Video game loot boxes should be regulated as gambling and children barred from purchasing them, a House of Commons committee has advised.

The recommendation comes as part of the digital, culture, media and sport (DCMS) committee’s report on immersive and addictive technologies, published on Thursday after months of parliamentary hearings with technology and gaming companies.

Loot boxes, in-game rewards that offer a randomised selection of items to players who buy or earn them, should not be regulated if they are exclusively earned for in-game success, the committee says. But if they are purchased for real money, then, at the very least, the game should be marked as containing gambling and age-rated content accordingly, and the government should consider regulating the practice as a game of chance under the Gambling Act 2005, the report concludes.

While loot boxes involve an element of chance because players do not know what they will get, they are not covered by existing gambling legislation because the items “won” are not considered to have monetary value.

But the report heard evidence that loot box winnings can be exchanged for money and that their use by game developers was likely to “facilitate profiting from problem gamblers”.

Damian Collins, the chair of the committee, said: “Loot boxes are particularly lucrative for games companies but come at a high cost, particularly for problem gamblers, while exposing children to potential harm. Buying a loot box is playing a game of chance and it is high time the gambling laws caught up. We challenge the government to explain why loot boxes should be exempt from the Gambling Act.”

A survey by the Gambling Commission in 2018 found that 31% of children aged 11-16 had paid for loot boxes, while one gamer told MPs that he was spending up to £1,000 a year on the football game Fifa hoping to win better players for his team.

Q&A What are loot boxes? Show Hide Loot boxes, usually embedded in games based on popular licences like Star Wars or Fifa, are roughly similar to baseball cards or other collection-based blind boxes: players pay a small fee for a chance to obtain a random assortment of virtual items. These rewards can be cosmetic (such as ‘skins’ that change the look of in-game objects) or affect gameplay (perhaps through higher stat numbers or unlocking abilities). Items usually have differing levels of rarity in proportion to their power or aesthetic desirability. Players could open a box and get an extremely rare and useful item, or get a bunch of junk – seemingly at random, especially because publishers rarely disclose the odds of winning certain items. The fee that players pay to open a loot box is usually in in-game currency that can be earned slowly through regular play. However, games are often structured to encourage players to buy the virtual currency for real money, especially for those short on time, or who feel a compulsion that has been likened to pulling a slot machine’s handle. Microtransactions, especially loot boxes, represent a continual revenue stream for publishers in addition to the initial one-off transaction of buying the game. While it is estimated that only a small proportion of total players spend any money on microtransactions, a subset of those that do spend astronomical amounts. An estimated 0.15% of players provided 50% of all revenue in the free-to-play mobile market according to research conducted in January 2014.

The report cited evidence from cognitive psychologists that such in-game features are “designed to exploit potent psychological mechanisms associated with [...] gambling-like behaviours”.

Academics told the DCMS committee there was not yet enough evidence on the psychological effects that gambling-style features in games have on children, partly because the industry has not released data it holds on the subject.

Loot boxes are already classed as gambling in Belgium, where MPs said video game companies had withdrawn them from sale rather than be forced to obtain a gambling licence.

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Labour’s shadow DCMS minister, Tom Watson, said the report’s findings bolstered his case for the Gambling Act 2005, introduced under Tony Blair’s Labour government, to be replaced entirely.

“This [the report] echoes the Labour party’s long-standing position on loot boxes,” he said. “However, making changes to the existing legislation will not be enough. We need regulation that is fit for the digital age, and this will require a whole new Gambling Act.”

The committee also argued that online games should be legally covered by the same enforceable age restrictions as physical sales, closing a loophole that publishers argued freed them of responsibility.

In a statement, Dr Jo Twist, the chief executive of games industry body Ukie, said “We will review these recommendations with utmost seriousness and consult with the industry on how we demonstrate further our commitment to player safety - especially concerning minors and vulnerable people.”

The report’s focus on video games will come as a relief to the wider technology industry, which was preparing for a deluge of criticism from the committee.

Social media companies including Facebook and Snapchat gave evidence to the inquiry, and came under fire for their failure to effectively keep children off their platforms, as well as their role in encouraging compulsive behaviours through mechanics like Snapstreaks and public “like” counts.

But, ultimately, the report focuses almost entirely on games, in part due to address frustration with the lack of answers received from the industry.

It says: “Having struggled to get clear answers and useful information from companies across the games industry in particular, we hope that our inquiry and this report serve to focus all in the industry – particularly large, multinational companies whose games are played all over the world – on their responsibilities to protect their players from potential harms and to observe the relevant legal and regulatory frameworks in all countries their products reach.”