Loot Boxes Could Be Made Illegal: New Bill Officially Introduced With Bipartisan Support

After releasing the first details of his plan to go after loot boxes and pay-to-win mechanics in video games, Republican US Senator Josh Hawley today officially released the full text of his bill. Not only that, but Hawley revealed two co-sponsors, and they are both of the rival Democratic party.

“It’s pretty simple. Video game companies shouldn’t put casinos targeted at kids in their games. Proud of this bipartisan effort,” Hawley said on Twitter.

The two co-sponsors of the bill, which is called Protecting Children from Abusive Games Act, are Democratic Senators Richard Blumenthal (Connecticut) and Ed Markey (Massachusetts).

The bill asks Congress to regulate some pay-to-win microtransactions in video games, while it also seeks a ban on loot boxes for games that are designed to appeal to people under the age of 18. Specifically, the full wording of the bill states that it would become illegal for a publisher to release a “minor-oriented” game that features pay-to-win microtransactions or loot boxes, while it also seeks to previously released games from receiving updates that add such mechanics.

Key to this bill is how pay-to-win and loot boxes are defined. The bill states that a pay-to-win mechanic is one that “eases a user’s progression through content otherwise available within the game without the purchase of such transaction,” as well as one that “assists a user in accomplishing an achievement within the game that can otherwise be accomplished without the purchase of such transaction.

It is also defined as something that “assists a user in receiving an award associated with the game that is otherwise available in association with the game without the purchase of such transaction.” And finally, the bill states that pay-to-win also means a purchase that “permits a user to continue to access content of the game that had previously been accessible to the user but has been made inaccessible after the expiration of a timer or a number of gameplay attempts.”

Exclusions include difficulty modes, cosmetic items that do not affect gameplay, and add-on content like DLC packs and expansions.

As for loot boxes, the bill defines a loot box as a “randomized or partly randomized” item that unlocks a feature of the product or adds to or enhances the entertainment value of the product without disclosing what the actual content is until after the purchase of the loot box.

The bill defines a “minor-oriented” game as one that is targeted at people under the age of 18 as judged by the subject matter, the visual content, and the music or audio content, among other things. No examples of what a “minor-oriented” game are were provided. The bill’s language also does not say if Hawley will work with the United States’ ratings organization the ESRB on this bill. That group is owned and operated by the Entertainment Software Association, which opposes this bill, so that could be one reason why.

Hawley’s bill says he’s able to ask for this ban under the Federal Trade Commission’s Unfair or Deceptive Acts or Practices act.

In addition to the ban on some loot boxes and pay-to-win mechanics, the bill is asking for a study to be conducted on the effect of pay-to-win and loot boxes that would be commissioned not later than two years after the act is enacted.

Hawley and his co-sponsors are asking for the study to analyze the psychological effects of pay-to-win microtransactions and loot boxes on users and also to study game development practices related to pay-to-win microtransactions and loot boxes, among other things. It’s not clear why Hawley is asking for these studies to be held after his bill is theoretically enacted and not before it.

The Protecting Children from Abusive Games Act’s co-sponsors released statements in support of the bill to The Verge. Markey said, “Inherently manipulative game features that take advantage of kids and turn play time into pay time should be out of bounds.” Blumenthal commented, “Congress must send a clear warning to app developers and tech companies: Children are not cash cows to exploit for profit.”

For its part, the ESA has said it opposes Hawley’s bill. The trade group, which represents the video game industry’s interests in Washington D.C. and also runs E3 every year, is in business to protect and support its members. A lawmaker from Hawaii who also targeted loot boxes told GameSpot that the ESA sent lobbyists to Hawaii to try to kill his bill. In response to Hawley’s bill, the ESA said in a statement to PC Gamer that countries like Ireland, Germany, Sweden, Denmark, Australia, New Zealand, and the United Kingdom have also determined that “loot boxes do not constitute gambling.”

“We look forward to sharing with the senator the tools and information the industry already provides that keeps the control of in-game spending in parents’ hands. Parents already have the ability to limit or prohibit in-game purchases with easy to use parental controls,” the ESA said.

An Uphill Battle

Research firm Cowen & Company released a note to investors about Hawley’s proposal. The overwhelming majority of bills that are proposed never pass in US Congress, and Cowen & Company said Hawley’s bill is no exception in that it faces an uphill battle.

Analyst Doug Creutz says Hawley’s bill represents a “far more serious, existential-level threat” to gaming, and specifically mobile gaming, because it also focuses on pay-to-win mechanics in addition to loot boxes.

As for why Hawley’s bill might run into trouble, Cowen & Company acknowledged that Hawley is an outlier among Republicans in that most Republicans are pro-business and regularly oppose regulation on technology companies. Not only that, but Congress is “barely functioning” in 2019, with lawmakers focusing more on “must-pass legislation” that keeps the government open.

“Loot boxes have very little mind share in Congress,” Cowen & Company said.

The firm also said Hawley’s bill might face a roadblock because the Supreme Court already decided in 2011 that video games are protected as free speech under the First Amendment. As such, some lawmakers might not want to be involved in a committee about loot boxes and microtransactions, Cowen & Company said. One of the new bill’s co-sponsors, Richard Blumenthal, supported the bill that sought to ban the sale of violent video games to minors which was eventually struck down.

The next step for Hawley’s bill would be to head to a Congressional hearing. No hearing is currently scheduled, which may not bode well for the bill. However, Cowen & Company noted that Markey and Blumenthal coming on as co-sponsors gives the bill more chances at getting a hearing. Hawley, a freshman Senator and the youngest US Senator at age 39, sits on the Judiciary Committee and he might ask chairman Lindsey Graham for a hearing, Cowen & Company said.

Another issue at play is that the FTC already announced it is holding a hearing on August 7 to dig into loot boxes. Democratic lawmaker Maggie Hassan (New Hampshire) requested this hearing, though despite that, she did not become a co-sponsor of Hawley’s bill.

Overall, Cowen & Company says the video game industry should take Hawley’s bill seriously, even though it also believes the legislation is not a near-term concern. You can read the full text of the Protecting Children From Abusive Games Act here.

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