From Tokyo, where gacha mechanics have been embedded in mobile gaming culture for over a decade, the legal drama unfolding in New York looks both familiar and significant. The state of New York has filed a lawsuit against Valve Corporation, the company behind the Steam gaming platform, arguing that its in-game loot box sales amount to an illegal gambling operation valued at tens of billions of dollars. It is an ambitious claim, and one that legal experts say will be very difficult to prove in court.
For readers less familiar with the mechanics at issue: loot boxes are randomised digital packages sold inside video games. A player pays real money for a key or a token, opens a virtual container, and receives a random cosmetic item, such as a weapon skin or character outfit. The outcome is unknown in advance. That element of chance is precisely what has drawn regulators' attention across multiple jurisdictions, from Belgium and the Netherlands to individual American states.
In most jurisdictions, gambling is defined by a three-part test: a player pays money for an outcome materially determined by chance, in the hope of receiving something of value. Valve's loot boxes pass the first two conditions without difficulty. The contested ground is the third: do randomised cosmetic items constitute "something of value" in the legal sense?
Jonathan Loiterman, a counsel at Foundation Law Group, told Ars Technica that the traditional conception of gambling involves the risk of receiving nothing at all. "Gambling traditionally means risking money and possibly getting nothing," he said. "Here, buyers can't lose their stake in the traditional gambling sense; they always receive an item. That looks more like buying a randomised product than placing a bet." Richard Hoeg, an attorney at Hoeg Law Firm who focuses on technology and gaming, drew a direct parallel to physical collectible markets. You pay for a pack of cards, you get a pack of cards. The stated value of the transaction is consistent, even if the specific contents vary.
That comparison is not merely rhetorical. If New York's argument prevails, the same logic could theoretically be applied to Pokémon card packs, blind-box toy sales, or promotional games like McDonald's Monopoly. Courts are generally reluctant to create legal precedents with such wide-ranging commercial consequences, and legal experts expect judges to be cautious here.
Where Valve's position becomes genuinely complicated is in its operation of the Steam Community Marketplace. Unlike most digital game platforms, Steam allows players to list cosmetic items they have obtained through loot boxes and sell them to other users in exchange for Steam Wallet funds. This introduces a secondary market with real economic pricing, and that changes the legal picture considerably.
Mark Methenitis, a video game law expert, was direct on this point: "The problem here is 100 per cent the ability to resell the items from the loot boxes. A loot box mechanic is fine when you can't turn around and resell the items because you're not getting something of value. When Valve is also providing a marketplace for those items, they've added the third element." In other words, the Steam Marketplace arguably completes the gambling test that loot boxes alone would fail.
New York's lawsuit goes further still, arguing that players can effectively convert Steam Wallet funds into cash by purchasing and reselling Steam Deck hardware on secondary markets. The state also contends that Valve tacitly endorses third-party services that allow direct cash-outs of Steam item inventories. These arguments are more legally adventurous. Loiterman cautioned that converting digital items into cash through "several indirect steps risks stretching gambling law beyond its traditional limits." On the question of third-party platforms, Methenitis noted the law remains genuinely unsettled, pointing to a paper he wrote nearly two decades ago examining the legal implications of third-party gold resellers in World of Warcraft. The core question, whether a platform bears responsibility for what users do with its economy outside its walls, has never been cleanly resolved.
The broader legal consensus among the lawyers consulted by Ars Technica is sceptical. Cases challenging loot box systems as gambling have failed in other jurisdictions, partly because gambling statutes were drafted with casinos and lotteries in mind, not digital cosmetics markets. Hoeg was blunt in his assessment: "I view it as a weak case offered primarily for political grandstanding over real legal effect." He added that even if loot boxes "may start to smell a bit like gambling," he would be surprised if courts adopted that characterisation without specific legislative reform directing them to do so.
That last point deserves attention, particularly for Australian readers. Australia's own regulatory framework around loot boxes remains fragmented. The Australian Competition and Consumer Commission and state-level gambling authorities have fielded inquiries about whether loot boxes fall within existing gambling laws, but no comprehensive federal position has been established. The Interactive Gambling Act 2001 was not written with digital cosmetics economies in mind, and the gap between the law as written and the technology as it currently exists is substantial.
New York's lawsuit, whatever its ultimate legal outcome, is a signal that governments are growing less comfortable leaving this space to industry self-regulation. Whether the answer is a court ruling or a legislative fix, the era of treating loot boxes as an entirely separate category from gambling is probably drawing to a close. The more honest question for policymakers, in Albany and in Canberra, is not whether randomised paid mechanics resemble gambling in practice, but how precisely to draw a regulatory line that protects consumers without sweeping up every collectible card pack and toy surprise egg in the process. That is a genuinely difficult problem, and the New York case, for all its legal weaknesses, at least forces the question into the open.