Australian government advised to review loot boxes after five-month inquiry

The Australian Government has been advised to undertake a comprehensive review of loot boxes by the Environment and Communications Reference Committee.

A 90-page report released yesterday following the committee's five-month inquiry considered evidence from all sides of the debate.

The committee noted that loot boxes are "not a homogeneous entity" and there are many different iterations of the mechanic.

As such, any regulation should consider this added complexity and "definitive statements regarding the operation and effect of loot boxes in general are difficult".

While it was conclusive that loot boxes meet the five psychological criteria for gambling, unless the contents can be monetised for real-world value, they do not meet the legal definition under Australian law.

"A range of stakeholders including regulatory agencies, and academics told the committee that loot boxes should be assessed on a case-by-case basis," reads the report.

"However, there was broad consensus that where real-world currency is exchanged... loot boxes may most closely meet the definitions of gambling (both regulatory and psychological), and therefore a range of risks to players may exist."

Dr David Zendle, co-author of survey which found that spending money on loot boxes is linked to problem gambling, told the committee that despite his findings "there is very little evidence for you to go on" regarding formal regulation.

"It will take months, if not years, for the literature to gain the nuances that you're talking about and be able to inform you in any empirical way," he said.

The committee said it acknowledges community concern that loot boxes may be "normalising gambling and gambling-like behaviour", but noted that neither games nor gambling are unregulated spaces in Australia, and there is a structure of government bodies and laws in place.

It recommended that a review into the matter be led by the Department of Communications and the Arts, in conjunction with a number of other government bodies, including the Department of Social Services.

The review should commission further research into potential for gambling-related harm in relation to loot boxes, identify any regulatory or policy gaps, examine the adequacy of the Classification Scheme, consider the efficacy of existing consumer protection frameworks, and ensure that Australia's approach is consistent with international peers.

The Interactive Games and Entertainment Association welcomed the committee's "measured and considered approach" to the inquiry and said it will work constructively with the government regarding the issue.

The Australian Greens were more fervent in their stance against loot boxes, and argued that the committee's recommendations didn't go far enough.

"It is our view that evidence given in this inquiry clearly indicates the risk to children and vulnerable adults from developing gambling-related harms through interaction with loot boxes is of such significance that stronger regulatory action should be taken," said the party.

This report comes at the same time as the US Federal Trade Commission reportedly told Congress it will investigate loot boxes in relation to addiction, and shortly after the UK Gambling Commission refuted reports that it linked the mechanic as a gateway to problem gambling.

For the record: This article previously stated incorrectly that Dr David Zendle co-authored an academic journal article titled 'Video game loot boxes are psychologically akin to gambling', when actually he co-authored a survey which supported it's findings. The content has been amended accordingly.