FIXING THE ODDS: DESIGNING INTELLIGENT LOOT BOX POLICY IN THE CANADIAN CONTEXT.

• Author: Fleming, Mitchel

INTRODUCTION 75 I UNDERSTANDING THE LOOT BOX 78 A. Where is the Risk? 78 II GAMING DEFINED 79 A. Permitted Forms of Gaming Operations 80 B. The Development of Canadian Gaming Law and Policy 81 III HOW NEW TECHNOLOGIES CHALLENGE THE DEVELOPMENT OF GAMING LAW AND POLICY 83 A. Internet Gaming 85 B. Random-Content Trading Cards 84 IV LOOT BOXES: GAMING'S NEWEST INTERPRETIVE CHALLENGE 85 A. Loot Boxes and Gaming--The Parallels 85 B. International Interpretations 87 C. International Conclusion 94 V APPLICATION OF INTERNATIONAL CONCLUSIONS TO CANADIAN LAW 94 A. Prize 95 B. Chance & Consideration 97 C. Canadian Conclusion 98 VI CANADIAN LOOT BOX POLICY: SHOULD LOOT BOXES BE CONSIDERED A FORM OF GAMING? 98 A. Governmental Regulation 98 B. Industry Self-Regulation 100 C. Regulatory Conclusion 105 VII LOOT BOX POLICY DIRECTIVES AND REGULATORY MEASURES 104 VIII CONCLUSION 108 INTRODUCTION

For any video game fan alive in the 1990s, the memory of the moral panic which produced the 1995 Congressional Hearings on Video Games may readily come to mind as concerned parents and legislators sought to comprehend the potential impacts of violent video games on children. (1) After months of public outrage, legislative consultation and video game industry testimony, a consensus was reached between all affected stakeholders that there was a need for regulation: specifically, video game standards and a content rating system. Thus, the Interactive Digital Software Association ("IDSA"), (2) a video game industry self-regulator, was formed and became the body charged with protecting the industry's most vulnerable consumers and, in many ways, the industry's reputation. (3) Despite the conflicting evidence demonstrating whether playing video games actually led to increased violent behaviour, (4) this emotionally charged period in video game history is demonstrative of the power of public outcry. (5) And two decades later, the video game industry has yet again found itself the subject of public outrage for its participation in another controversial practice.

The practice: loot boxes, a relatively new form of randomized in-game mechanic used by gamers to acquire in-game assets. The loot box became the topic of public conversation following the release of Monolith Production's ("Monolith") Shadow of War, a video game adaptation of JRR Tolkien's Lord of the Rings. In 2017, outcry from the gaming public shook the video game industry. Videogamers claimed that Monolith designed the game in a way that incentivized purchasing loot boxes to acquire in-game assets and their associated gameplay advantages as opposed to earning them through hard work and skill. Monolith was quick to respond, claiming that the game was assailable provided the videogamer invest sufficient time and effort. They failed, however, to provide a convincing response addressing the discrepancy between the relative advancement one videogamer may experience by having bought loot boxes versus one who chose to abstain. (6)

This industry squabble looked to be short-lived and coming to a close until Entertainment Arts ("EA") released Star Wars Battlefront 2, a game heralded for its broken pay-to-win mechanics. Gamers could directly purchase items that would provide for an unfair advantage during gameplay instead of earning them in-game. (7) Gamers were outraged by EA's prioritization of in-game monetization over gameplay as it provided for a gameplay experience that valued and rewarded additional spending over fostering skill and participation. This outrage was only exacerbated by EA when the company defended the mechanism's inclusion by claiming that "[the] intent [was] to provide players with a sense of pride and accomplishment for unlocking different heroes." (8) Just as Monolith before it, EA's response failed to address the prioritization given to videogamers who purchased in-game assets as opposed to their abstinent counterparts.

News of the Monolith and EA controversies were discussed widely throughout the internet and inevitably reported by major news networks including CNN, BBC and CBC. (9) And while Star Wars Battlefront 2 did not itself employ loot boxes, reporting of the controversy led to larger public concern over the amount of money children might be spending on in-game purchases and more importantly, the nexus between video games, loot boxes and gaming. Initiated by public calls for inquiry, gaming regulators around the globe have begun investigating loot boxes whilst legislators and industry self-regulators enact measures for their regulation, if not outright prohibition.

While national gaming regulators, the general public and industry stakeholders continue to weigh in on the appropriate course of action, the Canadian government sits quietly on the sidelines. The purpose of this article is to provide a coherent report of international dialogue from which an informed loot box policy applicable in the Canadian context can be derived. In doing so, this article will: (1) propose a uniform understanding of what constitutes a "loot box"; (2) summarize Canadian gaming law and policy and its historical development; (3) demonstrate how technological innovations have challenged gaming laws in the past; (4) analyze how loot boxes are currently challenging existing national gaming laws and catalogue the responses of various national gaming regulators; (5) determine how the conclusions of other national gaming regulators may apply in the Canadian context; (6) weigh the advantages and disadvantages of governmental versus industry self-regulation as they relate to Canadian gaming policy objectives; and (7) propose policy directives that can be adopted by government and industry to accomplish the aforementioned Canadian gaming policy objectives insofar as they concern loot boxes. This article seeks to demonstrate that loot boxes may indeed constitute a form of gaming as contemplated by the Criminal Code of Canada (the "Criminal Code") while at the same time asserting that industry self-regulation is the appropriate course of action regardless of its potentially illicit status.

I UNDERSTANDING THE LOOT BOX

Before we dive into the substance of the article, it is critical that the reader have a general understanding of what constitutes a "loot box." The loot box is a non-homogenous mechanism. Defined broadly, it is an in-game mechanic that is purchased in order to receive a randomized in-game asset. (10) Loot boxes are typically sought after by videogamers for the fun of their opening as well as for their contents." Loot boxes can manifest as lockers, boxes or even pinatas. They can award players with in-game assets such as skins or guns, in-game currency or even catchphrases. (12) Loot boxes may lie at the core of the gameplay experience or simply exist as ancillaries thereto. Despite its heterogeneity, what is most important is that the term loot box is understood as "[an] umbrella term for one or more game elements that are integrated into a video game whereby the player acquires game items either for payment or for free in an apparently random manner." (15)

1. WHERE IS THE RISK?

   The potential hazard of loot boxes, as we will come to see, stems from its similarities to traditional forms of gaming. In addition, the widespread market penetration and accessibility via the internet poses serious challenges for regulation as children and vulnerable persons may easily access these mechanics from the comfort of their home. As new forms of entertainment develop, the distinction between traditional forms of gaming and simple entertainment blurs and our understanding of what should constitute gaming must evolve. In addition, a determination of the appropriate regulatory measures required to contain the proliferation of new forms of entertainment and whether these measures are justified given their proven and inconclusive impacts on public health and safety is necessary.

   The risk that children and vulnerable persons may be participating in what is at its core "unregulated gaming" should be of serious concern to legislators and the public at large. While the impact of their participation is currently inconclusive, the potential for harm should be noted. While these technological innovations seriously challenge our current understandings of gaming law, there are considerable risks associated with premature governmental regulation on the development of new forms of entertainment. Despite their synonymous nature with gaming, treating loot boxes as such may not be in the best interest of the public and therefore, an appropriate regulatory regime must be designed. This article will provide a brief overview of what defines "gaming" in Canada and the policy developments that got Canada to the regulatory regime we operate within today before tackling the question of whether loot boxes constitute gaming and should be regulated as such.

   11 GAMING DEFINED

   "Gaming"--or "gambling," as it is commonly referred to--is defined as "the practice of playing some game which involves losing or winning money, money's worth or stakes, particularly any game of chance or mixed chance and skill." (14) A "game" is defined as "a game of chance or mixed skill and chance." (15) Thus, for a "game" to be considered "gaming," it must consist of three principal elements: (1) prize; (2) chance; and (3) consideration. (16)

   The "prize" is the merchandise or service, or lack thereof, awarded to the player upon the conclusion of the game. "Chance" ensures that the quality and quantity of the prize received for having participated in the game cannot be determined before its completion. In other words, the outcome of the game, and the prize derived therefrom, cannot be controlled at all or in large part by the skill of the participant but rather by random chance or happenstance. (17) Lastly, "consideration" ensures that the participant has a stake in the game, that is, they have invested a sum of money or an item with...