Search KoopaTV!


Tuesday, June 4, 2019

Government Regulation of Pay-to-Win and Loot Boxes: Good Idea Or No?

By LUDWIG VON KOOPA - I read the proposed bill and I'll share my informed opinion.

At the start of May, Senator Josh Hawley of Missouri (Republican) said he would introduce a bill to the United States Senate to regulate loot boxes and pay-to-win micro-transactions in the videogame industry. I didn't comment on it because the bill didn't exist yet. I won't write an article about a bill before the lawmakers bother to write the bill itself. Now it's written, and you can read the full text of the proposed legislation here (while he's still in office) and check out its progress through the legislative process here.

The bill is already co-sponsored by fellow Senators Richard Blumenthal (Democrat of Connecticut) and Ed Markey (Democrat of Massachusetts) and is now sitting in the Committee on Commerce, Science, and Transportation. Who knows where it'll go from there, but the United States's gaming industry lobby, the Entertainment Software Association, is too busy making public statements disagreeing about gaming addiction's existence (which I need to write a new article about now that it's officially a thing) and organising the Electronic Entertainment Expo (E3) to meaningfully impede the bill's direction.

When I think of the United States Senate trying to regulate videogames, I think of Hillary Clinton's failed attempt trying to pass the Family Entertainment Protection Act in 2005, which, after examining the bill closely like I did, would have created a very different—and much worse—videogame industry compared to today had it passed back then.

How does “A bill to regulate certain pay-to-win microtransactions and sales of loot boxes in interactive digital entertainment products, and for other purposes.” fare under scrutiny? Let's find out together with my awesome analysis. The bill has five sections, so that's how I'll organise my article.

Section 1. Regulation of Pay-to-Win Microtransactions and Sales of Loot Boxes in Video Games

This section says what the bill actually does—it's unlawful for game publishers (like Square Enix) or digital game distributors (like the console manufacturers’ online store fronts, or Valve with Steam, or the mobile stores with Google and Apple) to publish/distribute a game with pay-to-win micro-transactions or loot boxes, or to have an update to an existing game that introduces those mechanics, for any game that is “minor-oriented” or to anyone who they know is under the age of 18.

So far, fairly intuitive to understand what the legislators are going for. The meat and details of the document is in the next section, and here's where some disagreements happen.

(You know, besides the fundamental disagreement about whether or not the government should be regulating these things at all, but let's save that for a little later.) 

Section 2. Definitions.

This is by far the biggest section of the bill, because lawmakers can't just write something with normal words and leave it at that. Nah, everything has to be defined. For example, the bill doesn't go and say videogames, but it uses “interactive digital entertainment product”, defined as “such as a video game” but not if it limits user's interaction “to selecting options from a menu of choices” (uh-oh, that sounds like Ace Attorney!) and “would not be considered a game by a reasonable user.” (Phew, every reasonable person considers Ace Attorney to be a game, right? Even some unreasonable people consider Ace Attorney a full-fledged role-playing game!)

It also defines a distributor/publisher as someone who provides a game (for commercial purposes) to over 1,000 users per year. For a period of time, if KoopaTV had any method of collecting revenue, we would have been defined as a game publisher subject to this legislation.

You may have noticed in section 1 the bill used the phrase, “minor-oriented.” The bill defines it in eleven possible scenarios that a game could be “minor-oriented”, and as long as one of them is true, then it applies. These are incredibly broad, such as a game's graphical style, having young teenage characters, non-broody music, or anything that might be interesting to someone under 18. Essentially, unless your game is rated by the ESRB as Adults Only (and last I checked, that rounds to 0% of all games rated by the ESRB because publishers actively avoid that rating), some criteria will apply that will make any videogame “minor-oriented.” And if there isn't, the eleventh criteria is “other evidence” which is a catch-all.

In other words, this “to protect the children” legislation also applies to everything else in the industry. Equal application for something like Team Kirby Clash Deluxe as Destiny 2.

The bill proceeds to define a pay-to-win as paying for an add-on that makes progression/getting an achievement/award through the game easier or faster (paying through wait-to-play games is considered pay-to-win) when you could've gone through the game without the add-on, OR, in a competitive setting, allows you to have an advantage over those who don't pay. The reason that buying Bayonetta's DLC in Super Smash Bros. 4 wouldn't be considered pay-to-win is because the bill excludes one-time-purchase add-on content that provides non-win-only value. One could argue that marveling at Bayonetta's character model or music included in Super Smash Bros. 4 qualifies as such.

Loot box is then defined as a random or partially-random add-on transaction that unlocks a feature or adds to the entertainment value of a product, or a transaction that then leads to another transaction that wouldn't be possible without the first one, and that second transaction has unknown content.

This would make something like Nintendo Badge Arcade one giant loot box, since it's a partially-random real-money transaction that may or may not get you something new that you want. I already described Nintendo Badge Arcade as shameless and disgusting with how it targets children, as well as a gateway to gambling. In other words, I already concede that there are videogame publishers targeting children with gambling tactics for real money.

Nintendo Badge Arcade newsletter notifications quit any time try it once 3DS
Nintendo Badge Arcade would be totally banned if it was still operating.

One other interesting definition in this section: It's pay-to-win if it makes the game easier. Paying extra to make the game more difficult is explicitly permitted in the bill. That bothers me a bit. Not that people should pay extra money for an easy mode or a hard mode, but if you allow one end of the balance scale, why not the other end as well, especially because different kinds of gamers have legitimate interests in adjusting the game difficulty? Anyway, buying cosmetic alterations with no gameplay impact is also permitted.

Section 3. Enforcement and Applicability

The Federal Trade Commission (FTC) will enforce the bill, and violations of it by gaming publishers/distributors will be considered an unfair or deceptive practice. Essentially, that lets the FTC fine the company however much they want in civil court, especially if they want to make an example of them. Each person who buys a loot box or pay-to-win transaction is considered a separate violation, so if Fortnite decided to have something that could be construed as a pay-to-win mechanic overnight, then Epic Games might wake up to millions of individual violations in the morning.

Section 4. Study of Compliance

Two years (or sooner) after the bill is enacted, the Federal Trade Commission will give a report to Congress about how well the gaming industry is complying with the law.

Section 5. Study of the Effect of Pay-to-Win Microtransactions and Loot Boxes

Two years (or sooner) after the bill is enacted, the Federal Trade Commission will give a second report to Congress about how pay-to-win micro-transactions and loot boxes psychologically affect gamers, as well as how the gaming industry is financially affected. Plus, if the non-banned forms of micro-transactions like the cosmetic skins also might induce a compulsive gambling habit in minors. 'cause maybe they'll want to ban that later on.

One would think they should conduct a study on this BEFORE the bill becomes law, not AFTER. You know, it'd be nice to have facts about what you're trying to ban before you ban it, not after when it's outlawed already. Sheesh.

Conclusion and Analysis

I'm concerned about several things. One, this is going to apply to the entire industry, because everything can be defined as targeting or played by people under 18, even M-rated (17+, which is under 18) games. Loot boxes and pay-to-win transactions will be banned from everything.

You might consider that to be a good thing and you won't miss it. Quite frankly, I enjoy fixed one-time payments the most out of the currently-existing payment schemes the industry has come up with, but that doesn't mean the industry can't innovate in a few years and come up with something else. However, because of this bill, that new innovative payment or distribution method might be outlawed before it even starts.

More importantly, the federal government shouldn't be the one calling the shots. The concern from a lot of parents today is that kids are stealing their credit cards and buying a lot of stuff in games that they shouldn't be. That's an actual problem that happens, which is why the major console manufacturers have all come up with various parental control schemes that include spending limits and PIN codes whenever someone tries to digitally purchase something. It's why the ESRB is including that in-game purchases are available when they give their rating descriptors for games. When Microsoft goes out and discusses safety features for parents to parents, the notion of setting a teenager/child account is one of the things they're referring to, which can require adult approval to buy things.

Families shouldn't want the government to take their place as parents. Parents should be aware of tools already available to them, and talk to their kids about why buying crappy games that make you pay to win is bad, and offer alternative games that don't use those features. ...And there's literally no good reason why anyone should buy loot boxes. If your kid doesn't understand the value of money and how loot boxes are a poor usage of it, you should start giving them cash as gifts

If you don't like loot boxes and pay-to-win transactions, you should seek to continue to boycott games featuring them, and raise awareness among other consumers about how scummy they are. That actually is already achieving some amount of success, with how Star Wars: Jedi Fallen Order won't have micro-transactions and how celebrated that news is. You shouldn't want the government to have a blanket ban on them... because the bill already hints they might go ban some other things after, like purchasable skins. The slippery slope is always a valid argument when it comes to the legislature.

Don't willingly give the government power, because it'll never be limited to how it's first defined. It always grows. And unlike when it was tried in 2005, this time it's “bi-partisan.” In other words, both parties want an opportunity to have complete de-facto ownership and “what I say goes” over one of the biggest industries in the United States today.

You can put Ludwig down as against the bill, but maybe you disagree with Ludwig and just hate loot boxes and pay-to-win enough that you'll sell your soul to the devil to make them banned. You're free to try to present that argument in the comments section, or maybe you have a better argument to make. You're free to take Ludwig's thought process to its ultimate conclusion that people under 21 should be allowed to gamble in casinos.

The bill has died in committee, and the ESRB is taking on part of the cause to inform consumers about loot boxes.


  1. I agree that loot boxes and pay-to-win shouldn't be a thing, but the thing about laws is that people--and corporations--have to agree to follow them/enforce them. And I mean, gee, the fact that it's America that's enacting this and two out of the current Big Three are still based in Japan couldn't possibly complicate this beyond measure. After all, what could possibly go wrong with a government trying to force an entire set of complicated, corporate entities to get rid of something that makes them money hand over fist?

    I've been saying it for years now. One of these days, quite soon from now, Things are going to Happen and the change the world has been resisting will force itself down the world's throat, to the detriment of the lives of quite probably billions of people. This lootbox issue is related to those Things, but as much as a mere bucket in a lake.

    1. They're based in Japan, but they do business in America and have American divisions/headquarters that can easily be forced (with guns and tanks, if need be) to pay a big fine unless they want to be banned from the country.

      You're capitalising Things makes me think of Paper Mario: Color Splash, and those really are dangerous and possibly to the detriment of people's lives. Certainly my own.


We embrace your comments.
Expect a reply between 1 minute to 24 hours from your comment. We advise you to receive an e-mail notification for when we do reply.
Also, see our Disclaimers.

Spamming is bad, so don't spam. Spam includes random advertisements and obviously being a robot. Our vendor may subject you to CAPTCHAs.

If you comment on an article that is older than 60 days, you will have to wait for a staffer to approve your comment. It will get approved and replied to, don't worry. Unless you're a spambot.