Loot boxes are a popular mechanic in many video games. If you haven’t been living under a rock for the past few years, you will have likely heard that Loot Boxes are quite problematic worldwide.  These items, often purchased with real-world currency, face challenges under most countries’ laws regarding lotteries and gambling. In South African law, the question of whether loot boxes constitute gambling has not been expressly addressed. If you decide to adopt the dreaded loot box, we have a few recommendations to ensure that you do this lawfully.

Are loot boxes gambling in South Africa?

South Africa regulates gambling under the National Gambling Act (NGA). We also have other laws that regulate specific gambling activities, including lotteries, betting and promotional competition. The NGA defines gambling as encompassing any game where chance determines an outcome with monetary implications. If lootboxes fall within this definition, game developers need to comply with the NGA.

Key compliance challenges for publishers

We’ve identified the following important compliance challenges for video game publishers:

  • Licensing requirements
  • Age restrictions
  • Advertising restrictions
  • Consumer protection laws

Licensing requirements

If lootboxes fall under the NGA, you will need to apply for a gambling license. Application for gambling licences include strict vetting, substantial license fees and constant ongoing compliance with the licensing terms. If publishers do not have a license, they could be liable for penalties under the NGA.

Age restrictions and classifications

South African gambling laws prohibit minors from participating in gambling activities. If games have any evidence of gambling within them, you also run the risk of garnering the attention of the Film and Publications Board. To not fall foul of this, vide game publishers need to implement robust age verification systems to ensure their games are compliant. Age verification systems are much more than just verifying a user’s date of birth through an online sign up, you need to ensure that you have sufficient systems in place to verify someone’s age.

Advertising restrictions

Our gambling legislation and advertising legislation restricts how you advertise gambling. Lootbox promotions or campaigns need to avoid misleading claims and need to disclose the odds that someone has of receiving different rewards. Transparency is always key in mitigating risk.

Consumer Protection laws

South African consumer protection laws regard fairness and transparency as key principles in consumer contracts. Publishers could face complaints or legal action under the Consumer Protection Act.

Actions you can take

Publishers need to balance their creative freedom with proper compliance strategies to ensure that their video games comply with the law. We can help you:

  • review whether you have implemented loot boxes legally by reviewing your video game and monetisation strategies; or
  • keep you up to speed by consulting with one of our specialised video game lawyers.