The USD 15 Billion Loot Box Challenge: Comparing US, UK, and EU Regulatory Strategies

Loot boxes seem to be an inseparable part of the gaming industry, generating over USD 15 Billion a year revenue for gaming companies.¹ Gaming companies have defended loot boxes for being similar to chocolate eggs containing plastic toys, e.g. Kinder Surprises, where children do not know what exactly they are getting until they buy and eat the egg.² However, these loot boxes are very controversial amongst users and regulatory authorities, with some categorising them as a form of gambling.³ Tomomichi Amano, assistant professor at Harvard Business School, notes that part of loot boxes is the randomness of what will be inside, which can be similar to the appeal of gambling.⁴ 

Loot boxes have been criticised heavily for several reasons. One vein of criticism relates to them being the off-spring of corporate greed:

“They turn innovation into a monetization contest rather than an expansion of the art form, and they give companies excuses to let their greed run wild “.⁵

Another vein of criticism, perhaps the most significant one, relates to the emotional and financial harm from loot boxes that children are exposed to. In a report by Loughborough University, an 11 year old boy said: “The game just got better and better as I spent more money and I got addicted to it. I knew I’d spent the money, but I didn’t know how much… I was sad and crying a lot, and I went upstairs to my room. I put my money tin at the top of the stairs, and I started crying even more”.⁶  

Different mechanisms and strategies have emerged among global regulators, varying in aggressiveness, bindingness, scope, and more. This article analyses three specific strategies taken by important jurisdictions: the US approach, the UK approach, and the EU approach. These jurisdictions’ approaches are extremely different, and the author will try to make sense of them in order to come up with a regulatory recommendation, drawing on current strategies, that will most effectively tackle the issues with loot boxes discussed above.

The American Model: Deceptive Practices and Privacy Protection

The US, primarily through the Federal Trade Commission (FTC), strategically avoids the gambling debate. Instead, it targets game developers under the FTC Act and the Children’s Online Privacy Protection Act (COPPA). 

Recently, a key case was settled which established a crucial precedent: developers must prohibit children under 16 from purchasing loot boxes without affirmative parental consent. In United States v. Cognosphere, LLC, Case No. 2:25-cv-00447, the FTC reached a settlement and fined Cognosphere (HoYoverse), the developer and publisher of Genshin Impact, USD 20 million for unfairly marketing loot boxes to children, obscuring their real costs, and misleading all players about the odds of obtaining prizes.⁷ Moreover, the FTC alleged the developer violated COPPA by illegally collecting data from children and sharing children’s personal information with third-party analytics firms and advertisers, criticising them for not screening “players’ ages by way of an ‘age gate’ or require them to enter a birth year”.⁸

The FTC’s case relied on Section 5 of the FTC Act, which prohibits ‘‘unfair or deceptive acts or practices in or affecting commerce”.⁹ Unfair Acts or Practices are those which i) cause, or are likely to cause substantial injury to consumer; ii) cannot be reasonably avoided by consumers, and; iii) are not outweighed by countervailing benefits to consumers or to competition.¹⁰ The FTC held that the loot boxes in Genshin Impact amounted to such unfair practices, causing substantial injury to consumers by deceiving children into “spending hundreds of dollars on prizes they stood little chance of winning“.¹¹ 

On top of the fine, Hoyoverse will be required to disclose loot box odds, delete all personal information collected from children under 13 years old, and comply with COPPA rules in all of its future practices and games.¹² 

This case established a precedent for the enforcement of loot boxes in the US as the application of the FTC Act and COPPA opened a new possibility for tackling similar situations. The settlement serves as a direct warning to the entire US digital gaming market, as stated by an FTC Commissioner in a statement: “the gaming industry should be on notice that wanton use of loot boxes may create exposure to multiple theories of liability. Children may be unable to assess low-probability events, but responsible video-game publishers would be well advised not to take the chance of getting themselves hooked on loot boxes”.¹³

Thus, the US approach to loot boxes, following the settlement, can be characterised by punitive enforcement under the FTC Act and COPPA, avoiding the gambling debate. The model instead focuses on combating deceptive practices and prioritizing child protection by mandating age-gating and verifiable parental consent for loot box purchases made by players under the age of 16.

The UK Model: Self-Regulation and Compliance Failure

The UK has decided to not classify loot boxes as a form of gambling. The UK Gambling Commission stated that loot boxes are not legally defined as gambling because the Gambling Act 2005 requires that the prize must be “money or money’s worth”,¹⁴ however, the virtual items you win in games cannot be cashed out for real-world money.¹⁵

Instead, in 2022, the UK loot box regulation tasked the video-game industry with implementing its own guidelines to protect its players.¹⁶ In 2023, the industry published the UK Interactive Entertainment (Ukie) Industry Principles, comprising of 11 principles meant to regulate the use of loot boxes in video games, including, inter alia: make available technological controls to restrict anyone under 18 years old from acquiring loot boxes without parental consent, disclose the presence of loot boxes prior to purchase of a game, and give clear probability disclosures.¹⁷

This “self-regulatory” approach taken by the UK is widely criticised as a failed experiment as the guidelines are non-binding and lack meaningful enforcement. Research has shown that most popular iPhone games, for example, frequently broke many of the industry rules intended to protect consumers and children set by Ukie, for example by less than 10% of social media ads for video games with loot boxes disclosing the presence of those loot boxes as required.¹⁸ 

Furthermore, non-compliant games that were reported to Ukie and the UK government, even after six months, did not have any enforcement measure taken against them, and continue to be available for download.¹⁹ Hence, scholars UK-wide have called on the UK government to “stop relying on demonstrably ineffective industry self-regulation, adopt stricter rules, and ensure better enforcement of pre-existing law”.²⁰

While Ukie enforcement remains limited, the Advertising Standards Authority (ASA) has been forced to step in using general UK consumer law. For instance, in November 2025, the ASA upheld complaints against Hutch Games regarding their app listing for the game F1 Clash. The ASA ruled that there was a failure to clearly disclose the presence of loot boxes in the game, hence omitting ‘material information’ likely to influence a consumer’s decision.²¹ In its decision, the ASA completely disregarded the Ukie rules, set out for exactly these purposes, instead utilising the pre-existing UK Code of Non-broadcast Advertising (CAP Code). 

This intervention by the ASA is certainly welcome, as scholars have been urging other UK regulators to more proactively enforce the law due to Ukie’s failure.²² However, it simultaneously exposes the inadequacy of the voluntary, “self-regulatory” approach taken by the UK towards loot boxes, having to rely on other regulators to step in to protect consumers, instead of on the authority designated specifically for this purpose. As argued by The Royal Society: “Stricter regulation of loot boxes must be adopted as the industry self-regulation experiment has failed again”.²³

The EU Model: Towards a Total Ban?

The regulation of loot boxes in the EU is currently fragmented, varied by jurisdiction.²⁴ The reason for this fragmentation is because on the national level, member states have different interpretations of whether loot boxes are a form of gambling, in accordance with their domestic laws.²⁵ 

France, for example, states that loot boxes are not gambling unless the items inside them have real-world monetary value.²⁶ On the other hand, one of its neighbors, Belgium, declared loot boxes illegal under their gambling laws.²⁷ Nevertheless, research has found that the Belgian ban of loot boxes is ineffective, with 82% of the highest-grossing iPhone games in Belgium still containing loot boxes.²⁸ 

Even on a domestic level, there seems to be inconsistent interpretation and trouble enforcing loot box regulations. For example, in Austria, two important cases exemplify how cases involving loot boxes areassessed on a case-by-case basis. In 2024, the Higher Regional Court of Vienna concluded that loot boxes in FIFA Ultimate Team (FUT) are not gambling because players don’t acquire packs with profit-generation in mind, but purely to use in-game.²⁹ 

On the other hand, another case in Austria concerning loot boxes did not have the same outcome. A court in Styria ordered Valve to refund over EUR 14,000 that a Counter-Strike player had spent on loot boxes.³⁰ The reason for the refund is because the court recognised that loot boxes could be classified as gambling because the underlying items possess real-world monetary value via secondary markets, and thus require an Austrian gambling license, which Valve does not have.³¹ This judicial fragmentation highlights the failure of Austria’s national gambling laws to provide a clear regulatory standard.

Curiously, Padronus, a major Austrian litigation funding company, commented on the Valve case: “According to the Austrian Gambling Act, every provider of loot boxes must have a license. However, operators of FIFA, Call of Duty, and other games do not have a license”.³² If that is the case, then how come the court in the FUT case held the loot boxes were not gambling? 

Thus, we see that the fragmentation of EU member states’ approach towards loot boxes could prove problematic, and therefore, in October 2025, EU MEPs from the Internal Market and Consumer Protection Committee adopted a report urging the European Commission to solve the jurisdictional inconsistencies and ban loot boxes, specifically in games accessible to minors.³³ The European Parliament is calling for a harmonised EU approach to combat risks, particularly to minors, arising from loot boxes.³⁴ 

Importantly, the EU has proposed the Digital Fairness Act, and is foreseen for Q4 of 2026. One of the potential introductions of the act is the ban of loot boxes completely, or, alternatively, the requirement for game developers to obtain parental consent for loot box purchases by minors.³⁵ This proposed Act should help harmonise the enforcement of loot boxes across the EU.

Takeaways and Recommendation 

This article presented the three differing approaches the US, UK and the EU are taking towards the enforcement of loot boxes. The UK model demonstrates that leaving compliance to the industry (‘self-regulation’) is a failed experiment that essentially allows consumer harm to persist unchecked. On the other extreme, outright bans, while appealing, seem unworkable against the global nature of the industry, as the Belgian experience demonstrated.

The author believes that the most effective way forward is to have a hybrid system that removes the regulatory focus from the gambling definition and instead emphasises consumer protection and age assurance, similar to the US model. The article demonstrated how difficult the gambling definition is, where seemingly every country has a different take on it, and even on a domestic level, such as the Austria example, the unclear ‘gambling’ breadth leads to inconsistent judicial interpretations. 

Mandatory principles must lead the way in binding frameworks to be adopted by all jurisdictions. These must include transparency obligations, requiring companies to disclose the existence of loot boxes and their odds, and verifiable parental consent as a mandatory prerequisite for loot box purchases by minors (e.g. under 16). Only through hard laws treating the substance of the problem (transparency, minor protection, information asymmetry), could governments effectively protect vulnerable players, not through theoretical and linguistic discussions.

1.  Scott Van Voorhis, ‘The $15 Billion Question: Have Loot Boxes Turned Video Gaming into Gambling?’ (21 April 2023) https://www.library.hbs.edu/working-knowledge/the-15-billion-question-have-loot-boxes-turned-video-gaming-into-gambling accessed 3 December 2025.
   ↩︎
2.  Tom Gerken, ‘Top-Selling Mobile Games Breaking Rules on Loot Boxes’ (29 November 2024) https://www.bbc.co.uk/news/articles/c748ww9y9nno accessed 4 December 2025.
   ↩︎
3.  Video Games Federation Belgium, ‘Loot boxes in Belgium’ (2025) https://vgfb.be/loot-boxes-in-belgium/ accessed 4 December 2025.
   ↩︎
4.  Scott Van Voorhis (n 1).
   ↩︎
5.  thebyrnedisplay, ‘Loot Boxes are Terrible’ (2018) https://culturehud.wordpress.com/loot-boxes-are-terrible/ accessed 3 December 2025.
   ↩︎
6.  Loughborough University, ‘Loot boxes cause financial and emotional harm to children, new report reveals’ (28 November 2022) https://www.lboro.ac.uk/news-events/news/2022/november/loot-box-report-emotional-financial-harm-children/ accessed 4 December 2025.
   ↩︎
7.  Federal Trade Commission, ‘Genshin Impact Game Developer Will be Banned from Selling Lootboxes to Teens Under 16 without Parental Consent, Pay a $20 Million Fine to Settle FTC Charges’ (17 January 2025) https://www.ftc.gov/news-events/news/press-releases/2025/01/genshin-impact-game-developer-will-be-banned-selling-lootboxes-teens-under-16-without-parental accessed 4 December 2025.
   ↩︎
8.  Stacy Feuer, ‘A Kids’ Privacy Adventure: Exploring the FTC’s Privacy and Lootbox case against Genshin Impact’ (24 January 2025) https://www.esrb.org/privacy-certified-blog/a-kids-privacy-adventure-exploring-the-ftcs-privacy-and-lootbox-case-against-genshin-impact/ accessed 3 December 2025.
   ↩︎
9.  Board of Governors of the Federal Reserve System, Consumer Compliance Handbook: Federal Trade Commission Act – Section 5 (June 2008) https://www.federalreserve.gov/boarddocs/supmanual/cch/200806/ftca.pdf accessed 4 December 2025.
   ↩︎
10. ibid. ↩︎
11.  Matt Kim, ‘Genshin Impact Developer Agrees to $20M Fine Over Loot Box Violations’ (17 January 2025) https://www.ign.com/articles/genshin-impact-developer-agrees-to-20m-fine-over-loot-box-violations accessed 4 December 2025.
    ↩︎
12. ibid. ↩︎
13.  Rebecca Kelly Slaughter, ‘Concurring Statement of Commissioner Rebecca Kelly Slaughter Regarding United States v. Cognosphere, LLC’ (17 January 2025) https://www.ftc.gov/system/files/ftc_gov/pdf/slaughter-cognosphere-statement.pdf accessed 4 December 2025.
    ↩︎
14.  Gambling Commission, Guidance to licensing authorities, ‘Appendix H: Poker games and prizes’ (14 September 2023) https://www.gamblingcommission.gov.uk/guidance/guidance-to-licensing-authorities/appendix-h-poker-games-and-prizes accessed 3 December 2025.
    ↩︎
15.  Fintech Harbor Consulting, ‘Loot Boxes Platforms: Legal Status, Compliance and Regulation’ (2025) https://www.fintecharbor.com/loot-boxes-platforms-legal-status-compliance-and-regulation/ accessed 4 December 2025.
    ↩︎
16. ibid. ↩︎
17.  Ukie, ‘New loot box principles agreed by industry’ (18 July 2023) https://ukie.org.uk/news/new-loot-box-principles-agreed-by-industry accessed 4 December 2025.
    ↩︎
18.  Leon Y. Xiao, ‘UK video game industry fails to self-regulate gambling-like loot boxes’ (11 June 2025) https://royalsociety.org/blog/2025/06/video-game-industry-loot-boxes/ accessed 4 December 2025.
    ↩︎
19. ibid. ↩︎
20. ibid. ↩︎
21.  CMS, ‘ASA upholds complaints against Hutch Games over loot boxes and prize odds’ (3 December 2025) https://cms-lawnow.com/en/ealerts/2025/12/asa-upholds-complaints-against-hutch-games-over-loot-boxes-and-prize-odds accessed 4 December 2025.
    ↩︎
22. Leon Y. Xiao, (n 18). ↩︎
23. Leon Y. Xiao, (n 18). ↩︎
24.  1D3 Digitech OÜ, ‘Loot box regulation worldwide: EU, United Kingdom and more.’ (30 August 2023) https://www.1d3.com/blog/loot-box-regulation-worldwide accessed 3 December 2025.
    ↩︎
25.  Fintech Harbor Consulting, (n 15).
    ↩︎
26.  1D3 Digitech OÜ, (n 24).
    ↩︎
27. BBC News, ‘Loot boxes are gambling and must be removed from games in Belgium’ (26 April 2018) https://www.bbc.co.uk/news/technology-43906306 accessed 3 December 2025.
    ↩︎
28.  Leon Y Xiao, ‘Breaking ban: Belgium’s ineffective gambling law regulation of video game loot boxes’ (2023) 9(1) Collabra: Psychology art 57641 https://www.greo.ca/Modules/EvidenceCentre/Details/the-ineffectiveness-of-belgiums-regulation-of-loot-boxes accessed 3 December 2025.
    ↩︎
29.  Christopher Dring, ‘Key Austrian court finds FIFA Ultimate Team packs are not gambling’ (24 October 2024) https://www.gamesindustry.biz/key-austrian-court-finds-fifa-ultimate-team-packs-are-not-gambling accessed 4 December 2025.
    ↩︎
30.  Calum Patterson, ‘Valve ordered to refund $15k to CS:GO player as cases ruled ‘illegal’ in Austria’ (19 December 2023) https://www.dexerto.com/counter-strike-2/valve-ordered-to-refund-15k-to-csgo-player-as-cases-ruled-illegal-in-austria-2437525/ accessed 4 December 2025.
    ↩︎
31.  UKRtecho, ‘Austrian Court Rules in Favor of Gamer Against Valve for €15,000’ (22 April 2025) https://faq.planet-mc.net/en/faqs/austrian-court-rules-in-favor-of-gamer-against-valve-for-15-000/ accessed 4 December 2025.
    ↩︎
32.  Callum Patterson, (n 30).
    ↩︎
33. European Parliament, ‘New EU measures needed to make online services safer for minors’ (16 October 2025) https://www.europarl.europa.eu/news/en/press-room/20251013IPR30892/new-eu-measures-needed-to-make-online-services-safer-for-minors accessed 3 December 2025.
    ↩︎
34.  Fintech Harbor Consulting, (n 15).
    ↩︎
35.  Tobias Timmann and others, ‘The EU’s proposed Digital Fairness Act: A game developer’s guide to potential implications’ (7 November 2025) Freshfields Technology Quotient https://technologyquotient.freshfields.com/post/102ltio/the-eus-proposed-digital-fairness-act-a-game-developers-guide-to-potential-imp accessed 3 December 2025.
    ↩︎