On April 25, 2018 the Belgian Gambling Commission (“BGC”) has released the long-awaited outcome of its loot box investigation. The Belgian Gambling Commission considers loot boxes to be illegal gambling in general and therefore applies an even stricter standard than the Dutch gambling authority about a week ago. - This overview reflects input from multi-jurisdictional surveys on loot boxes which were conducted for different video gaming companies.

I.           Loot boxes in Belgium - The story so far

Loot boxes or loot box like mechanisms have been on the radar of the BGC for some time already. In February 2015, and thus way before the 2017 global loot box uproar, the BGC filed a report with the country’s law enforcement authorities, alleging that social games developer Machine Zone was illegally offering players gambling-style games through its strategy title Game of War (note that Machine Zone and Game of War was subject to similar proceedings in the US where it won all proceedings[1]).

In October and November 2017, Belgium suddenly became the focus of global attention when the BGC announced that it started an investigation on loot boxes[2]. Initial media coverage stated that the BGC generally considers loot boxes illegal. However, it was later revealed that the BGC’s investigation was not concluded yet. In the meantime, the Belgian Minister of Justice, Koen Geens, weighed in, stating, “Mixing gambling and gaming, especially at a young age, is dangerous for the mental health of the child[3]Geens even added that he intends to ban loot boxes on a European level: "But that takes time, because we have to go to Europe. We will certainly try to ban it.” [4] Last week the Dutch Gambling Authority released its decision on loot boxes and already implied that it is in close contact with other supervisory authorities in order to take joint action.[5]

II.           The decision of the BGC

Today, April 25, 2018, the BGC released the outcome of its investigation via a short but nevertheless impactful press release[6]: In November 2017, “engineers, lawyers and IT specialists from the Gaming Commission began analyzing various video games to determine if […] loot boxes included in video games or other "in game-elements" meet the definition of game of chance.” Investigated games were OverwatchStar Wars Battlefront IIFIFA 18 and Counter-Strike: Global Offensive. The BGC concludes that “paid loot boxes are games of chance” in general and announces that “If these [loot boxes] are continued to be exploited, criminal law enforcement action is indicated”. Furthermore, the BGC recognizes that “the phenomenon is broader than the 4 games analyzed” and therefore will make “a number of recommendations for decision-makers, game makers, gaming platforms and licensing organizations such as FIFA.

Additionally a statement of the Director of the BGC, Peter Naessens is added to the press release: "Payable Loot Boxes are not an innocent part of video games that are a game of skill. The players are seduced and deceived and no protective measures regarding games of chance are applied. Now that it is clear that in particular children and vulnerable people are exposed unprotected here, the game makers and the parties concerned are called upon to put an end to this practice".

III.          Assessment / Comments

1.          Legal situation of loot boxes in Belgium

The BGC’s decision is not surprising and was foreseeable based on recent case law.  Applicable law in Belgium is the Gaming and betting act of 7 May 1999, as amended by the act of 10 January 2010 (“GBA”). Games of chance are defined in Art. 2 GBA as any game by which a stake of any kind is committed, the consequence of which is either loss of the stake by at least one of the players or a gain of any kind in favor of at least one of the players, or organizers of the game and in which chance is a factor, even if only ancillary, for the conduct of the game or for determining the winner or his or her gains. Like in Many jurisdictions, these requirements can be summarized as (i) consideration, (ii) prize and (iii) game of chance. Under Belgian gambling law, the operation of (online) gambling is prohibited unless the game operator has obtained a license. However, in contrast to other jurisdictions, licenses for online gambling are actually available in Belgium.

The big difference under Belgium gambling law in contrast to many other gambling laws can already be derived from the wording of the above-mentioned definition: While most gambling laws require the prize to be a thing of a certain real-world economic value, the Belgian definition is broader and only requires “a gain of any kind”. It was already decided by the Belgium Council of State in 2015 that social games constitute a game of chance, even if the player cannot win any money but only additional virtual in-game currency to continue playing.[7]

2.          What’s next

Video game operators providing loot box mechanisms should first assess whether their game also falls under Belgian gambling laws. However, at least in relation to payable loot boxes this is likely given the strict Belgian gambling laws and their interpretation by the BGC. Remaining options are applying for a Belgium online-gambling license, ceasing the sale of loot boxes on the Belgian market or considering a legal challenge of the BGC’s position.

License: Unlike in other jurisdictions, applying for an online-gambling license is more than a theoretical option in Belgium and can therefore be actively considered and weighed against the disadvantages and advantages, including the revenue generated on the Belgian market. Still, the conditions for a license - as usual for gambling regulations - are rather strict and require, inter alia, a land-based presence and - to a certain extent - servers located in Belgium. Additionally, the available licenses for online gambling are limited and therefore subject to competition. Nevertheless, for some game providers this might be an option (in particular those offering games for adults anyway).

Legal challenge: As mentioned before, case law exists already which suggests that virtual in-game currency that enables the player to continue playing satisfies the prize element under Belgian gambling laws. However, applied to loot boxes this brings up the question whether such case law holds up in terms of loot boxes which do not include items that enable players to continue playing, or in other words: to obtain additional loot boxes. The latter might not apply to loot boxes which do not generate virtual in-game currency or additional loot boxes. However, an in-depth assessment taking into account the specific loot box mechanism and the exact case law is required in this regard.

IV.          Possible sanctions

The BGC has a wide range of powers. Companies located abroad should not simply ignore the BGC’s announcement based on an assumed foreign “safe haven”. Such a position needs to be carefully evaluated. The BGC powers include the possibility to issue warnings and administrative fines. In any case the accused gambling operator must be heard by the BGC. As a first step, however, the BGC will typically not act by itself and instead informs the public prosecutor. Several internationally operating companies have already become subject to sanctions this way. Possible sanctions can be imprisonment of up to 5 years and criminal fines of up to EUR 800.000. Persons who advertise or facilitate illegal gambling in any way can also become subject to enforcement actions. Possible sanctions in this regard can be imprisonment of up to 3 years and criminal fines of up to EUR 200.000. Furthermore, all applicable sanctions can be doubled in case of a second offence within five years or in case the offence has been committed in relation to minors. The latter will most likely apply to several loot box mechanisms. Furthermore, a court is eligible to seize all tools and machines that have been used for the illegal gambling activities. As mentioned before, administrative fines can be imposed as well. Lastly, illegal offshore gambling websites can additionally be added to a blacklist in Belgium. These websites are blocked by Belgian internet service providers.