Kevin Ramirez is a seasoned gamer. The California resident enjoys playing FIFA and Madden, two of the best-selling video games in the world.
But Ramirez is not a fan of the company that makes them, Electronic Arts. In fact, he’s the plaintiff in a newly filed, multi-million dollar lawsuit against the publisher, one that could impact the entire gaming industry.
The suit centers around “loot boxes,” a popular piece of the economy in many video games. Gamers spend real money to open the boxes, which unveil virtual items of varying value. They can contain a new weapon, a new character, a shortcut to higher levels or even discounts on future purchases.
The boxes have been a source of controversy for years, including lawsuits against other publishers, concern from state legislators and even a bipartisan bill last year than never made it out of the Senate. Some countries have banned them. Last week, the Federal Trade Commission released its findings from a day-long workshop focused on the issue.
What makes Ramirez’s lawsuit different is his argument. His lawyers claim that EA’s “predatory” loot boxes constitute illegal gambling, with a wager, inherent chance and a resulting win or loss. It’s the first major legal challenge to loot boxes in the U.S. based on an anti-gambling provision contained in a state criminal code.
Ramirez estimates that he’s spent about $600 on “Ultimate Team Packs,” which are popular in EA Sports games. In Madden, a pack might provide the gamer with the ability to play with an avatar of Joe Montana, Reggie White or other former stars. These packs, Ramirez’s attorneys argue, “are nothing more than a gambling bet, [featuring] completely randomized chances to win valuable professional players and other items.”
The highest rated players in FIFA and Madden can be found in loot boxes, but, Ramirez charges, “they are also the most difficult to obtain and the least likely to be received.” More often, the loot consists of “undesirable” players and collectibles.
At stake here may be the economics of how most video games make money. Once a basic transaction—buy game, own game—video games have evolved into a much more complex web of payments. Many popular games nowadays, like Fortnite, are entirely free to play, but they make billions off in-game microtransactions. Want an NFL uniform for your Fortnite character? That’ll cost around $15. Want to compete in special challenges with your friends? The Fortnite Battle Pass is roughly $10.
Loot boxes take this one step further. Instead of buying something specific, loot boxes let gamers test their luck for something potentially much more valuable. In addition to the gambling argument, critics say they often encourage addictive behavior, deliberately obscure the odds associated with the box contents, and are geared specifically toward young children, who often play video games outside of the supervision of their parents.
Topics discussed in the FTC workshop included the correlation between loot box purchases and problem gambling. David Zendle, a media effects researcher and University of York lecturer, told the group that behavior around loot boxes mirrors the gambling addiction seen in casino games. (Two years ago, the Belgium Gaming Commission determined that loot boxes constitute illegal gambling under the country’s gaming laws.)
“Both when you’re playing on a roulette wheel or when you’re opening a loot box, you’re wagering something that you have in your hand of value now on the uncertain hope of getting something of greater value later on,” he said. “Because of those formal similarities, people have been worried for a very long time that loot boxes might act as a gateway to problem gambling, particularly amongst younger and vulnerable populations.”
Loot boxes are found in a wide range of games, too. One recent study concludes that roughly three out of every five of the top games on the Google Play and Apple Store contain loot boxes.
They’re also becoming increasingly important for the bottom line at EA and other publishers. In fiscal 2020, for example, EA made $2.0 billion from physical game sales and full game downloads, but $2.8 billion from its “live services,” a category largely made up of in-game microtransactions. It’s by far the biggest revenue driver at the company, one routinely praised by EA executives. Ramirez’s legal team, which includes longtime consumer rights litigator Timothy Flood and seasoned consumer rights attorney Andrew Brown, compares the purchasing of packs to paying slot machines. These packs, the attorneys write, “have all the hallmarks of a Las Vegas-style slot machine, including the psychological aspects to encourage and create addiction.”
The packs are allegedly illegal under California’s anti-gambling statutes, which prohibit so-called “slot machines or devices.” This term is defined to include a “machine” or “device” that the user pays to play and then, by chance, the user might receive “a thing of value.”
Attorneys representing Ramirez contend that loot boxes fit within this definition. They highlight that a gamer uses a console, computer, smartphone or tablet to play an EA sports game, and then uses real-world currency to pay for the “opportunity” to open a pack. The pack, in turn, offers a randomized possibility to win game assets.
Maybe a Joe Montana avatar will appear, but more likely the loot will be less valuable. But buy another box and maybe it will have a Montana or another superstar. Chances are it won’t. Try again. And again. Rinse and repeat. Kind of like playing a slot machine.
The complaint contains claims for unlawful and unfair business practices, deceptive acts and unjust agreement. Ramirez insists that EA has “engaged in immoral, unethical, oppressive and unscrupulous activities that are substantially injurious to consumers.”
Ramirez’s attorneys also maintain that loot boxes “target” minors, “not unlike Big Tobacco’s ‘Joe Camel’ advertising campaign” attempted to create “addictive behaviors” for revenue generation. The attorneys cite academic literature backing Zendle’s research on problem gambling. As the attorneys see it, EA is willing to harm “children and families” in order to boost profits.
The alleged targeting of minors is a topic that also arises in companion lawsuits filed by the same attorneys against Google and Apple. The lawsuit against Google is brought by several plaintiffs, one of whom is a minor who allegedly has been “induced to spend his parents’ money and perhaps his own money” to purchase loot boxes in the game Dragon Ball Z. Similarly, the Apple case involves a minor who played Brawl Stars and purchased loot boxes “for the random-chance possibility of winning valuable items.” (Both Apple and Google require that apps on their platforms disclose loot box odds).
Ramirez, who seeks $5 million in damages, intends to have his case against EA certified as a nationwide class action on behalf of other gamers who bought loot boxes in EA games—including NHL, Star Wars Battlefront, Apex Legends and Plants v. Zombies. Whether Ramirez’s case is certified would be up to the presiding judge, U.S. District Judge Beth Labson Freeman, and such a decision wouldn’t occur for many months. But it is a looming threat to EA: A certified class action, potentially on behalf of thousands of gamers, would greatly expand the scope of possible monetary damages.
Like Google and Apple in their loot box lawsuits, EA will answer the complaint and deny the claims. Among other points, EA will contend that Ramirez’s attorneys have intentionally misread California’s anti-gambling laws to include loot boxes. They’ll likely emphasize that the state’s prohibition against slot machines was never intended to cover loot boxes. The state’s penal code was enacted in 1872, and case law involving the prohibition traces back to at least the 1940s, a time long before video games. Similarly, EA can contend that banning loot boxes could trigger a slippery slope—if loot boxes are banned because of their element of chance, could the same rationale apply to buying a pack of baseball cards?
EA will also highlight contractual language for gamers. The language instructs that gamers agree to resolve disputes through arbitration (rather than through litigation) and that they waive the right to pursue class actions.
Ramirez and other loot box plaintiffs don’t necessarily need to win jury trials in order to effectively “win” their cases. Should their cases withstand early motions for dismissal, they would enter the pretrial discovery process, during which attorneys for the gamers could demand emails and other sensitive information from these large, publicly-traded companies, and also require company officials to testify under oath. Often such companies offer settlement terms at that stage in order to avoid the disclosure of information that could damage the company’s reputation or that of its executives.
