When I spoke with Take-Two CEO Strauss Zelnick at last month's Electronic Entertainment Expo, I asked him how concerned he was about US Senator Josh Hawley's pending legislation banning loot boxes and pay-to-win mechanics in games children play.
"We're always concerned about any legislation that might interfere with our ability to captivate and engage consumers," Zelnick said, adding, "I don't think that legislation will become law."
When I asked why, he responded, "It's this little thing called The First Amendment, that thing that allows you to ply your trade and allows us to ply ours."
The Entertainment Software Association would also rely on a First Amendment defense to combat Hawley's legislation. Loot boxes are entirely absent from the trade group's otherwise exhaustive policies page, but the First Amendment section's assertion specifies "Calls to regulate video game content, whatever the reason, infringe upon this guaranteed right."
"Just because games are recognized as a form of protected speech under the First Amendment doesn't mean they can't be restricted by laws"
It was the First Amendment's freedom of speech protections that the ESA successfully invoked over a decade ago when California and a wave of other states rolled out legislation to keep violent games out of kids' hands. The fight went all the way to the Supreme Court, which in 2011 affirmed that games are indeed a protected form of free speech and tossed the California law.
Just because games are recognized as a form of protected speech under the First Amendment doesn't mean they can't be restricted by laws; it just means it's harder to restrict them. Any law looking to curb protected speech must pass a standard of strict scrutiny, which means the government has to have a compelling interest in restricting the speech and the law must achieve that interest using the least restrictive means possible.
In 2011, Justice Antonin Scalia ruled in the majority opinion that California's law failed the strict scrutiny test on both counts. The state couldn't demonstrate a compelling interest in keeping violent games away from children because the science purporting to show adverse effects of exposure to violent games wasn't convincing. Furthermore, Scalia said the law was not properly scoped to fulfill the goal of the legislation and nothing else.
Let's consider how loot box legislation would fare against the strict scrutiny standard.
First, can the government demonstrate a compelling interest in outlawing loot boxes? There's comparatively little research into loot boxes yet, so that could work in the industry's favor. However, the government could attempt to tie the loot box issue to gaming addiction, and there's been enough research into gaming addiction to convince the World Health Organization (WHO) to make its gaming disorder diagnosis official (albeit over the objections of industry trade groups and some researchers). WHO's International Classification of Diseases database (ICD-11) also includes an entry for hazardous gaming, which describes "a pattern of gaming, either online or offline that appreciably increases the risk of harmful physical or mental health consequences to the individual or to others around this individual."
It might not be such a large leap to argue that a monetization model driven by endless engagement -- a model often relying on the same psychological levers and pullies as slot machines -- could be tied into the harm that comes from gaming addictions. Going a bit further into the uncomfortable similarities between video games and gambling, the ICD-11 only lists two specific disorders due to addictive behaviors: gaming disorder and gambling disorder. The entries describing the hallmarks of two disorders are functionally identical, listing the same patterns of behavior, manifestation of symptoms, and suggested term of behavior before a diagnosis can be made (12 months, less if symptoms are severe).
"Defending a loot box law may be tricky because so much of what makes loot boxes dodgy is perfectly legal in so many other contexts"
The other half of the strict scrutiny criteria -- that any law curbing protected speech serve the interest of the government as precisely as possible and show curtailing free speech is necessary to do that -- presents another challenge for Hawley's proposed legislation.
The court could rule that Hawley's bill is too broad because it bans a wide array of pay-to-win mechanics in addition to loot boxes. As distasteful and manipulative as some pay-to-win treatments may be, they don't map as closely to traditional gambling mechanics as their loot box counterparts. Or it may be overly broad because it would prohibit not just minors' access to loot boxes, but loot boxes in any game that children play.
The court could also rule that Hawley's bill isn't broad enough to actually serve the government's interest because it leaves seemingly comparable things -- trading card games, for example -- unregulated. That was a particular problem for Scalia in 2011, as he questioned whether California's violent game bill would actually achieve its goal of protecting children when there was no such restriction on violent cartoons, movies, or books. Because so much of what makes loot boxes dodgy -- randomized reward schedules, virtual currency obfuscation of value, manipulative game design -- is perfectly legal in so many other contexts, the government might have to show there's something uniquely harmful about the combination of these things that is only present in the video games that would be affected by the law.
Clearly, there are arguments to be made against Hawley's bill. But the government doesn't necessarily need to refute them all. Even if the scientific research linking loot boxes, gambling, and gaming disorders is short of compelling at the moment, the court might still give the argument some weight.
For example, on the California game violence case, Justice Samuel Alito took the industry's side in his concurring opinion, but he split with the majority opinion when it came to the validity of the existing scientific research.
"We should not hastily dismiss the judgment of legislators, who may be in a better position than we are to assess the implications of new technology"
Justice Samuel Alito
"We should not jump to the conclusion that new technology is fundamentally the same as some older thing with which we are familiar," Alito wrote, adding, "And we should not hastily dismiss the judgment of legislators, who may be in a better position than we are to assess the implications of new technology."
Justice Stephen Breyer was one of two judges to side with California in the case. He likewise acknowledged not all of the research on effects of gaming violence was coming to the same conclusion, but regardless found the violent game law passed the strict scrutiny test.
"This Court has always thought it owed an elected legislature some degree of deference in respect to legislative facts of this kind, particularly when they involve technical matters that are beyond our competence, and even in First Amendment cases," Breyer wrote, adding, "The majority, in reaching its own, opposite conclusion about the validity of the relevant studies, grants the legislature no deference at all."
In his own dissenting opinion, Justice Clarence Thomas side-stepped the strict scrutiny question entirely by saying that the First Amendment's freedom of speech protection "does not include a right to speak to minors (or a right of minors to access speech) without going through the minors' parents or guardians."
Even in Scalia's majority opinion, there's room to infer the court would be more receptive to a loot box law. Scalia was particularly preoccupied that the California law was creating a new class of unprotected speech, specifically violent media aimed at minors. He argued the court had already forbidden legislatively creating new classes of unprotected speech the previous year when it ruled 8-1 that a law prohibiting the sale of animal cruelty videos was unconstitutional.
"Without persuasive evidence that a novel restriction on content is part of a long (if heretofore unrecognized) tradition of proscription, a legislature may not revise the 'judgment [of] the American people,' embodied in the First Amendment, 'that the benefits of its restrictions on the Government outweigh the costs,'" Scalia wrote, adding, "That holding controls this case."
It's fair to say that there is a long tradition of laws prohibiting children from gambling in the US, whether that be through casinos, sports betting, lotteries, or bingo halls.
This is not to say that these specific judges would rule one way or another on a loot box case. That sort of speculation is of limited use when a bill hasn't even been passed yet, much less gone through the years of appeals to find its way to a Supreme Court that already has two new faces on it and might have more by the time any such loot box legislation goes before it. But it can still be instructive to look at what issues Supreme Court judges previously raised when considering a free speech defense of games, and to consider how they might apply to future fights over loot boxes (particularly because those fights are almost certainly coming).
This is not actually about Hawley's bill, specifically. Like Zelnick, I'm skeptical that it will become law, much less go through the appeals process all the way to the Supreme Court. But there is a notion that because the Supreme Court ruled that games have free speech protections, legislation of any kind is doomed to fail. That is absolutely not the case, and if the industry conducts itself otherwise, it does so at its own peril.