When Dave* was going through a breakup and had more time to himself, he downloaded a free mobile game to his phone.

It was called Transformers: Earth Wars.

Dave’s a gamer, but this game felt different: players are encouraged to spend money — real money — on loot boxes inside the game.

Loot boxes are found in all kinds of mobile, PC or console games, and they’ve been around for about a decade. They differ from game to game, but they usually work like this: you buy a virtual box of random items without knowing what’s inside. Here's an example of one in Overwatch.

You could open up the box and get exactly what you wanted, or you could get total crap. It’s chance.

In some games, a loot box will contain purely cosmetic items (like a new hat or costume for your character), and sometimes a loot box will contain items that actually help you advance in the game (like extra lives, or better powers).

Loot boxes in Transformers: Earth Wars are the latter, and Dave got hooked.

"All your spending can be done in your home in your own comfort zone.

"I went through a bad patch last year, and this year with my mother dying of cancer, I had to find an outlet. An outlet I couldn’t afford, but still maintained.

"$15,000+ later I don’t even know how this was all possible. I can look back now and know I gambled, I took the risk, and I ended up losing.

"I wish I could stop people getting into loot box-designed games because they have ruined my life."

Mike’s story

For Mike*, who also plays Transformers: Earth Wars, loot boxes have become an "addiction".

Over the past two years, Mike has spent over $50,000 on loot boxes in Transformers: Earth Wars. Hack has seen Mike’s bank statements to verify this.

"At one stage I was spending close to $500 a week on it. It’s pretty disgusting really, and I’m sort of ashamed of myself to come to terms with how much I’ve spent.

"There were times when I was thinking, do I buy lunch, or do I buy a bundle?

"100 per cent they are gambling, and they should be under some sort of restriction in Australia."

Regulating loot boxes around the world

Microtransactions — where players spend small amounts of real money inside a video game, including to buy loot boxes — have been around for a while. As early as 2005, Microsoft introduced microtransactions in its Xbox Live Marketplace. At the time, Wired called it the "online store of the future".

But mainstream interest in loot boxes has only spiked in the last year or so, while the loot box industry - along with the gaming community’s rejection of it - grows enormously.

Last year, a response from gaming giant EA that defended microtransactions in its Star Wars: Battlefront II game became the most downvoted comment in Reddit history.

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Whatsapp Star Wars Battlefront II

And Overwatch, a game with over 35 million players worldwide, sparked the biggest conversation around loot boxes - with its director Jeff Kaplan having to insist that Overwatch’s loot boxes were not "really evil".

After media interest around loot boxes in Star Wars: Battlefront II took off, lawmakers around the world jumped on it.

In Hawaii, Senator Chris Lee called for loot boxes to be banned, saying Star Wars: Battlefront II was a "Star Wars-themed online casino, designed to lure kids into spending money".

Senator Lee introduced legislation in Hawaii that targets loot boxes this month. The bills propose that games containing loot boxes be prohibited for users under 21, and for games that contain loot boxes to be labelled with this warning that says that game contains "gambling-like mechanisms which may be harmful or addictive".

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A democratic bill to regulate loot boxes has also been introduced into Washington State, and New Hampshire Senator Maggie Hassan has called for US government oversight on loot boxes.

Chris Hansford, the director of Consumers for Digital Fairness, a not-for-profit advocacy group lobbying governments in the US to regulate loot boxes, hopes Hawaii and Washington are the first of many states to follow.

"We do feel that loot boxes, when they are purchased for real funds, cash, are a form of gambling and that does deeply concern us," Chris told Hack.

"They’ve started to push tactics that we feel have been ripped right off of the casino floor, and shoving them into our living rooms and into the hands of children and young adults that really aren’t equipped to handle those kind of things."

Meanwhile in Europe, Belgium’s justice minister called for loot boxes to be banned across the continent.

But in New Zealand, its department of Gambling Compliance last year said loot boxes did not meet the legal definition of gambling.

The situation in Australia

In Australia, gambling is regulated by each state and territory. Hack asked each state and territory’s gambling authority about their position on loot boxes.

Every jurisdiction told us they were aware of loot boxes as an issue, but none have made a formal determination about whether or not loot boxes should be considered gambling.

Queensland’s Office of Liquor and Gaming Regulation admitted that loot boxes "may constitute an interactive game within the definition provided in Queensland’s Interactive Gambling (Player Protection) Act 1998."

Queensland said they are "currently investigating" whether loot boxes could indeed "offend any legislation we administer."

Similarly, New South Wales said they were "actively looking" into the issue of loot boxes.

As far as Federal politics goes, 23-year-old Greens Senator Jordon Steele John says action needs to be taken on loot boxes, which he believes are a "gambling" product.

"The Australian gaming industry hates these things, they’re a scourge.

"They require no creativity. I have a lot of concern about them at the end of the day because we are very clear — as a party and generally as a society — gambling is not a good thing, poker machines are not a good thing."

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Whatsapp Greens Senator Jordon Steele-John addresses the media

"Mixing kids and applications which utilise gambling techniques are really quite a concerning thing."

Senator Steele John told Hack he is currently consulting with stakeholders in the gaming industry about the issue.

"The impact of gambling in people’s lives is such that we actually can’t afford to stay silent.

"If it does seem that legislation is something that needs to happen, we’ll certainly look at it. I think any legislation would have to be innovative and not necessarily blunt."

Senator Steele John said the government was often slow to move around issues involving the gaming industry.

"I’m not surprised we’ve had silence on this issue. I think a lot of my colleagues haven’t quite yet got past Pacman."

Gamers in support of ‘purely cosmetic’ microtransactions

Hack has heard from Australian gamers who are emphatically against loot boxes. But we’ve also heard from gamers who think the issue has been overstated.

23-year-old Xavier from Canberra, who plays Clash Royale and Overwatch, told Hack that he doesn’t think regulation is the way to go for loot boxes in Australia - even though he’s spent about $1200 of his own money on them.

"I had the money at the time, I didn’t suffer because I lost any of that money, I worked hard for that money and I spent my money where I wanted to.

"I was very consciously going, ‘Ok are you happy to do this, is this game insanely fun?’ [and I would go] ‘Yes it is, okay’."

Xavier doesn’t support calls for regulation in Australia.

"I can see it becoming an issue for a lot of people but by the same token, I think that it shouldn’t be regulated. That’s the ultimate question, as a law student I’d say - is it supposed to be regulated? I’d say, definitely not.

"I find it hard to imagine people getting addicted to this to the point of problem gambling, to the equivalent of the pokies or the races. I struggle personally to see it like that.

In a report by Qutee released this month, a survey of over 1000 gamers revealed that 69 per cent supported microstransactions - but only if they were for purely cosmetic items, not items that advance gameplay. Only 6 per cent of respondents said they "never" buy loot boxes.

*Names have been changed.