My colleague, Sheldon Evans of St. John's, has written Pandora's Loot Box. Here's the abstract:
Virtual worlds are a frontier unlike any other. But as virtual worlds grow exponentially in the internet age, they find more overlap with the real world and the laws that govern it. One such emerging intersection is the advent of “loot boxes.” Borrowing their design from the gambling industry, loot boxes operate as a hybrid between slot machines and packs of trading cards. A consumer pays real-world money to buy a virtual box without knowing its contents. Upon opening the box, the consumer receives a virtual good that may be of great value, but may also be a common or duplicate virtual good of little to no value. Such is the gamble that fuels this troubling and addictive virtual gaming mechanism.
While scholars and government agencies have considered differing views regarding the ownership, property, and sale of virtual goods, few have considered the gambling perspective brought on by loot boxes. This Article offers a unique legal exploration of the overlaps between loot boxes and gambling by proposing that state gambling laws be updated to include the social science concept of perceived value that explains consumer behavior. By examining the perceived value of loot box rewards, it becomes clear that consumers are driven to gamble for virtual goods based on the value they bestow in the virtual world—irrespective of any real-world value. This framework of virtual valuation is key in properly regulating loot boxes as a form of gambling, which plays on the same psychological triggers as do slot machines. This new framework carries important implications outside of gambling regulation in virtual worlds, while also contributing to the developing literature exploring the ethical and economic dilemmas when software is designed to increase user engagement by exploiting psychological weaknesses.