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Lawyer Tuomas Pelkonen takes on loot boxes and the law

Live at PGC Helsinki, the attorney describes how the use of loot boxes highlights a wider issue of compliance in gaming
Lawyer Tuomas Pelkonen takes on loot boxes and the law

It’s day one of Pocket Gamer Connects Helsinki 2023, and we’ll be bringing you coverage from our event as it happens. 

One key aspect of any PGC event is the talks and tracks, with individual talks by some of the game industry’s brightest and best divided into individual tracks by topic.

As we go into the afternoon, attorney at Nordia Law, Tuomas Pelkonen gave his talk on "The legal risks around loot boxes" on the Global Trends track.

In addition to the legal day job, Pelkonen regularly competes in competitive esports including EA Sports' NHL Game. “Being an attorney, economist and competitive esports player - placed among the top 32 best players in the EU in EA Sports' NHL World Championship tournament in 2023 - provides a unique skill set to master the topic of my talk,” he explained.

What all the loot box fuss about?

Pelkonen highlighted how loot boxes are still an ongoing legal issue in key markets such as Europe and while the makers of FIFA have argued that being unable to trade their loot box prizes for anything of monetary value effectively removed any element of gambling, in actuality that only seems to encourage legislative scrutiny rather than discourage it.

Furthermore, the monetisation techniques prevalent or proposed for mobile today, such as gacha, microtransactions and even blue-sky ideas like the integration of NFTs, muddy the waters for what is and isn’t acceptable going forwards.

“In recent years, the debate over loot boxes and whether they are considered gambling, and thus illegal, has been more intense than ever as the courts have given their verdicts on the pending loot box cases in the United States, the Netherlands and most recently in Austria in March 2023. Despite the rulings, the legal status of loot boxes remains unclear as the rulings differ considerably, although the game examined in each case was the same, EA Sports’ FIFA.”

Staying safe and staying legal

So, how should developers deal with similar issues that may impact their monetisation plans? “One of the tasks of an attorney is to recognise risks and provide solutions to them. We have all read and heard about multi-million-dollar settlements in court cases in the United States. By including an arbitration agreement and class action waiver in your game's terms of service, you can mitigate this risk considerably.

“You might have also heard that some countries have banned or have strict rules regarding loot boxes. In these countries, game developers may be required to alter or rethink their game's loot box mechanism.

“The courts in the Netherlands and, most recently, in Austria have paid attention to the fact that selling in-game currency on secondary markets has made it possible to make a profit by playing loot boxes as their own sort of game, which has been a key factor behind rulings where a loot box mechanism has been deemed contravening national gambling law.

“Forbidding external trading in your game’s terms of service can mitigate this risk. The definition of gambling in national gambling laws generally includes three elements (consideration, price of monetary value and chance) which must be met at the same time in order for an activity, for example, a loot box mechanism, to be considered gambling.

“Eliminating one of these elements generally puts your game’s loot box mechanism on the safe side. One option is to let players know beforehand what a loot box contains and then let the players make the decision whether they want to purchase the particular loot box.”

Lessons learnt

When asked for broad advice, Pelkonen suggested that developers should “Invest in legal services when legal expertise is needed and do not try to save money by doing all the work yourself; it will mitigate your risks, save money in the long run and might even increase the value of your company.”

But it’s not just potential legal issues due to game content that legal consultation can guard against. It’s wider issues such as investment and funding which more than ever are crucial for building companies. “Do you have an investment round or exit on the horizon?,” he asked. “By investing in legal services early and thus making sure that all important agreements are carefully drafted and negotiated, IP rights are protected and so on, your investor or potential buyer will not have a due diligence report full of red flags, which could potentially change their minds or give you worse terms.”