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Bulletin

United States Senator Proposes Law to Regulate Microtransactions and Loot Boxes

Fasken
Reading Time 3 minute read
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Video Games and Computer Games Bulletin

In May 2019, Senator Josh Hawley introduced a bill called The Protecting Children from Abusive Games Act (the "Act") to regulate "pay-to-win microtransactions" and the sale of "loot boxes" in video games sold in the United States. The bill follows similar moves by European gaming authorities that banned the sale of loot boxes in video games in Belgium and the Netherlands, as well as even earlier regulatory measures in Japan. It also builds on state-level regulatory action against loot boxes and skingambling in Washington state.

If adopted into law, it will require fundamental changes to how many games generate revenue, since it could effectively outlaw many of the most common monetization strategies for both paid and free-to-play (F2P) games.

As written, the Act would prohibit game publishers and distributors from including pay-to-win microtransactions and loot boxes in "minor-orientated" video games. The Act adopts a wide definition of minor-oriented games, which are considered to be either (1) games targeted at individuals under the age of 18 (as determined by things like subject matter and visual content) and, somewhat more ambiguously, (2) games where the publisher or distributor has actual or constructive knowledge that any users are under the age of 18.

The Act prohibits several monetization mechanisms that Senator Hawley considers overly exploitative when they are available to children. These include both loot boxes and microtransactions (but only if the microtransaction has a pay-to-win effect):

  • "Microtransactions": an add-on transaction that assists the user in progression or in the obtainment of an award associated with the game that is otherwise available within the game without the purchase of such transaction. The definition includes transactions in competitive multiplayer games that give users a competitive advantage over players who did not make such transactions. However, the new legislation would not apply to skins or other cosmetic items.
  • "Loot Boxes": an add-on transaction that in a randomized or partially randomized fashion unlocks features or rewards for players.

The Act would be enforced by the Federal Trade Commission, which would treat the publication or distribution of games containing prohibited monetization mechanisms as an unfair or deceptive act or practice. Any State's attorney general would also be authorized to act against companies which violated the Act.

Perhaps unsurprisingly, gaming studios and industry groups have responded by criticizing the Act. This includes leading industry associations like the Entertainment Software Association, whose CEO Stanley Pierre-Louis stated:

This legislation is flawed and riddled with inaccuracies. It does not reflect how video games work nor how our industry strives to deliver innovative and compelling entertainment experiences to our audiences. The impact of this bill would be far-reaching and ultimately prove harmful to the player experience, not to mention the more than 220,000 Americans employed by the video game industry. We encourage the bill's co-sponsors to work with us to raise awareness about the tools and information in place that keep the control of video game play and in-game spending in parents' hands rather than in the government's.

The Act has been referred to the United States Senate committee on Commerce, Science and Transportation. Should it receive favorable consideration, it will be sent to the Senate floor for approval. The current text of the bill can be found on here.

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