Are Loot Boxes Gambling? Random reward mechanisms in video games

Abstract

In this paper we investigate the phenomenon colloquially known as “loot boxes” or “loot crates”. Loot boxes became a hot topic towards the end of 2017 when several legislative bodies proposed that they were essentially gambling mechanisms and should therefore be legislated as such. We argue that the term “loot box” and the phenomena it covers are not sufficiently precise for academic use and instead introduce the notion of “random reward mechanisms” (RRMs). We offer a categorization of RRMs, which distinguishes between RRMs that are either “isolated” from real world economies or “embedded” in them. This distinction will be useful in discussion about loot boxes in general, but specifically when it comes to the question of whether or not they represent instances of gambling. We argue that all classes of RRMs have gambling-like features, but that only one class can be considered to be genuine gambling.