An Austrian court recently ruled that Sony must repay 338.26 EUR to a gamer. The Hermagor District Court (Bezirksgericht Hermagor) considered the FUT Packs that are available in the soccer simulation FIFA to be gambling under Austrian law. This case has reignited the debate surrounding the legal classification of loot boxes in the gaming industry.
In this article, we analyse the rationale behind the ruling, its potential impact on similar cases, and the legal classification of loot boxes under German law.
Facts of the Case
A gamer purchased the currency “FIFA Points” for the FIFA Ultimate Team mode (“FUT”) of Electronic Arts’ (“EA”) famous football simulation game via his PlayStation console. He then used the points to purchase “FUT Packs”. The FUT Packs are loot boxes that contain random player cards of varying rarity for the online multiplayer mode FUT. The player cards “pulled” from the pack can then be used in one’s own team or sold on a secondary market to other players for the game currency “Coins”.
The player accused Sony of violating the gambling monopoly in Austria, as the design of the FUT Packs constituted gambling. He directed the action against Sony and not against EA, since the contract on the purchase of the game currency was entered into with Sony.
On the 26 February 2023, the District Court of Hermagor ruled at the first instance and ordered Sony to pay back 338.26 EUR.
On 26 February 2023, the District Court of Hermagor ruled in the first instance and ordered Sony to repay 338.26 EUR. The content of the FUT Packs purchased was determined by chance and also constituted a “pecuniary benefit”, so that they constituted a game of chance within the meaning of § 2 para. 1 of the Austrian Gambling Act (öGlückG). The exception of § 4 öGlückG did not apply. Sony had therefore carried out an act of gambling and thus violated the state monopoly on gambling. Due to this, the contracts on the purchase of the loot boxes were null and void and the plaintiff therefore had a claim for repayment of the purchase price.
The first-instance judgement became final on 3.4.2023, however, we do not possess the full version of the text.
Ambiguities and Unresolved Questions
The question of how the court established and substantiated the connection between the purchase of the FUT packs, Sony and the plaintiff remains particularly intriguing. This is because the players have effectively only concluded a contract on the purchase of the in-game currency “FIFA Coins” with Sony. The purchase of the FUT packs for real money is via the PlayStation Store (the software marketplace of the Sony consoles) not possible. Players have to buy the Packs using the FIFA Points in EA’s game itself.
The coverage of the case also fails to show whether and how the district court took into account the fact that the FUT Packs can also be purchased through Coins – an in-game currency that gamers can earn by playing the game or trading players on the in-game marketplace.
Furthermore, it remains an open question if and how this ruling can be transferred to games where cross-progression is possible. Cross-progression means that the progress (such as unlocked items, characters, in-game currency etc.) in a game is bound to the player’s account in a way that allows the player to use it on different platforms. In such games (e.g. Genshin Impact (mihoho) and Smite (Hi-Rez Studios)), gamers can purchase the in-game currency via the PlayStation Store, for example, and use this currency to purchase the loobox on another platform such as PC or Xbox.
Assessment Under German Law
This ruling is not applicable to German gambling law.
Whether or not Loot boxes constitute gambling under German law has not been conclusively clarified.
Gambling within the meaning of Section 3 (1) sentence 1 of the State Treaty on Gambling 2021 (GlüStV) occurs “if, within the framework of a game, a remuneration is required for the acquisition of a chance to win and the decision on the win depends entirely or predominantly on chance”. This legal framework remains unchanged with the amendment of the State Treaty on Gambling. Essentially, three characteristics must be fulfilled for the assumption of gambling. Remuneration must be charged for winnings that are entirely or predominantly dependent on chance.
In the following, we summarise whether and how these characteristics can be applied to loot boxes:
Entirely or Predominantly Dependant on Chance
The potential content of most loot boxes implemented in games is known from the outset. However, players have no influence on what specific item they receive from the respective opened loot box. Loot box contents are usually sorted by rarity and given a corresponding probability of a draw in percent (“droprate”). Which item the loot box actually contains when opened depends entirely or predominantly on chance.
Some games have implemented so-called “pity systems”. These are systems that increase the probability of receiving rare rewards after a certain number of loot box openings, or in some cases even guarantee their acquisition. Although these systems are set up and marketed as a kind of safety net for players, they do not change the classification of loot boxes as largely dependent on chance, as the activation of the system itself depends on chance. If a rare item is drawn from a loot box before the pity system is activated, the internal counter is reset – in this case the system was not activated.
The criterion of remuneration concerns the player’s financial investment in the game.
In games that have implemented loot box mechanics, the acquisition of loot boxes does not result directly from the use of real money, but indirectly from the purchase through in-game currency.
It can be argued that the in-game currency falls under the term “digital representation of a monetary value” as defined in Section 327 (1) sentence 2 of the German Civil Code (BGB). This could in turn lead to a classification of the gaming currency as a remuneration within the meaning of the State Treaty on Gaming.
The fact that the gambling currency cannot be directly converted back into real money in the majority of cases speaks against such classification. This represents a decisive deviation from “classic” gambling, where the credits or chips can be converted directly back into real money.
Another problem with considering in-game currency as remuneration is that in-game currency does not have a fixed equivalent value in real money. The purchase of in-game currency is usually structured in such a way that players can receive discounts on the purchase. They can either purchase bundles, where the currency is one of several components, or make bulk purchases (purchases in larger quantities), which always contain more currency per real money than do purchases in smaller quantities. In addition, there is almost always the possibility of earning in-game currency for free. This can be done, for example, by completing tasks or reaching certain milestones in the game. This also contributes to the inability to truly determine the real-life value of the in-game currency. As a result, an additional level of abstraction is created that sets loot boxes apart from conventional gambling.
Furthermore, the argument is sometimes put forward that even if a classification as remuneration is possible, the characteristic of “stake”, which is also required for the definition of gambling, is not fulfilled, since every loot box always contains a reward. The possibility of a total loss, which is an integral part of gambling, is missing.
Aqcuisition of a Chance to Win
Whether or not loot boxes constitute gambling also depends on the characteristic of the “chance to win”. This raises the question of whether the contents of a loot box can be considered as winning in the sense of gambling law.
A fundamental argument against the classification of items drawn from loot boxes as winnings is their lack of any real countervalue. It is true that in some constellations the individual items can also be acquired separately for in-game currency, so that a certain in-game value can be attributed to them (whereby the problems addressed in paragraph 2 also apply here). In games in which the item drawn from the loot box cannot be transferred to other players, however, there is no value in the sense of gambling law, since a possible winning from an item that is of higher value in game currency than the loot box itself cannot be realised.
In games in which there is the possibility of exchanging items with other players, this classification is no longer quite as unproblematic. Games such as CS:GO and DOTA 2 have a separate marketplace for items on the Steam platform, where players can trade with each other using real money. However, this money remains in the gamer’s Steam account and can only be used on the Steam platform. In other games – such as FIFA – it is possible to sell the drawn player cards to other players in exchange for Coins. In these cases, a classification of the items as winnings in the sense of gambling law can be considered.
A systematic approach to the legal situation suggests that loot boxes should not be classified as relevant under gaming law.
The problems associated with the use of loot boxes and similar mechanisms and the outcry from communities and child and youth protection advocates have not gone unnoticed in the political discourse. This was confirmed by the amendment to the German Youth Protection Act (JuSchG), which came into force on 1 May 2022.
The newly worded Section 10b (3) JuSchG reads as follows:
“In particular, risks to the personal integrity of children and youths which may occur in the context of the use of the medium and which are to be classified as significant according to a concrete risk prognosis shall be adequately taken into account, including any precautionary measures within the meaning of Section 24a (1) and (2). These include, in particular, risks from communication and contact functions, from purchase functions, from mechanisms similar to gambling, from mechanisms to promote excessive media use behaviour, from the disclosure of inventory and usage data to third parties without consent, as well as from purchase appeals that are not age-appropriate, in particular through advertising references to other media.”
In the legislative explanatory memorandum to the “Second Act to Amend the Youth Protection Act”, loot boxes and similar mechanisms are specifically named as “mechanisms similar to gambling”. Based on this intent of the legislator, it becomes clear that a consideration of loot boxes under German law does not (yet) provide for a categorisation as “real” gambling.
Irrespective of the legislation, an argument that is increasingly being put forward is that analogue systems that have already existed for decades and can be compared to loot boxes are not classified as gambling. Examples of this are Panini-Stickers and trading card games such as Magic the Gathering, Yu-Gi-Oh! and Pokémon. The cards from the trading card games in particular have in some cases a very substantial cash value on the secondary market.
This ruling by the Austrian District Court of Hermagor against Sony is not quite the landmark case for the rights of gamers, as the headlines would have us believe.
The Austrian ruling relates to a unique constellation with regard to Sony and FIFA, so that a general validity for other constellations cannot be assumed without any further consideration. Moreover, the ruling cannot be transferred to Germany, as, in addition to a different gambling law landscape, further legislative initiatives have already addressed the loot box issue.
Loot boxes are unlikely to disappear completely from the gaming world in the near future. In mobile gaming in particular, they are often part of the core business model in combination with other monetarisation models. The legal nature of loot boxes has, however, been at the centre of the monetarisation debate in games for many years. With several countries already heavily regulating or outright banning loot boxes, there has already been an evolution in the monetarisation strategies of major developers away from loot boxes and towards alternative models such as the Battle Pass. This shift is a testament to the fact that the video game industry is responding to the criticism of loot boxes.