ARE LOOT BOXES GAMBLING? A CRATE START FOR A NEW GAMBLING FRAMEWORK Whether the Dutch and Belgian legal definitions of gambling coincide with what science defines as gambling. C. L. E. Arrigoni Anr.: 601561 Snr.: 2030535 Thesis Supervisor: Colette Cuijpers Second Supervisor: Lisa van Dongen October 2019 TABLE OF CONTENTS 1. INTRODUCTION ..................................................................................................................................... 5 1.1 Background on the issue .......................................................................................................................... 5 1.2 Research Question and sub-questions ..................................................................................................... 6 1.3 Methodology and Structure ..................................................................................................................... 7 1.4 Limitations and Preliminary Remarks ..................................................................................................... 8 2. THE SCIENCE: WHAT IS GAMBLING? ............................................................................................... 9 2.1 Behavioural Addiction: Gambling, the Silent Destroyer ......................................................................... 9 2.2 Brain Chemistry: Dopamine, hijacker of the brain ................................................................................ 12 Dopamine, the pleasure ‘I want’ chemical. ........................................................................................... 12 Uncertainty as a motivator ..................................................................................................................... 14 2.3 Cognitive Neuroscience ......................................................................................................................... 14 The Near-Miss Effect – “I’m not losing, I’m almost winning”. .............................................................. 14 The Skinner Box – The Operant Conditioning Chamber ........................................................................ 16 2.4 Psychological factors ............................................................................................................................. 17 Availability Heuristic ............................................................................................................................... 17 Gambler’s and Hot Hand Fallacy ............................................................................................................ 18 Illusion of control .................................................................................................................................... 18 Loss aversion principle – Chasing losses ................................................................................................ 18 Sunk cost fallacy ...................................................................................................................................... 19 Dark flow - Losses Disguised as Wins ..................................................................................................... 19 2.5 Business models – How casinos exploit gambling ................................................................................ 19 The House Edge ....................................................................................................................................... 19 Marketing strategies: Attract, capture and induce to return ................................................................ 20 2.6 Conclusion ............................................................................................................................................. 20 3. THE LAW: HOW IS GAMBLING DEFINED ....................................................................................... 22 3.1 European Level – Tug of War ............................................................................................................... 22 Gambling Legislation in the EU ............................................................................................................... 22 Why? Common issues ............................................................................................................................. 23 Case Law .................................................................................................................................................. 24 3.2 The Netherlands ..................................................................................................................................... 24 The Law: Gambling - WOK ...................................................................................................................... 24 The Law: Online Gambling - KOA ........................................................................................................... 25 3.3 Belgium ................................................................................................................................................. 27 The Law - Gambling................................................................................................................................. 27 The Law – Online Gambling .................................................................................................................... 28 Are loot boxes gambling? – A crate start for a new gambling framework Conclusion ............................................................................................................................................... 29 4. APPLICATION – LOOT BOXES .......................................................................................................... 30 4.1 What are Loot Boxes – Characteristics ................................................................................................. 30 The Notion of RRMs ................................................................................................................................ 30 Types of Loot Boxes – A helpful economic perspective ........................................................................ 33 4.2 Overlap with Gambling ......................................................................................................................... 35 4.3 The Brain ............................................................................................................................................... 35 Strikingly Similar Business Techniques .................................................................................................. 38 4.4 Conclusion – Loot Boxes ARE Gambling ............................................................................................ 39 5. LOOT BOXES AND THE LAW ............................................................................................................ 42 5.1 Overlapping Elements ........................................................................................................................... 42 5.2 Netherlands – Partial Coverage, Some Loot Boxes Still Legal ............................................................. 43 5.3 Belgium – Covered and Illegal due to Licencing Impossibility ............................................................ 43 5.4 Current Events – “Surprise Mechanics” ................................................................................................ 43 5.5 Conclusion ............................................................................................................................................. 45 6. CONCLUSION – WEAK POINTS ....................................................................................................... 46 5.1 Dutch Law Weakness ............................................................................................................................ 46 Possible Solution(s) Regarding Loot Boxes ............................................................................................ 47 New forms of gambling .......................................................................................................................... 47 5.2 Conclusion ............................................................................................................................................. 48 7. ADDITIONAL TABLES AND APPENDIX .......................................................................................... 49 List of Abbreviations ................................................................................................................................... 49 Gaming (alphabetical) ............................................................................................................................. 49 Legal (alphabetical) ................................................................................................................................. 49 Scientific (alphabetical) .......................................................................................................................... 49 Technical (alphabetical) .......................................................................................................................... 49 Gaming Terms (alphabetical)* ............................................................................................................... 50 List of cited or mentioned videogames (by RRM type) ......................................................................... 51 8. BIBLIOGRAPHY ..................................................................................................................................