PGC Helsinki: Lawyer Tuomas Pelkonen on loot boxes and the law | Pocket

Legal Risks Surrounding Loot Boxes: Insights from PGC Helsinki

Day one of Pocket Gamer Connects Helsinki 2023 is off to a great start, and we’re here to provide you with live coverage of the event. If you haven’t already, you can still get tickets for day two, or join virtually through our virtual ticket, which grants you access to all the sessions on video and allows you to schedule meetings even after the show.

One of the highlights of PGC events is the series of talks and tracks, where industry experts share their insights in different areas of game development. In the afternoon session, Tuomas Pelkonen, an attorney at Nordia Law, presented a talk titled “The legal risks around loot boxes” on the Global Trends track.

Pelkonen, who is not just a legal expert but also a former esports player, explained the unique perspective he brings to the topic: “Being an attorney, economist, and competitive esports player – ranked among the top 32 players in the EU in EA Sports’ NHL World Championship tournament in 2023 – provides a unique skill set to master the topic of my talk.”

The Ongoing Debate over Loot Boxes

Pelkonen emphasized that loot boxes continue to be a legal issue in key markets like Europe. While game developers argue that removing the ability to trade loot box prizes for real-world value eliminates the element of gambling, it seems that this argument only attracts more legislative scrutiny instead of alleviating concerns.

In addition, the monetization methods commonly used in mobile games today, such as gacha, microtransactions, and even ideas like integrating NFTs, further complicate the definition of acceptable practices in the future.

Pelkonen stated, “The debate over loot boxes and their legality has been more intense than ever. Court rulings in the United States, the Netherlands, and Austria in March 2023 have added to the confusion. Despite these rulings, the legal status of loot boxes remains uncertain, even when the same game, EA Sports’ FIFA, is examined in each case.”

Staying Compliant and Protected

So, how should game developers navigate these legal challenges to ensure their monetization plans aren’t at risk? Pelkonen provided some insights: “As an attorney, one of my roles is to identify risks and provide solutions. We’ve all seen multimillion-dollar settlements in court cases. By including an arbitration agreement and class action waiver in your game’s terms of service, you can significantly mitigate this risk.”

Pelkonen highlighted the importance of understanding the regulations in different countries: “Some countries have already banned loot boxes or imposed strict rules. In these cases, game developers may need to alter or reconsider their loot box mechanics.”

He also mentioned that courts in the Netherlands and Austria have considered the ability to sell in-game currency on secondary markets as a factor in determining whether a loot box mechanism violates national gambling laws. Pelkonen suggested that forbidding external trading in a game’s terms of service can help mitigate this risk.

Furthermore, Pelkonen explained that the definition of gambling in national gambling laws typically includes three elements: consideration, price of monetary value, and chance. By eliminating one of these elements, such as providing transparency about the contents of a loot box before purchase, developers can ensure that their loot box mechanics comply with even the strictest jurisdiction.

Lessons from the Legal Expert

When asked for general advice, Pelkonen recommended investing in legal services when needed and not trying to handle everything alone: “It will mitigate risks, save money in the long run, and possibly increase the value of your company.”

He also emphasized that legal consultation is essential not only for avoiding potential issues related to game content but also for ensuring smooth investment and funding processes. Pelkonen advised developers to think ahead: “If you have an investment round or potential exit in sight, investing in legal services early on and ensuring all crucial agreements are properly drafted and negotiated can prevent red flags during the due diligence process that may change investors’ minds or result in unfavorable terms.”