Could Australia be on the edge of a legislative breakthrough with loot boxes and gambling-like activities in video games?

Last Friday, the Albanese Government announced it would pursue draft legislation banning the use of credit cards for online wagering. This legislation specifically targets gambling organisations that encourage a sense of gambling urgency around live sporting events, making it easier than ever to throw down money on a bet. The strategy these companies deploy, the Government will argue, fosters a Bet Now mentality that drives people to make risky financial choices. Further, the Government feels betting over the internet using a credit card encourages people who may already be prone to gambling problems to give in to impulse and get themselves into deep financial strife. On the face of it, it’s an attempt to protect those with gambling problems from themselves as much as from companies happy to encourage, and then prey on, an addiction.

But such legislation could create a ripple effect that reaches the local games industry. Specifically, it could alter how video games are considered in the Interactive Gambling Act of 2001.

Let’s talk about skin gambling

It’s far from a secret that gambling and gambling-adjacent monetisation are now common in most major video game releases. As production and marketing budgets skyrocket, publishers look for any way to recoup the eyewatering expense of making these games. To do this, many have adopted the most predatory approaches created by mobile games as they offer quick returns.  Playing the mental game and encouraging players to spend is part of the equation. However, there are other instances of gambling in video games that have sprung up outside the publisher ecosystem — take Counter Strike: Global Offensive, for instance.

For years, the CS:GO community has enjoyed a legally tenuous, morally dubious relationship with skin gambling. Years ago, skin gambling sites came under the microscope as creators in the space tried to use them for financial gain. So intense was the scrutiny and outcry at the time that it seemed like skin gambling might finally be gone for good. Surprise: it wasn’t, not by a long shot. Many of the sites that existed then are still around and still turning over large sums of cash for high-value skins. If you follow esports on Twitch and YouTube in any capacity, I’m sure you’ve been fed their ads with monotonous regularity. What’s even more stunning is that, even after all the tumult and havoc they caused in 2016, protections and regulations still haven’t caught up with them.

CS:GO developer Valve has been under pressure for years to do something about these sites, to bring some of its considerable power to bear in ending their reign. Rather, it has seemingly decided that, despite being centred around its own game and its ingrained reward systems, off-platform gambling is not a problem it’s interested in solving. Why? It appears to be because, despite shaking its head and making tutting sounds from time to time, it stands to profit from these transactions. If you’d like to know more about this, you can watch an excellent, recent doc by People Make Games on the topic right here. Following the release of that documentary, and in the wake of Counter-Strike 2‘s announcement, Valve did make some attempts at banning skin traders, but the damage was done, and ongoing. It was all too little, too late.

Nevertheless, credit cards are used to pay for CS:GO skins on these sites as often as items are traded for other items. If the government wants to ban credit cards from being used for gambling, would that impact CS:GO skin betting sites?

And then there’s loot boxes, the preferred monetisation strategy of the video game industry in the 2010s. Though loot boxes have fallen somewhat out of favour in the 2020s — supplanted by Battle Passes as a way to get around tightening regulations around the world — they still appear in many mobile games. Loot boxes promoted the same one-more-turn feeling of a poker machine, complete with randomised prizes. Publishers loved loot boxes because the randomised rewards meant players had no control over what they got out of them. If there was a specific item you wanted, you just had to keep putting money in the slot and pulling the lever until it fell out.

Of course, the game’s creators control the likelihood of any particular drop. Every item that can potentially come out of a loot box has a chance to drop, and that’s the rub. Publishers can make the chance of a particular item appearing so vanishingly small that players are forced to spend thousands of dollars chasing it. The opening of loot boxes is always accompanied by a lot of “juice”, spectacular effects tuned to stimulate the pleasure centres of your brain. The act of opening a loot box is supposed to make you feel good so that you spend more for another dopamine hit when it inevitably doesn’t give you the drops you wanted. All by design.

Again, players use a credit card to pay for loot boxes. Cards are frequently attached to platforms and digital stores and used to make impulse purchases like loot boxes quickly and efficiently. Would laws that banned credit cards for gambling cover loot boxes as well?

As Labor prepares its new draft legislation, these questions leap readily to mind, along with another, much bigger one: What will these changes mean for video games in Australia?

The Interactive Gambling Act 2001

Here’s where things currently stand: video games are covered in the Interactive Gambling Act of 2001, but only incidentally. Some references to video games seem tied up in “Gaming” terminology, overlapping with the gambling-oriented definition of Gaming (ie: Poker Machines). The Act has had numerous revisions and amendments since its passage into law, the most recent in February 2022.

Most of the Act’s rules in relation to Gaming, be they video games or poker machines, are filed under Exemptions. Further, video games don’t fall under the current Prohibited Internet Gambling Content, either. These headings exist to confirm exactly what the Government won’t go after gambling companies for and, unfortunately, that includes most of the monetisation strategies people hate in video games in 2023.

As noted by Dundas Lawyers in Queensland, currently, video games do not fall within the Interactive Gambling Act 2001 definition of “gambling services.” Further, nothing in the Classification guidelines demands loot boxes be considered in the rating classification of new video games, either.

Right now, there is little to stop video games from promoting gambling in Australia, either in-game or off-platform.

If you’d like to read the Act for yourself, you can do so here.

So I asked the government what the go was

But could that all be about to change? To find out, I went to the very person driving this new online wagering legislation, Minister for Communications Michelle Rowland. What I wanted to know: if the government had thought about the part video games have to play in Australia’s wider gambling ecosystem? Is there a scenario where they could be categorised under the terms of the draft legislation? If they are considered within the scope of the legislation’s remit, what exactly could publishers be on the hook for?

“The measures announced by the Albanese Government last week build on our strong track record when it comes to harm minimisation and tackling gambling-related harm,” Minister Rowland told me via email. “The proposed ban will apply to Australian licensed wagering providers as defined under the Interactive Gambling Act. The Government will commence public consultation in the coming months, with a view to introduce legislation to the Parliament by the end of the year.”

A fairly diplomatic response, I think you’ll agree. No need to panic, we’re just table-setting right now, and currently only “licensed wagering providers” (aka the gambling companies) are currently in the firing line. Let’s get into what it actually means.

Kotaku Australia understands that the House of Representatives’ inquiry into online gambling is considering the definition of a “gambling service” as it is defined under the Interactive Gambling Act 2001. Part of these deliberations will include determining if “gambling service” should be amended to encompass other “gambling-like” activities — like simulated gambling in video games. This would put loot boxes, and the thousands of shovelware casino games you see on mobile app stores, squarely in the firing line. Whether that could also mean that CS:GO betting sites finally get drummed out of the Australian market, once and for all, remains to be seen. Their part in all this, off-platform as they are, remains a much hairier case study.

That report, and its final recommendations, are still forthcoming. Its findings, it’s understood, will drive the Government’s response in this case.

This isn’t the first crack the Albanese Government has had at gambling in video games. In March, Minister Rowland announced classification reforms that seek to encompass “gambling-like features” in video games. Under the proposed rules, games containing simulated gambling would automatically receive an R18+ classification, while games with loot boxes would automatically receive an M rating. For these specific reforms to pass, the Government will first need agreement from all Australian states and territories.

Kotaku Australia also reached out to ACMA for comment on this piece but did not receive a response. We will update this piece if/when it replies.

What could happen next

It’s honestly hard to say. In the purely hypothetical:

If Australia’s gambling laws changed and loot boxes and skin gambling sites suddenly fell within their scope, there could be a scramble to pull games from Australian stores like we’ve never seen before. Copies could be pulled from store shelves, turning any copies already sold into collector’s items overnight. Digital licenses could need to be revoked (and would those players get a refund? Unlikely). Were this to happen, there would be no guarantee that any of these games would ever return because, in many cases, removing the aspects of their design that promote gambling-like activities would be akin to removing a load-bearing pillar.

Those publishers that could absorb the financial shock of massively altering their games might consider the good publicity tied to their return an even trade. Many others simply wouldn’t bring their games back at all. Australia could find itself thrown in with European countries that have implemented similar laws — with publishers refusing to release certain games locally rather than make the necessary changes to remove loot boxes and other gambling-adjacent activities. Blizzard did this most recently with Diablo Immortal, refusing to launch the game in Belgium and the Netherlands. Under the right circumstances, that could also easily happen here too.

But would that be so bad? Is that a hit we’re prepared to take if it means we can finally do something about loot boxes and gambling mechanics in Australia? That’s the question the Government wants Aussies to answer when it opens public consultation later this year. We’ll let you know when they open the floor so you can have your say.