RESPAWN: Ireland and Spain revive potential bans on loot boxes

Since the flurry of activity at the end of 2022 during which we saw proposals from the Dutch, Spanish and UK authorities to tighten regulation on loot boxes, there's been a comparative lull in activity with many assuming these initiatives had died in the turmoil of the legislative process. However, a few recent updates suggest that legislators in Europe are (gradually) turning their eyes back to the issue; and that some of these proposals might not be as dead as they seem.

What's changed? – Northern Ireland

First off, we have the UK. In the latest Inquiry Report (dated June 2024) of the All Party Group ("APG") on Reducing Harm Related to Gambling, the Northern Irish assembly considered the latest research on loot boxes and the risk of gambling harm among children and young people; and concluded that: "gambling within video games be severely limited to the greatest possible extent in the second phase of gambling legislation in [Northern Ireland]. Legislation should seek to regulate the structural characteristics, availability and accessibility of gambling mechanics within video games, including loot boxes, in order to protect children and young people from gambling-related harm". Furthermore, the APG recommended a departure from the UK's self-regulatory approach, favoring instead "stringent, legally mandated regulations," potentially including "direct purchase options for loot box content at reasonable prices or provide all loot box content after a set expenditure".

It remains to be seen whether these recommendations will be taken up by the legislator. However, the prospect of divergent legislation even within the British Isles creates added complexity for businesses trying to develop a consistent global strategy, and adds to mounting calls for the development of a harmonized position across Europe.

What's changed? – Spain

Similarly, in Spain, there appears to have been a revival of interest in loot box regulation. In May, the Ministry of Consumer Affairs, together with the Council of Ministers, approved a draft organic law for the protection of minors in digital environments which regulates access by minors (in Spain, under-18s) to random reward mechanisms (alongside other issues like imposition of parental control and age verification requirements). Art. 5 of the draft law envisages an outright ban on minors "accessing or activating random reward mechanisms". In this respect, "random reward mechanism" would be defined as including any "virtual functionality" whose activation is performed with legal tender or through a virtual object, such as a code, key, in-game currency, cryptocurrency or other item with legal tender or through a virtual object, such as a code, key, in-game currency, cryptocurrency or other item, acquired with money directly or indirectly; where the outcome of such activation is uncertain and consists of obtaining a virtual object that can be exchanged for money or other virtual objects.

As in Northern Ireland, the explanatory memo to the draft explains that the central concern here again is the potential connection between loot boxes and traditional gambling, and the associated mental health risks this poses for children.

What does this mean for business?

This latest reversal of fortune for regulation of loot boxes continues a wider trend we have been seeing in the area of digital regulation in general – which is an increased concern for the welfare of children online (as we’ve seen under the EU's Digital Services Act, and the UK's Online Safety Act for example). Moreover, it rears the spectre of a further fragmented global position on loot boxes which most international businesses trying to develop a consistent worldwide strategy will not find welcome. That said, as we've often seen before with these initiates a new lease of life might not necessarily mean a long one. Both initiatives are still a long way from being on the statue books, and in the Spanish case in particular being an "organic law" affecting fundamental rights means that it will likely face even greater challenges – requiring a higher degree of political consensus than is generally required for "ordinary" laws. Whether the ban will make it through this political process in tact therefore very much remains to be seen.

Nevertheless, the interlinking of loot box regulation with wider child protection initiatives like age gating is an interesting development to note, so businesses looking to develop their European compliance strategy will want to continue to watch this area closely. A European regulation on loot boxes is not dead yet – and indeed it may spawn further such initiatives elsewhere.

With special thanks to legal advisor, James Russell, co-author of this article; and Guillermo Ponce de León Ruiz for their analysis of the proposals in Spain.

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