Hawaii’s Loot Box Legislation Clearly Aimed at Console Games

Caution: Gambling

Introduced on February 12th, Hawaii’s HB2727 and HB2686 are aimed at cracking down on the rise of gambling-like elements through randomized rewards in video games. Though the introduction of the new legislation is likely a result of the controversy over the use of loot boxes in Electronic Art’s Battlefront II, the bills have a much wider scope.

The three major things the bills would change:

  • Prohibit the sale of video games with randomized rewards to anyone under the age of 21
  • Require games that have randomized rewards to carry a warning label
  • Require the disclosure of reward probability rates

The legislation covers the use of both real money and in game currency purchased with real money that can be used to purchase randomized rewards. It also makes it clear that both brick and mortar and internet based stores are covered under this legislation. This law will potentially cover a large swath of Android titles, including gacha games, strategy titles that have players collect cards from loot boxes, and of course casino gambling titles.

Dawn Break Odds
Some games like the recently released Dawn Break: The Flaming Emperor already disclose reward odds.

What is a purchase?

While the bill is clear about the definition of a video game and thankfully doesn’t leave any ambiguity when it comes to the use of premium currency, it does not define ‘sale’ or ‘purchase’. With the nearly all of the top grossing games on Android and iOS being free to play, they may escape the age gate and warning label provisions.

State law for a global industry

Hawaii is a small state. Representing under 0.5% of the total US population, game companies could potentially skip the State entirely if the new legislation was passed and the publisher found it particularly objectionable. The decision to skip Hawaii would become even easier for a mobile game company that hails from Asia and already derives a large portion of its revenue from its local market. For reference, Lineage 2: Revolution publisher Netmarble generated just 26% of its revenue in the United States in Q4 2017. There is a possibility that if this legislation passes that other States will follow.

The incentives to skip Hawaii can become even stronger as a result of section 2 §481B-A (b). The section gives gives the State the authority to audit the code of games in order to ensure that the probability rates are as described. Although such a provision is unlikely to be invoked unless there is suspected foul play, the provision will trouble developers and publishers that value the secrecy of their code.

A lack of vision

The currently proposed legislation has been designed to address the controversy that sprung up as a result of the controversy created by loot boxes in Battlefront II, and it is quite clearly designed to address the issues of traditional paid games. Although the description of retailer, as defined, would likely apply to Playstation Network, Google Play, the App Store, etc., it is unclear whether the term sale and purchase would apply to free games. That means that free to play titles may be exempt from the portions of this bill, with the sole requirement being odds disclosure. The bills also ban the addition of gambling-like elements after a game’s release. Though that sounds great, it would likely apply to titles like Team Fortress 2, which went free to play and added loot crates long after their release.

As written, this legislation addresses some of the issues associated with gambling-like elements in games. However, despite its scope, it will likely only have a meaningful impact on a small subset of games even if adopted.