gambling regulations in most jurisdictions. Loot boxes undeniably have an aleatory element, as they yield randomized items where you do not know what you will receive. The video game algorithm randomly decides which “quality class” of virtual goods (common or rare virtual goods) the player will receive from the loot box. As a result, for example, the Dutch and Belgian authorities (subject to the specific design) have classified loot boxes as games of chance. They are thus subject to the respective gambling regulations.
In the meantime, an Austrian district court has ruled in the first instance in favor of a player reclaiming his stakes in loot boxes. The court found FIFA Ultimate Team (“FUT”)-packs to be a form of gambling. Without a national gambling license, the Court declared the contracts between the player and Sony to buy FIFA points to obtain FUT packs null and void. Therefore, Sony would now have to pay back the money they received from the player. However, the judgment is not yet final, as Sony can still appeal.
Online video games per se are generally not subject to the monopoly and licensing provisions under the Austrian Gambling Act, which are intended to protect players and prevent gambling addiction. However, as the Austrian District Court ruled, the loot boxes may qualify as games of chance within the meaning of the broad definition of gambling in the Austrian Gambling Act.
While it is clear that the outcome of FUT-packs bought with real-world money is mainly determined by chance, it is worth questioning whether there is a total “loss” of the stake, considering that the player receives certain virtual goods for the stake. However, according to Austrian High Court jurisprudence, it is sufficient that the value of the winnings may be lower than the amount invested, which would again indicate a classification as a game of chance.
Even if loot boxes would be classified as games of chance in Austria, Section 4 para 1 of the Austrian Gambling Act provides an exception for games of chance for amusement and for small stakes (up to EUR 10 according to Austrian case law). In this case, no license would be required to offer the loot boxes in Austria.
In the event of classification as gambling, this would have far-reaching consequences, as not only would the contracts be null and void. The stakes would have to be repaid, but the providers in Austria would also be subject to the (online) gambling tax of 40% of the gross gambling revenues (GGR – stakes minus winnings).
The legal uncertainties surrounding the classification of loot boxes as games of chance underscore the need for regulation, not least because of the criminal provisions in the Austrian Gambling Act for offering games of chance without a national license.
On a similar topic, you can find the following article interesting “New transparency standards for loot boxes in video games agreed with Italian authorities.”
