4 Dems Pushing Game Companies To Drop Loot Boxes Pointing At UK Law That Doesn't Mention Loot Boxes

from the what's-in-the-box dept

Somehow, despite all odds, the conversations between the public and the video game industry about loot boxes are still going on. If you're not familiar with loot boxes, they are a randomized reward, typically after a purchase, that provides some kind of in-game benefit, cosmetic or in gameplay, to the purchaser. Because of their random nature, a whole lot of people consider them both a form of gambling (kinda) and an affront to fair online competitive gameplay (definitely) because they allow those with money to be stronger in the game than those without money. This consternation has caught the eyes of politicians, who then attempt to trade off of it in order to build up some kind of goodwill with the gaming public. You will recall that Josh Hawley introduced a doomed bill in the Senate to "regulate play to win" practices of video game companies. The bill died in Congress without receiving a vote.

Well, now a group of Democrats are trying to get larger gaming companies to self-regulate their own loot box practices by pointing to a UK law of all things.

Democrats are calling on some of the largest gaming companies to better protect children by extending new UK design rules to children in the US. The regulations could ban companies from selling in-game loot boxes to minors, among other restrictions. In letters to a dozen major gaming companies, including Blizzard, Epic Games, Microsoft, Nintendo, and Riot, Sen. Ed Markey (D-MA), Rep. Kathy Castor (D-FL), and Rep. Lori Trahan (D-MA) pressed executives to extend new UK design regulations to children in the US.

“It is imperative that Congress acts with urgency to enact a strong privacy law for children and teens in the 21st century,” the lawmakers wrote. “As we work towards that goal, we urge you to extend to American children and teens any privacy enhancements that you implement to comply with the AADC.”

You can read the entire letter here (PDF). One important section of that letter to gaming executives includes this.

Loot boxes go one step further, encouraging purchase before a child knows what the “bundle” contains— akin to gambling.3 Children are uniquely vulnerable to manipulation and peer pressure associated with in-game purchases and loot boxes. Experts suggest that Entertainment Software Rating Board (ESRB) ratings and parental controls are insufficient. 4 The AADC represents a monumental step towards child centric design by default.

And, with respect to loot boxes, that is a very interesting position to take for this group of politicians. Why? Well, primarily because the AADC has literally nothing to say about loot boxes. As in, it doesn't even mention them. The AADC is also not a "law", but a regulatory set of standards.

However, the code explicitly mentions neither loot boxes nor in-game gambling, nor ever really even alludes to them. While the subjects of loot boxes and IAPs came up during the UK regulator’s research into “Detrimental use of data,” it’s not a factor of the final publication. It’s certainly a stretch to see how the content of the AADC relates to what’s raised in the letter sent to US publishers.

And so, to summarize: a group of Democrats are attempting to gaslight the gaming industry into doing what they want by citing a regulation from another country that doesn't even apply to its demands, all under threat of actual American legislation. "Do what we say even though our argument doesn't make sense or we'll force you to do it anyway" is not a great look for any politician, never-mind one attempting to apply this towards an industry that is absolutely protected by the First Amendment. The goal of introducing protections for children against micro-transaction practices in video games may well be a well-intentioned goal, but getting there by sneaky means doesn't fill the soul with confidence.

But, then, so little about Congress does these days.

Filed Under: congress, ed markey, kathy castor, loot boxes, lori trahan, regulations, uk, video games

Law Firm Hoping To Add Legal Losses To Plaintiffs' Gambling Losses By Suing Google, Apple Over Casino Apps

from the huckster,-llc dept

There's a new cottage industry of Section 230 lawsuits springing up from the law offices of Tycko & Zavareei in Washington, DC (with the assistance of Pearson, Simon & Warshaw of California, the state where the lawsuits are being filed).

Over the past few years, we've seen a plethora of lawsuits alleging vicarious liability for terrorist attacks being filed against social media platforms by opportunists at 1-800-LAW-FIRM and Excolo Law. Not a single one of these lawsuits has made it past the pleading stage, even if one Ninth Circuit judge went off the rails a bit during oral arguments last spring. Whatever Section 230 immunity doesn't eliminate, the law firms' decision to sue the wrong parties (i.e., anyone but the people who committed the crimes) has generally proven fatal to their claims.

Fortunately, this new batch of lawsuits doesn't involve exploiting people who've recently suffered personal tragedies. Instead, they're trying to force companies like Google and Apple to reimburse small-time losers who lost real money to gambling apps.

No less than five putative class actions over (incredibly small) gambling losses have been filed by Hassan Zavareei of Tycko & Zavareei and Daniel Warshaw of Pearson, Simon & Warshaw. The only unique factor is the dollar amount of gambling losses. But these aren't whales. These are small fish in the online gambling ocean demanding courts order app store purveyors pay them back for the tens of dollars they've lost. Not a single one of these plaintiffs has lost more than $300 to gambling apps, but every single one of them is demanding a chunk of damages their attorneys claim exceeds $5,000,000.

Everything is boilerplate, other than the named plaintiffs' individual losses and their choice of app store purveyor. Apple is named in one lawsuit. Google is named in all the others. But they're all equally ridiculous. Feast your eyes on this accusation:

Google permits and facilitates illegal gambling by operating as an unlicensed casino.

The lawsuits reach this conclusion by noting Google (and Apple) allow users to download gambling apps from their app stores. At no point do Google or Apple create and develop any gambling apps, nor do they operate or maintain ownership of the apps. All they do is offer a storefront. Users are responsible for their own actions while interacting with third-party apps. The companies do not need to obtain licenses to operate casinos because… THEY DON'T OPERATE CASINOS.

The lawsuits then do a bit of narrative explaining the obvious: gambling can be addictive and it can cost people vast sums of money. The suits also note that several states have laws prohibiting exchanging money for more playing time -- some of those put in place recently to protect users from things like pay-to-win games and "loot boxes," which some states have chosen to view as another form of unlicensed gambling.

Then the lawsuits quote liberally from the Statute of Anne -- something we've seen misquoted more often in terms of copyright enforcement here at Techdirt, even though it was instrumental in creating the idea of "public domain." The relevant part of the Statute, passed in 1710 partly as a legislative attempt to prevent British citizens from gambling themselves into bankruptcy, allowed residents to sue to recoup their gambling losses. (That it was repealed almost entirely in 2005 seems to have escaped the notice of the find legal minds at both law firms.)

[A]ny Person . . . who shall . . . by playing at Cards, Dice, Tables, or other Game or Games whatsoever, or by betting on the Sides or Hands of such as do play any of the Games aforesaid, lose to any . . . Person . . . so playing or betting in the whole, the Sum or Value of ten Pounds, and shall pay or deliver the same or any Part thereof, the Person . . . losing and paying or delivering the same, shall be at Liberty within three Months then next, to sue for and recover the Money or Goods so lost, and paid or delivered or any Part thereof, from the respective Winner . . . thereof, with Costs of Suit, by Action of Debt . . . .

So how does a 1710 British law factor into a bunch of online gaming lawsuits filed in the United States? Well, a lot of nascent US states adopted British laws because they didn't have many of their own at that point. And it was safe to assume newly minted US citizens were just as likely to make bad decisions in games of chance. So, these laws went into the books, along with other large chucks of the Statute of Anne and its offshoots.

This aspect of the Statute has rarely the focus of gambling related litigation. But it has been used successfully in a few cases where courts allowed families/significant others to sue over gambling losses, usually under the theory an entire family shouldn't be put into the poorhouse just because one of its residents blew a bunch of money on gambling. And in the cases that did secure a victory, the amount at stake was hundreds of thousands of dollars, rather than the $160-250 range represented in these lawsuits.

Only twenty-five states have adopted this aspect of the Statute of Anne. The litigants represented here are from states that adopted the anti-gambling text. But it's not going to be nearly as helpful as they believe it will be. At best, the law simply makes some gambling debts unenforceable.

Online gaming in virtual casinos (unlike more direct gambling options like online betting services that provide actual cash payouts) don't incur gambling debt, even if they may result in regular, non-gambling debt if users spend too much money gaming. No one is under any obligation to pay to do more gaming, nor are they able to obtain credit from app operators to continue gaming, which makes it impossible to rack up the sort of gambling debt this Statute was adopted to address. That's just the beginning of the apparently willful misreading of this law by the attorneys representing these clients. There's more.

First, the lawsuits have been filed in California, which -- as a late-arriving member of the Union -- did not adopt this Statute. Second, even if the courts decide that the losses occurred in the plaintiffs' home states (rather than wherever the app developers' gaming servers are located), it's definitely not going to help in at least two cases. There's a case directly on point dealing with venue-shifting by Mississippi plaintiffs hoping to use another state's laws to allow them to recover gambling losses.

We too find that it would be a great injustice if Tennesseans could reap the benefits of gambling in states where it is legal when they are successful, but seek shelter in Tennessee courts when they lose. As a result, we conclude that there is nothing in the Mississippi laws in question that outrages the public policy of Tennessee. Therefore, the gaming contract between the parties is enforceable in Tennessee.

This means the two plaintiffs from Mississippi aren't going to be able to use another state's laws to claw their money back from Google and Apple. But even if local laws are given deference -- along with the residents' claims their losses occurred in Mississippi -- it still won't work. The adoption of the Statute of Anne varies from state-to-state. In some states, it only allows for government enforcement via suits brought by the state attorney general. In other states, gambling losers can sue directly, but they have to sue the entity they lost money to. No matter how the local laws are interpreted, they cannot be read to allow people who lost money to online casinos to sue a third-party that never took any money from them.

But there's really no reason to even get into the weeds of local laws adopted hundreds of years ago by newly developed states in a brand new country. The lawsuits all note the plaintiffs lost money to app operators like Zynga, SpinX Casino, and DoubleUGames. None of those companies are listed as defendants. Only the operators of app stores are. And that's not going to work. You have to sue the party that injured you, not one at least once step removed from the equation.

Section 230 allows Google and Apple to exit lawsuits that claim they're responsible for content -- including apps -- uploaded by third parties. This holds true even if the content is vetted by Google, etc. before being allowed to go live. Moderation (or this perceived lack thereof) does not undermine these protections.

But that argument likely isn't even likely to be considered. Suing the wrong party should result in dismissals even if the court decides not to consider Google and Apple's expected Section 230 defense. You just can't hope to win a case if you're not willing to sue the right defendants.

The only silver lining in this batch of bad-faith litigation is the plaintiffs haven't lost hundreds of thousands of dollars gambling at this point, so they likely haven't destroyed anyone's lives at this point, not even their own. But who's going to take up the case of possibly hundreds of class-action plaintiffs who are going to be duped by law firms and lawyers like those pushing these cases? I mean, as long as we're talking about holding other people responsible for your own bad decisions, why not find someone willing to go after shit-heel attorneys padding their resumes with the sad stories of rubes they've duped into believing they actually have something worth suing over?

Filed Under: app stores, apps, class action lawsuits, gambling, intermediary liability, loot boxes, section 230
Companies: apple, google, pearson simon and warshaw, tycko and zavareei

Gaming Industry And Game Consumers On A Collision Course Over Loot Boxes

from the down-their-throats dept

If you're a gamer, you know all about loot boxes. We haven't covered them or the associated controversy here, as both are slightly outside of the usual topics we cover. But we do in fact cover digital marketplaces and how companies and industries react to market forces and it's becoming more clear that the gaming industry and the gaming public are on something of a collision course over loot boxes.

As a primer, a loot box is a digital randomized thing, typically purchased in-game and resulting in a random reward of in-game content. Some content is more valuable than others, leading to some referring to loot boxes as a form of gambling, particularly when some of the game content can provide benefits to players in multiplayer settings. Overwatch popularized loot boxes somewhat in 2016, although mobile games have used some flavor of this kind of monetization for pretty much ever. The gaming public never really liked this concept, with many arguing that it breaks in-game competition by giving players willing to pay for loot boxes an advantage. But the loot box fervor hit its pique after the release of Star Wars Battlefront 2, with EA being forced to massively alter how its loot boxes worked in game. Since then, loot boxes are a topic of consumer backlash as a general rule.

Making it somewhat strange, therefore, that the gaming industry seems to want to embrace loot boxes as its dominant business model.

With all the controversy, scrutiny, and international regulation randomized video game loot boxes are facing these days, you might think the practice of charging players for a chance at unknown in-game items might be set for a precipitous decline. On the contrary, though, one analyst sees spending on loot boxes increasing by over 62 percent in the next four years to become a $47 billion piece of the industry. By then, loot boxes will represent over 29 percent of all spending on digital games, the analyst said, up from just under 25 percent currently.

In a newly published forecast of the global game market, Juniper Research concedes that developers are "effectively encouraging a form of in-game gambling" with loot boxes and using that addictive potential to "extend both the lifecycle and engagement of games titles to their audience." These kinds of non-traditional money-making techniques are a practical necessity for developers squeezed by increasing costs and stagnant or declining up-front game prices, Juniper says.

Whatever your opinion of loot boxes, it should be clear that there is trouble on the horizon. Individual opinions will vary, but it seems clear that the majority of gamers are strongly against loot boxes, and that majority is very, very loud. Put another way, the vocal reaction to loot boxes is almost universally negative, with barely anyone at all praising their use in games. The market is sending the gaming industry a very clear message and the industry has apparently decided to place an awful lot of poker chips in dismissing that message.

Even governments are getting in on the backlash, actually, for a variety of reasons. Some seek to protect consumers from blatant attempts to extract more revenue from them by gamemakers, while others want loot boxes regulated as a form of gambling.

Yet the gaming industry is so all-in on this that Juniper thinks both the public and governments will allow loot boxes to exist merely because gamemakers are making so much money off of them right now.

"Whilst some restrictions may be put in place by government and regulatory bodies, the practice is unlikely to be banned outright simply due to the effect it would have on the games industry as a whole," Juniper writes in a recent white paper on the subject. And while platforms like Steam have recently cracked down on third-party "skin gambling" sites, Juniper argues they've resisted calls to ban skin trading altogether for the simple reason that they make too much money from their five-percent transaction fee.

That all works at the governmental level, where regulatory capture is indeed a thing and monied interests likely will indeed sway politicians, but the market forces in the public are another matter. Already the public has thought of loot boxes as generally abusive of the industry. Free to play mobile games are one thing, but the moment EA tried this in a paid-for console game, the shit hit the fan.

Loot boxes aren't the only business model available to the gaming industry, but they are fairly unique in how disliked they are. If the gaming industry doesn't correct course soon, we could easily see a slowdown in an industry otherwise primed for massive growth.

Filed Under: business models, consumers, loot boxes, video games