In an important decision for the gaming world, the Administrative Jurisdiction Division of the Council of State decided on 9 March 2022 that loot boxes do not automatically qualify as of games of chance. The Division also set out clear steps to be followed when assessing loot boxes under gambling legislation.
The decision was rendered in the Electronic Arts FIFA22 matter and was decided in favour of Electronic Arts, overturning an earlier ban by the regulator (the KSA). The decision changes the Dutch legal landscape on loot boxes. Previously, pursuant to the regulator’s EA ruling and general guidance, loot boxes were automatically regarded as gambling (and thus required a gambling license) if chance decided the contents of the loot box and if the prize had an economic value. This approach is now no longer applicable because of the Division’s decision.
The Division states that it cannot be said in general that the loot box phenomenon leads to a stand-alone game being offered within a game. If the prize is determined by chance and the prize won represents a certain economic value, then it may be the case that introducing loot boxes will create a game of chance within the meaning of the Act. However, before being able to assess whether a game of chance has been created, it must first be determined whether the obtaining or opening of the loot boxes can be regarded as a stand-alone game. Pursuant to the Division’s decision, loot boxes that are clearly part of another, skill-based game will not automatically be regarded as gambling, but rather will generally be permitted without a license.
Regarding EA’s game FIFA22, the Division decided first of all that the acquisition and opening of loot boxes (‘packs’) are not a stand-alone game. They are part of a game of skill and add an element of chance to the game. Gamers use the contents of packs to assemble teams, play matches, and fulfill in-game assignments. The fact that the packs are opened separately from the match or in-game assignment does not make it a separate game. Secondly, most packs are obtained by and used for game participation. The tradability of the packs on the black market is relative. The black market focuses primarily on trading complete accounts rather than individual packs or their contents.
Because the packs do not constitute a stand-alone game, but are part of a game of skill, they are not a game of chance and do not require a license. Therefore, EA did not violate the Betting and Gaming Act and the KSA should not have imposed a sanction.
We set out the decision in more detail below.
Description of game
EA is the publisher of the computer game FIFA. The most recent edition, FIFA22, was released on October 1, 2021. Within FIFA, there are several ways to play the game. The most popular play mode is the ‘FIFA Ultimate Team’ (FUT) mode. This is an online mode, in which FIFA players can create their own team of footballers and use them to play virtual football matches against both the computer and other FIFA players. A player starts with a starter kit and the player can then customize and improve the player’s team. This can be done by trading virtual footballers or in-game items on the virtual transfer market for so-called FUT coins or trading them with other players. In addition, a player can acquire a pack (a digital package), the exact content of which is not known in advance and which contains virtual footballers or other in-game items. The contents of the packs can be traded on the virtual transfer market.
The KSA took the position that loot boxes, in which chance determines the content and the prizes have an economic value, must be considered a game of chance in the sense of the Betting and Gaming Act (Wet op de kansspelen, or Wok) (Act) and that a prohibition applies to them.
Article 1, paragraph 1 of the Act reads as follows:
“Subject to the provisions of Title Va of this Act, it is prohibited to provide an opportunity to compete for prizes or premiums, if the designation of the winners is made by any probability determination over which the participants cannot generally exert a predominant influence, unless authorized under this Act.”
According to the KSA, this applied to the packs in FIFA, which have an economic value because the contents can be traded on the virtual transfer market. Because EA did not have a license to offer games of chance, it was in violation of the prohibition laid down in the Act.
EA appealed against the KSA decision with the district court. However, the district court dismissed EA’s appeal, holding that the KSA was correct in concluding that the packs should be considered a stand-alone game and assessed as such, given that the game could be played separately from FIFA and the packs were separate from the football matches. EA offers packs, players can participate by (buying and) opening packs, players can win objects from packs that represent a (possibly high) economic value, participants are not able to exert predominant influence on winning a prize when (buying and) opening the packs, and the objects from the packs can be traded both on the internal transfer market, as well as on the black market. Thus, a pack qualified as a game of chance, according to the district court.
EA appeal before the Division
EA lodged an appeal with the Division against the district court decision, arguing that the packs and the FUT mode are not a game of chance within the meaning of the Act. According to EA, the packs are part of a broader game of skill (the FUT Mode) and, although adding an element of chance, do not constitute a separate game. Most packs can only be acquired through playing the game. Another portion of packs can be opened by paying money; a gamer can theoretically only open those packs separately from FIFA matches. Furthermore, the contents of the packs do not qualify as prizes or premiums, they cannot be legally converted into money and are closed off from the economy.
Are the packs separate games?
Before answering the question of whether the packs constitute gambling as referred to under the Act, the Division first assessed the following question: Can FIFA’s packs be considered separate games that should be evaluated separately from FUT mode?
EA argued in this respect that the district court erred in assuming that loot boxes – and in particular FIFA’s packs – should be considered separate games that should be assessed in isolation from FUT mode. EA referred to the standard formulated by the Supreme Court (“Golden Ten” judgment) that for the component of chance, it is relevant how a game is played in practice by the majority of players. That should also be applied here. In addition, there can never be a prize, according to EA, if the contents of a loot box do not represent a fair market value.
Furthermore, according to EA, the district court erred in concluding that the packs are a separate game because the packs can be opened independently of the FIFA matches. A large part of the packs can only be opened by gameplay, for example by winning matches or competitions or other challenges that mainly rely on the player’s dexterity. These packs cannot be acquired with FIFA points. Playing the game is therefore a prerequisite for opening the packs. Only the packs that can be acquired with FIFA points can in theory be played independently of the game. In practice, however, these packs are not opened separately from FUT mode. The court should have looked at how the majority of players play FUT mode and FIFA points packs in practice.
Assessment by the Division
The Division noted that it was not in dispute that the game FIFA and specifically its FUT mode is a game of skill. FUT mode is a game in which gamers play virtual soccer matches. Playing these matches is the goal of the game and to do this as well as possible, gamers must try to put together a strong team that suits their style of play. They can do this by opening packs or by buying players on the transfer market with FUT coins. These FUT coins can only be earned by playing the game. Thus, the packs are a part of the FUT mode and add an element of chance to it.
The packs can be obtained in a number of ways. The largest percentage is obtained through in-game involvement. A smaller proportion of packs are purchased by FIFA players using FUT coins. Only a small portion of packs are obtained with FIFA points. These points represent a virtual currency that FIFA players can obtain by purchasing with real money, or through donations from EA or other gaming platforms. The packs and transfer market are an integral and integrated part of the FUT mode. To play the soccer matches, it is furthermore important that the FIFA player deploys various skills, such as in a general sense dexterous playing of computer games, understanding (virtual) soccer on a tactical level and managing a soccer team, play formations and soccer players. Managing the team should also be aimed at creating a certain synergy between the virtual soccer players. All this requires insight, knowledge, experience, and dexterity when playing the games. Skill is a decisive part of the game.
The KSA classified FIFA packs as a stand-alone game of chance. The KSA based this on the fact that the packs can be purchased and opened separately from the FIFA matches. Therefore, the goods can be won separately from the FIFA matches. The buying and opening of the packs take place independently in a stand-alone process, separate from the playing of FIFA matches. The prizes from them can be won independently from FIFA matches and traded independently from FIFA matches, both for FUT coins and – on the black market – for real money.
Loot boxes not automatically a stand-alone game being offered within a game; factual assessment necessary
The Division continued that it cannot be said in general that the loot box phenomenon leads to a stand-alone game being offered within a game. If the price determination is determined by chance and the prize won represents a certain economic value, it cannot be excluded that by the introduction of loot boxes a game of chance within the meaning of the Act is created. However, before being able to assess whether a game of chance has been created by the packs in FIFA, it must first be assessed whether the obtaining or opening of the packs can be regarded as a stand-alone game.
To assess this, the Division found that it needed to look at how the game is played by the majority of the gamers, following EA’s argument in this respect.
The research submitted by EA supported its view that FUT mode is a mixed skill game. The packs add an element of chance to the game. The Division agreed with EA’s argument that the practice is that gamers only open the packs for the purpose of playing virtual soccer matches. In doing so, the Division considered that the packs are obtained and opened in FUT mode and mostly obtained through game involvement. Packs are not opened in an environment separate from FUT mode. The fact that it is not completely impossible to obtain the packs in any other way does not make the packs a stand-alone game.
The vast majority of packs are obtained and used for game participation. The tradability of packs on the black market is relative. The black market focuses on trading complete accounts rather than individual packs or their contents. The KSA was not permitted to isolate one component – namely, that the packs can be purchased and opened separately from the game – to conclude that there was a separate game, unless the KSA could provide extensive justification that this was taking place on a large scale. The KSA had not succeeded in doing so.
Conclusion of the Division
In view of the above, the Division concluded that the KSA wrongly took the position that the acquisition and opening of the packs could be regarded as a stand-alone game, and to that extent it could not be regarded as a game of chance in the sense of the Act. The KSA did not argue that the game FIFA as a whole was a game of chance. This meant that the KSA decision could not be upheld.