Exploring Finland's proposed loot box regulation

In September, member of the Finnish Parliament Sebastian Tynkkynen proposed a bill to regulate loot boxes as a form of gambling in Finland.

To understand what the bill could mean for the Finnish games industry, we speak to Dr Joseph Macey, an academic researching the relationship between consumption of digital games and participation in emergent gambling activities, Topias Mattinen, a PhD student whose research is focused on digital gambling, loot boxes and the gamblification of digital games, as well as Tynkkynen himself.

Sebastian Tynkkynen is a Finnish MP and member of the Perussuomalaiset Party or 'Finns Party'. He is a right-wing populist figure in Finnish politics who has been convicted and fined for "ethnic agitation" three times for comments about Muslims.

When asked whether Tynkkynen's views could affect the bill's success, Mattinen tells GamesIndustry.biz that he thinks it could "but not in the way that you're expecting."

"In a weird way, the bill could benefit from his controversy in the sense that he may net the bill more publicity because he's such a controversial figure," he says.

However, Mattinen also stresses that the content of a bill should be more important than its proposers.

Prior to this bill, Finland has not attempted to regulate loot boxes.

Under the current law, for an activity to be considered a lottery and thus, gambling, participation must cost participants a fee, the outcome of the activity must be determined at least in part by chance, and the prizes participants could receive must have monetary value.

Macey tells GamesIndustry.biz that "like in most countries, Finland defines gambling in terms of money or money's worth." This means that the prize received from the gambling activity must have a monetary value.

The Finnish Police Board (or Poliisihallitus) oversees police work across the country and has a division called the Arpajaishallinto which governs the interpretation and enforcement of gambling law in Finland. The Arpajaishallinto does not consider most loot boxes to be gambling on the basis that most loot box prizes are only usable in-game and therefore, lack monetary value. As most loot box prizes cannot be directly exchanged for money, they are not usually regarded as a form of gambling.

Mattinen explains that Tynkkynen's bill intends to amend the Lotteries Act by extending the legal definition of a lottery to include 'virtually utilisable profits' (virtuaalisesti hyödynnettävän voiton) or prizes with virtual rather than monetary value.

This change is specifically targeting loot boxes and would mean that loot boxes would be considered a form of gambling even if their prizes lack monetary value.

However, the scope of this change is not immediately clear. The interpretation given to this phrase – 'virtually utilisable prize/profit/outcome' – will determine the bill's impact on the games industry in Finland. Even in Finnish, the term does not have an obvious definition.

According to Tynkkynen, the bill's proposer, the term should be interpreted as meaning that "prize would not need to have monetary value or exchange value for a loot box to be considered as gambling. So, if a loot box fulfils the other two features of gambling: it costs money to open a loot box and the content of it is unknown to a player" prior to purchase, then it would be considered gambling under this amendment "even if it is uncertain whether the prize has monetary value or not."

If the bill passes, loot boxes will be considered gambling even if the prizes received by players cannot be sold or traded, are non-transferable between user accounts, and can only be used in-game, meaning they lack extrinsic value. Loot boxes that have prizes that can only be sold or traded via third party sites would also be considered gambling.

Tynkkynen explains that if "the player is ready to pay money to get random content from a loot box, it shows that at least from the players point of view the content has real value."

The amendment, therefore, acknowledges that the subjective value that players attribute to in-game items often goes beyond their ability to financially profit from them. The bill would therefore put Finnish law in line with current psychological views on gambling motivation.

Tynkkynen hopes that through this amendment, "we would not have to argue constantly [about] whether [an] item has real monetary value and can be sold in some marketplaces…

"Thus, we would have much clearer limits and we would not have to update our approach every time there comes a new game or a new third-party platform that allows to sell or exchange loot box prizes."

It is also worth noting that the bill is not strictly limited to loot box prizes but encompasses all virtual prizes.

"Although it uses loot boxes as the frame and context for introducing this change, it doesn't specify loot boxes in the actual wording [of the amendment]," Macey says. "It just [talks about] paid games of chance [with prizes that] include virtual items which have some kind of usable value to the consumer. It's not just loot boxes, it's any chance-based transaction with a virtual reward."

"It's more about the entire concept of virtual goods being gambled upon and being won"Topias Mattinen

Both Macey and Mattinen welcome the increased attention being paid to this issue, with Mattinen saying that "it's a good thing that [the bill is] not narrowly focused on loot boxes."

"It's more about the entire concept of virtual goods being gambled upon and being won," he adds.

Therefore, this legal change would likely also consider skins gambling to be a form of lottery.

Another notable feature is the bill's decision to only regulate loot boxes where the player must pay real money to open them. Macey explains that the proposal makes "a conscious effort to distinguish normal acceptable chance-based situations from gambling activities."

Both academics felt that this was a sensible limit to put on the amendment as the aim of regulation should not be to eliminate all randomness from gaming. According to Mattinen, it isn't "correct to consider all randomised rewards spread across every form of digital game as loot boxes."

"It gets very muddled very quickly when you spread that concept as far as it can go," he says.

In terms of the potential impact that the bill could have, Mattinen first explains that, in Finland, there is a monopoly on traditional gambling. Only the Finnish Gambling Monopoly (Veikkaus Oy) can provide gambling services where money is directly involved (such as casinos or slot machines) in Finland. If loot boxes were considered monetary gambling, only the Veikkaus would be able to sell them.

Smaller 'raffles' are also considered gambling, but can be carried out by companies that are granted a permit from the Finnish Police Board. Under current Finnish law, a gambling permit cannot be given to a company that seeks to profit from gambling activities. If loot boxes are considered to be a type of raffle, then games companies would have to apply for a permit to include them in their games.

However, as Macey points out, "the only rationale for games companies to have these things in their games is that it makes them more money. And that's not really acceptable. Just because it makes you money doesn't mean it's fine."

"The only rationale for games companies to have these things in their games is that it makes them more money"Dr Joseph Macey

Mattinen expresses that "if loot boxes and similar mechanics like them were seen as a raffle under Finnish law, then it would be very hard for games companies to get a permit to sell these items."

Both academics were interested to see how Finnish games companies such as Supercell and Rovio might react if this legislation were passed.

"Companies like Supercell and Rovio contribute a huge amount in taxes to the Finnish economy and government," explains Macey. "This change would seriously impact their business models because they do free-to-play games like Clash of Clans."

Mattinen continues: "Would they even apply for the permit? I can't see them getting a permit to sell these gambling items because it's not permitted to companies that profit from these gambling activities… Either [games companies like] Supercell would have to change how they monetise their games or they just might pack up and leave the Finnish market. Companies can just stop making their games available in Finland rather than actually changing how they sell these items to the players. It's also hard to imagine a foreign company [like] Valve bowing down to Finland to change how it operates as a company."

While the bill could have a huge impact on how Finnish games companies are able to monetise their games, Tynkkynen explains why introducing it felt important and necessary to him.

"In Finland we have severe problems related to gambling," he says. "At least for me, it is shocking that in our country of 5.5 million people, we have 112,000 citizens who suffer [from] gambling problems, [according to] 2019 statistics. For many foreigners it can be surprising that, in Finland, it is [rare] if a regular grocery store doesn't have a row of slot machines right next to the cash desks.

"Just like slot machines in grocery stores, loot boxes inside video games bring gambling into our everyday lives, especially for the young people. It shouldn't be like that. Most already know how harmful online casinos and coin slots can be, but loot boxes form an area that is unknown for many, [even though] it is a very common thing for those who like to play video games."

Overall, both academics welcome the bill. Macey believes that while "gambling is not a problem in itself," changes must be made in "the way that it's provided" and there's a "duty of care and responsibility" from the studios that include loot boxes in their titles.

"That's where all these games companies are lacking," he says. "They're actively avoiding any kind of duty of care to their players."

However, he also raised concerns about how effective the bill is likely to be.

"By the time these changes come into effect, loot boxes aren't gonna be the same as they are now," he says. "As soon as there's any hint that this legislation will come into force, the [games companies] will just do something else. And they can implement the changes really quickly compared to legislation which takes years."

Both academics also highlight ways games companies might attempt to circumvent the legislation. They may give players free loot boxes when they purchase in-game currency (as companies in China have done to evade regulation) or have loot boxes that can only be purchased with a virtual currency that can be earned in-game, or bought for real money, which would eliminate the probability aspect of the transaction.

According to Tynkkynen: "We must understand that the phenomenon is relatively new and unfortunately not very simple. But the key thing is that we need to start somewhere and keep enhancing our regulation while we move forward. The most dangerous thing would be to do nothing.

"We might not have a silver bullet, but I think the Norwegian Consumer Council had a clear message we all should hear: loot boxes are a real problem and there´s an obvious need for regulation.

"While building regulation, we need to think one or two steps ahead and try to answer this problem. But at the same time, we need to be realistic: companies can be very innovative [when] trying to avoid regulation. Therefore, we need to follow how regulation [evolves] and be ready to react with enhanced control if a need for that emerges. This is a marathon, not a sprint."

"It's also hard to imagine a foreign company [like] Valve bowing down to Finland to change how it operates as a company"Topias Mattinen

Regardless of how effective the bill is at achieving its aims, both Macey and Mattinen emphasise the importance of increasing awareness of this important issue.

"It's very hard to effectively regulate games," Macey says. "I think the main thing is to get these issues talked about by the people in power, and [in the] wider society. If it's at least getting it on the agenda and getting them to start thinking about it, then that's something."

The bill has not yet had its first parliamentary reading. Before it becomes law, it must go through a long parliamentary process that may involve changes and amendments. Tynkkynen explains that "it is hard to estimate how quickly the bill will proceed." The next step is for the bill to be presented in a plenary session.

As the bill is in such early stages, it is hard to know whether it will pass and if it does, how different its content will be from the current proposal.

Like most legislation, this bill is not going to be decided upon quickly and it may be several years before its fate is determined. However, it is yet another example of continuing legislative interest in loot boxes, and how the games industry has been handling them.