26 July 2021
Potential regulations could affect online or video games with loot boxes and free online “minigames” for business promotion purposes
In recent years, “loot boxes” – virtual boxes, crates or chests which contain randomly allocated virtual items that can be used in-game, and which generally require real money to purchase – have increasingly come under scrutiny from regulators all around the world. Certain forms of loot boxes have been declared illegal in Belgium and the Netherlands, and have come under scrutiny in many other jurisdictions.
Perhaps unsurprisingly, regulators in Singapore are also now looking closely at this issue. In its consultation paper, the Ministry of Home Affairs (the “Ministry”) explained the need for these amendments by prefacing that its laws and regulations must keep up with advancements in technology and must recognize that the boundaries between gambling and gaming have become blurred. These are issues that the proposed amendments seek to address.
In this article, we discuss a few of the proposed amendments, specifically as they relate to the issue of online and video games:
Selling and betting using in-game items
Due to the significant value of in-game items, some third-party websites and third-party exchanges have been set up to allow players to trade in-game items or use in-game items to engage in gambling or betting activities online. This is a practice sometimes called “skins gambling” or “skins betting”.
The Ministry intends to update the laws and regulations to address the issue of such trading on third-party exchanges. Under the proposed amendments:
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For pay-to-play games without in-game monetisation facilities (i.e. the ability for players to exchange virtual prizes for real-world pay-outs), transferable virtual items should be retained within the context of gameplay and entertainment, as intended by game developers.
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Websites such as skin-betting sites, which allow players to use virtual items from other games as a form of stake on casino games or match outcomes, will not be allowed.
Interestingly, the proposed regulations mainly target the issue of trading on third-party exchanges or overt gambling websites. They do not appear to target the practice of offering loot boxes per se (for example, by imposing transparency/disclosure obligations or by regulating the ability to purchase loot boxes using real money, as some jurisdictions have done).
It could be that the Ministry is taking the view that this is an issue it prefers to take a “light touch” on, preferring for online and video games to self-regulate. For example, one of the most popular online games in the world, Fortnite, announced a few years ago that certain loot boxes in its video game would let players see what is inside them before they make the purchase. Other games around the world have also started making changes to their loot box practices, either as a response to consumer demands or due to regulatory pressure. It remains to be seen if this is sufficient, and this is likely one of the key areas that the Ministry is seeking feedback on.
Safeguards for free-to-play games with in-game monetisation
The Ministry is also proposing to allow “free-to-play online games with in-game monetisation facilities”, subject to a set of safeguards.
What are “free-to-play online games with in-game monetisation facilities”? One example could be certain “mini-games” offered by some e-commerce platforms or apps for business promotion purposes. In some cases, users would play these games for free and have a chance of obtaining rewards such as vouchers/currency that can be used on a platform.
The safeguards mentioned above include:
a. The online game must be for the purpose of business promotion (e.g. sales of a product or service other than a gambling service)
b. No stakes involved (i.e. no payment for participation)
c. No profits from the online game of chance per se
d. No gambling iconography (in particular, that the online game of chance cannot involve games such as poker, mahjong, or roulette, and cannot involve instruments such as dominoes, mahjong tiles, roulette wheels, or playing cards)
e. No gambling-related advertisement and promotion
Many businesses today use minigames to improve user engagement and to encourage users to spend more time on their websites and apps. As such, the Ministry is also looking to ensure that the regulations are not unintentionally overbroad and that these rules are clear and easy to follow in practice.
