Pay-to-win or pay-to-lose? Monetization in gaming between business and consumer deception

The computer games industry has experienced unprecedented economic growth in recent years. In Germany alone, over 5.5 billion euros were generated from computer and video games in 2022 – a market that has expanded rapidly in just a few years. This turnover includes not only the sale of games themselves, but also a significant proportion of in-game purchases and in-app purchases, i.e. monetization within games. Modern games are increasingly being operated as a service (“games as a service”) and are often financed by ongoing revenue from the game. Free-to-play titles in particular entice players with free entry, but generate their profits through optional in-game purchases. These new business models raise legal questions: Where does legitimate business practice end and where does consumer deception or unfair trading begin?

At the same time, consumer protection and youth protection aspects are coming into focus. Around a fifth of gamers are minors; although the average age of gamers is around 38, children and young people make up a significant proportion of the audience. Monetization mechanics – such as random-based loot boxes or psychologically clever purchase incentives – can have particularly powerful (and potentially harmful) effects on underage gamers. Parents, consumer advocates and regulatory authorities are increasingly asking whether certain practices in the gaming sector are compatible with applicable law. It is in this context that the“pay-to-win or pay-to-lose?” debate has arisen: While pay-to-win describes a model in which paying players can buy gaming advantages,“pay-to-lose” resonates with the accusation that consumers end up on the losing side – be it financially or through a tarnished gaming experience.

This article analyses monetization in gaming from a legal perspective. It examines common monetization mechanisms and classifies them from a legal perspective. Subsequently, the relevant areas of law – from unfair competition law (UWG) to youth media protection and gambling law – are systematically examined, taking into account the legal situation in Germany, Austria, the EU and the USA. International comparisons (such as the developments in Austria, relevant EU directives and the reactions in the USA) serve to classify the German legal situation. Differences between platforms (browser game, mobile app, PC/console game) are considered as well as the economic context (start-up vs. AAA studio, ethical limits of monetization). Finally, there is a practical conclusion with recommendations for action for game developers on how legally compliant monetization can be designed – for example through suitable contract design, clear terms and conditions, parental controls, compliance with platform rules and proactive protection against regulatory risks.

Definition and systematics of common monetization mechanisms

A basic understanding of the monetization mechanisms used in gaming is a prerequisite for legal classification. Key terms and models are defined and systematically classified below:

Free-to-play, microtransactions and in-game currency: Many modern games follow the free-to-play model: the base game is free, revenue is generated via microtransactions. A microtransaction is usually a small purchase that can be initiated by the player at any time from the game menu in exchange for real money, typically in the price range of a few cents to a few euros. Such purchases are often made using an in-game currency. This is virtual credit (e.g. gold coins, gems, points) that the player either earns by playing or – more frequently – purchases with real money. The use of an in-game currency serves several purposes: Firstly, it technically facilitates the processing of many small purchases; secondly, it disguises the specific amount of expenditure for the consumer, as in-game pricing is usually in virtual currency. It is therefore not always immediately obvious to the player what amount in euros is behind, for example, “500 crystals” – a deliberate design that can lead to impulse purchases. Legally, questions of price transparency are relevant here. Under certain circumstances, the deliberate concealment of real costs can be considered misleading or an unfair commercial act (see 3. below).

Pay-to-win and in-game advantages for a fee: Pay-to-win refers to a design philosophy in which players can gain game-changing advantages by spending money. These can be, for example, powerful equipment, better weapons, exclusive character abilities or simply a time advantage (skipping waiting times or faster leveling). In extreme cases, the balance of the game is thrown out of kilter: non-paying players can hardly keep up and winning is effectively linked to the amount of money invested. Critics see this as consumer deception if a game is presented as fair competition but actually favors paying customers. The question also arises as to whether such a business model is compatible with the principles of youth and consumer protection, as younger or impulsive players in particular could be tempted to spend more and more money in order to remain competitive. However, pay-to-win mechanisms are difficult to regulate as long as the purchases are offered transparently. From a purely civil law perspective, we are in the area of freedom of contract here – the player decides voluntarily to invest money. However, accompanying circumstances (such as aggressive incentives, misleading promises or exploiting the inexperience of minors) can make such monetization illegal (see the section on fair trading law).

Loot boxes (loot boxes) and gacha systems: Loot boxes are virtual boxes, packages or capsules that contain random content and are usually available for a fee. The exact definition varies slightly depending on the source, but it is usually a purchase mechanic where the player does not know what item (e.g. a cosmetic “skin”, a rare character or a power-up card) they will receive at the time of purchase. A mixture of common and rare items is typical, with low win probabilities for high-value content to encourage players to make multiple purchases. Loot boxes can either be purchased directly for real money or (which is more often the case) for an in-game currency previously purchased with real money. In some cases, loot boxes can also be earned through gameplay (e.g. as a reward for achievements) or are given away at special events – but at the heart of the legal problem are loot boxes purchased for money. The concept is similar to classic games of chance or lotteries: Staking money in the hope of winning a valuable prize. An Asian counterpart is the Japanese gacha system, named after vending machines (“gashapon”) in which capsules containing random toys are drawn. In digital gacha games (particularly common in the mobile sector), players acquire random new characters or items of equipment by drawing lots. Loot boxes are legally relevant from two points of view in particular: Youth protection/media supervision (because they could make gambling elements available to minors) and gambling law (the question of whether loot boxes qualify as illegal gambling, see section 5). In terms of consumer protection law, loot boxes also raise the question of misleading consumers and exploiting their cognitive weaknesses.

Other monetization models: In addition to the aforementioned main categories, there are other common mechanics. Battle pass or season pass systems, for example, offer a range of in-game benefits for a fixed fee (e.g. monthly or per “season”), typically a mix of cosmetic content and light gameplay bonuses that can be unlocked over the course of the season. They are a predictable source of income and reward regular play, but without the randomness of loot boxes – usually legally unproblematic as long as they are clearly communicated. DLCs (downloadable content) and expansion packs are classic additional purchases (new levels, story content, etc.) and have been established since the 2000s; they basically fall under normal purchase contracts for digital content. Advertising financing (e.g. optional advertising for bonus items) should be mentioned for the sake of completeness – this concerns data protection and labeling issues, but less the UWG or gambling law.

Secondary markets play a special role: In some games, virtual items can be resold or traded, whether officially via integrated marketplaces (e.g. Steam Marketplace for skins) or unofficially via third-party platforms. This can lead to monetization by the players (keyword “real-money trading”) and have legal implications for gambling. In this article, however, the focus is on primary monetization by the game operators themselves.

The system can be summarized as follows: Game developers often combine several mechanics to generate revenue – such as microtransactions for cosmetic items (which are usually uncritical), pay-to-win offers for impatient players, and loot box systems to maximize sales through psychological incentives. The legal assessment of these techniques depends on their specific design. In the next section, we will first look at the law of fair trading: When do such practices qualify as unfair or misleading?

Unfairness and consumer protection (UWG)

Monetization mechanics in games are subject to the rules of competition law, in particular the Unfair Competition Act (UWG). This protects consumers from unfair business practices by companies. In the context of video games, which are usually sold in a B2C (business to consumer) relationship, the UWG is relevant when it comes to misleading practices, aggressive sales methods or other unfair influences on the player-consumer.

The central provisions of the UWG for our question are: § Section 3 UWG (prohibition of unfair practices in general), Section 3a UWG (breach of law – breaches of other laws that are likely to harm the interests of consumers), Section 5 UWG (misleading commercial practices), Section 5a UWG (misleading practices by omission), Section 4a UWG (aggressive commercial practices) and the annex (blacklist) of the UWG, which lists practices that are unlawful per se. The German standards implement the requirements of EU Directive 2005/29/EC on unfair commercial practices and must therefore be viewed in a European context.

Misleading about costs and performance (Section 5 UWG): A key issue is whether free-to-play games mislead consumers about the actual costs incurred. If a provider advertises a “free” game, although reasonable progress is only possible with numerous microtransactions, it could be assumed that the price components are misleading. Case law has not yet conclusively ruled on this, but the extent to which advertising with “free” is inaccurate if significant paid content is added (“free, but…”) is being discussed in the literature. As early as 2014, the EU Commission insisted within the Consumer Protection Cooperation network that games should not be advertised as “free” if there are cost traps for progress – a measure that led to a change in labeling in app stores (Apple, for example, dispensed with the term “free” and refers to “download” or “get”). According to the German Unfair Competition Act, advertising is likely to be misleading if essential information about costs incurred is concealed (Section 5a (2) UWG). A game that initially appears to be free of charge but systematically pushes the player into purchasing situations must at least make this clear. In-game currencies can also be problematic: If the true monetary value of virtual currency is disguised or unfavorable conversion rates (e.g. €1 = 80 diamonds, so that no round amount fits and there is always remaining credit) are used to stimulate more purchases, this could be objected to as misleading about the price. However, it is essential that the average consumer must have recognized that costs are incurred – which is usually clear after a short period of use in common free-to-play games (they provide clear purchase options in the UI). Specific UWG cases due to “free-to-play” deception have rarely become public to date; in many cases, the authorities and associations are content with informal influence (such as the app store wording mentioned above). In practice, a clear price indication and clear labeling of in-game purchases prevent accusations of misleading information.

Unfair influence and aggressiveness (Section 4a UWG): Many monetization strategies work with psychological pressure. Examples: A time-limited special offer pack (“50% discount on the mega pack today only, then never again!”) creates artificial scarcity and time pressure – techniques that can be understood as pressure to buy. Or a game makes progress drastically more difficult after a certain point (“hard paywall”), so that players become frustrated and feel pressured into buying a solution package. § Section 4a UWG prohibits aggressive commercial actions that significantly impair consumers’ freedom of choice through harassment, coercion or undue influence. The boundary here is fluid: the offer of an optional purchase does not in itself constitute aggression. Only if the course of the game is deliberately designed in such a way that a player comes under undue pressure can unfairness be present. One example from practice was the criticism of certain mobile games that encouraged users to re-enter and purchase through constant pop-ups and push messages – a possible form of harassment. The targeted addressing of emotional weaknesses (e.g. “You’ll let your friends down if you don’t buy the power-up now!” in a team game) can also be considered unlawful. So far, there have been no individual decisions on this, but consumer protection authorities are increasingly critical of such dark patterns in game design. In 2025, European consumer protection agencies published guidelines that, for example, strongly advise against disguising the true cost of virtual currencies or exerting excessive pressure over time. These guidelines are based on the idea that such mechanics are likely to distort the free will of consumers – which is contrary to the UWG.

Direct appeals to children to buy (Annex UWG No. 28): The UWG Annex classifies certain practices as per se unfair – without further examination. No. 28 of the Annex prohibits advertising with a direct appeal to children to buy, i.e. encouraging children to buy a product themselves or to persuade their parents to do so. This was the subject of the highly publicized“Runes of Magic” case. In the online role-playing game “Runes of Magic”, posts were published in a forum with phrases such as “Grab the opportunity and give your armor and weapons that certain something!” using the “you” form of address and language aimed at young people. The Federal Court of Justice considered this to be an inadmissible appeal to children to buy and confirmed with Judgment of July 17, 2013 (Case No. I ZR 34/12 – Runes of Magic) that such advertising violates No. 28 of the Annex to Section 3 (3) UWG. The BGH clarified that the prohibition does not depend on whether children are actually predominantly present in the game – the decisive factor is the design of the advertising, which is objectively aimed at a child audience. Terms such as“Pimp your character!” or the trivializing language were classified as suggestive and particularly enticing for children. The result of the ruling was an advertising ban on such in-game appeals aimed at children. This ruling is a clear warning shot for the entire industry: anyone who formulates appeals to buy ingame or in accompanying media (forums, social media) must take strict care not to use child-friendly animated language, provided the offer is at least also aimed at minors.

Breach of law (Section 3a UWG): Section 3a UWG declares a commercial act to be unfair if it violates a statutory provision that is also intended to regulate market behavior in the interests of market participants and if this violation is likely to significantly impair the interests of consumers. This somewhat unwieldy standard – also known in fair trading law as the “market conduct rule” – plays an important role in monetization in gaming. This is because various special laws come into play here (protection of minors, gambling law, information obligations), to which Section 3a refers. In concrete terms, this means that if a game operator violates youth protection regulations (see the next section) or prohibitions under gambling law (see section 5), this violation may also be unfair if it has an impact on market behavior. Example: If a loot box turns out to be prohibited gambling within the meaning of the German State Treaty on Gambling, the offering of such a mechanic would not only be illegal under gambling law, but would also qualify as unfair competition vis-à-vis law-abiding competitors and consumers under Section 3a UWG. Consumer protection associations or competitors could then assert claims for injunctive relief under the UWG. A recent example was provided by Austria (more on this later): Sony was convicted there for violating the gambling monopoly – such a breach of the law would also be relevant in the German UWG context via Section 3a. Equally conceivable: A breach of information obligations under civil law (e.g. from the Consumer Rights Directive, implemented in the German Civil Code, e.g. lack of withdrawal instructions for in-game purchases of additional content) could be punished via Section 3a UWG. In practice, however, large providers endeavor to comply with such formal obligations (e.g. information in the store that there is no right of withdrawal as soon as the virtual content is delivered, in accordance with Section 312f BGB).

Interim result consumer law: From the perspective of fair trading law, it can be stated: Many pay-to-win and free-to-play mechanisms are within a legally permissible framework as long as transparency is maintained and there is no undue influence. The misleading facts call for clear communication about prices and game conditions. The prohibitions on aggressiveness require that the player is not coerced into buying the game through excessive pressure – a limit that has not yet been specified by court rulings in game design practice, but can certainly be exceeded in blatant cases. The protection of minors as a rule of market conduct and gambling law as a rule of market conduct always resonate in the background: What is prohibited there also makes the UWG vulnerable. Addressing children is particularly sensitive: With the Runes of Magic ruling, the courts have put a clear stop to this, which should be observed by all developers and publishers – advertising in games must be designed in such a way that it does not give the impression of directly encouraging children to buy.

Having looked at general fair trading and consumer protection law, we now turn our attention specifically to the protection of minors in the media. While the UWG is primarily aimed at regulating market behavior, youth protection laws are specifically designed to protect young players from potentially developmentally harmful offers.

Youth media protection

Computer games as a medium are subject to differentiated supervision in Germany with regard to the protection of minors. Two central sets of regulations are intertwined: the Federal Youth Protection Act (JuSchG) and the Interstate Treaty on the Protection of Minors in the Media (JMStV) of the federal states. In addition, there are self-regulatory institutions such as the USK (Entertainment Software Self-Regulation Body) for media and the FSK/FSF for film/television, as well as the Commission for the Protection of Minors in the Media(KJM) as a supervisory body for telemedia. The question of monetization is: Which mechanisms could be considered harmful to minors or impairing their development, and what legal consequences would this have?

Age ratings and descriptors (JuSchG and USK): The JuSchG stipulates that public games may only be made available to children and young people if they have an age rating or are obviously harmless. Traditionally, computer games have been tested by the USK primarily with regard to content such as violence, sexuality, drugs, etc. However, since the amendment to the Youth Protection Act on May 1, 2021, “interaction-related risks” have also been explicitly taken into account. § Section 10a of the JuSchG lists purchase incentives, gambling elements, communication risks and usage time risks as criteria to be taken into account. In practice, this means that when reviewing a game for the USK, the reviewers must now pay attention to whether the game contains loot boxes or similar gambling elements, whether there are intensive in-game purchase appeals or whether it has mechanisms that encourage excessive gaming (keyword: risk of addiction). These factors can influence the age rating. Although it cannot be assumed that a game that is otherwise suitable for young people will automatically receive a “USK 18” rating simply because of the presence of loot boxes, such content could result in an upgrade (e.g. from USK 6 to USK 12) if it is not considered appropriate for younger children. The USK has also introduced additional descriptors – small symbols or additional labels that indicate in-game purchases, for example. For some time now, packaged games (and digital labeling) have indicated whether “purchasable content” is offered in the game. Consumers, especially parents, should be able to recognize this: This game is rated 6+, but contains purchase options or even “random purchases”. A special descriptor for “gambling-like mechanics” (such as loot boxes) is under discussion or has been implemented at European level by PEGI (PEGI has introduced the label“In-Game Purchases (Includes Random Items)“). In Germany, the USK is also working on systematically including such information. The background to these measures is the realization that cost traps and gambling mechanics can certainly represent a negative factor for development – for example by tempting children to spend money uncontrollably or lowering their inhibitions towards real gambling.

Interstate Treaty on the Protection of Minors in the Media (JMStV) and online content: The JMStV regulates the permissibility of content in telemedia (i.e. online games and apps in particular) for young people. According to Section 5 JMStV, content that is likely to impair the development of children or young people may only be offered in such a way that it is not accessible to the respective age group (e.g. through broadcasting time restrictions or technical means such as age verification). In contrast to the JuSchG, where the USK labeling is in the foreground, in the online sector it often depends on a self-check by the providers or on subsequent checks by the KJM. This is relevant here: Could excessive pay-to-win elements or loot boxes, for example, cause a title to be classified as “developmentally impairing”? According to the prevailing opinion in the literature and initial statements by the KJM, loot boxes should generally be included in the assessment. However, there is still a lack of precedents in which an online game has been classified as “18+” or similar solely due to monetization practices. One conceivable scenario: If the content of an online game is actually suitable for all age groups (e.g. a colorful children’s game), but contains an aggressive money game system (constant loot box raffles that offer strong incentives for addiction), the KJM could come to the conclusion that this element is too demanding for children and younger adolescents. The provider would then have to take technical precautions to keep young people away – which would in fact deprive the game of its economic basis if it was primarily aimed at this target group. So far, the supervisory authority has been cautious here. However, the 2021 amendment has made it clear that youth media protection no longer only considers purely content-related aspects (violence, etc.), but also economic and socialization risks. For developers, this means that aspects relating to the protection of minors should be taken into account when planning monetization. A game with random-based purchases should – if you want to get by without age restrictions – provide mechanisms that make abuse by minors more difficult (e.g. spending limits, a clear note in the terms and conditions stating “purchases only from 18 or with parental consent”, etc.).

Self-regulation and rating systems (USK, PEGI, ESRB): In addition to the legal requirements, the self-regulatory bodies play a pragmatic role. In Germany, the USK cooperates closely with the state youth authorities; its age ratings in accordance with the JuSchG have a quasi-legal character. Internationally, PEGI (European age rating system, relevant in many EU countries) and ESRB (US rating agency) are relevant. Interestingly, ESRB in the USA responded to political pressure (including hearings in the US Senate) in 2018 and introduced an“In-Game Purchases” label, supplemented in 2020 by“Includes Random Items” for loot boxes. This happened even though there was no legal obligation – the industry hoped to avoid the threat of regulation through voluntary labeling. PEGI followed suit with similar notices. At their core, these labels serve to protect minors and consumers: parents should be warned that a game may entail further expenditure. While the ESRB ratings have no legally binding effect in the USA (there is no central statutory age rating system for games there, apart from retail sales guidelines), they are de facto enforced by platforms and retailers. An AO (Adults Only) rating, for example, which could theoretically be awarded due to explicit content or excessive gambling mechanics, means that console manufacturers do not allow the game to be released. In Europe, a PEGI 18 rating due to gambling mechanics does not automatically result in sales bans, but it does have a strong influence on public perception. Overall, it is clear that the industry itself has recognized the need for transparency and caution when dealing with underage gamers. For example, major providers such as Nintendo, Sony and Microsoft jointly announced in 2019 that they would disclose loot box probabilities and improve tools for parents (e.g. spending limits via family settings). Although this is (still) voluntary, it reflects the trend: the protection of minors in gaming is being interpreted more broadly than before and monetization systems are under scrutiny.

Civil law aspects for minors: One point that is often overlooked in this context is general civil law: children and young people only have limited legal capacity. Purchase contracts concluded by a minor without parental consent – including in-app purchases – are invalid (Sections 107, 108 BGB) unless they were paid for with funds that were given to them for this purpose or at their free disposal (Section 110 BGB, the so-called pocket money paragraph). This means that if a 13-year-old charges €100 in a game without their parents’ knowledge, the provider is not actually entitled to keep the money if the parents refuse to give permission. In practice, there have already been cases in which parents have demanded refunds from platform operators (Apple, Google) because their children had spent unauthorized sums. In response, the major platforms have introduced processes to prevent such purchases (password request, limits) and offer goodwill in the event of refunds. From a legal perspective, it is clear that youth media protection and civil law are intertwined here. A provider who deliberately sets out to entice underage customers to spend money runs the risk of not only violating youth protection regulations, but also of producing masses of ineffective contracts – with all the financial and legal consequences. This is less a UWG problem than a civil law problem, but it underlines the need not to base monetization on exploiting the inexperience of minors. A game aimed at minors should, within reason, ensure that payments are only made with parental consent (e.g. through technical hurdles or clear instructions).

In summary, youth media protection in Germany and many other jurisdictions has begun to respond to the challenges of in-game monetization. Legal adjustments (such as in the JuSchG 2021) and voluntary industry solutions aim to protect children from excessive purchase incentives and gambling simulations without abandoning the principle of free play. Game developers should take this development seriously: Good game design takes the protection of minors into account not as an afterthought, but from the very beginning – for example, by using lootbox-like elements only in games for adults or at least embedding them carefully (transparency, limits) and by giving parents support in monitoring them. In the following discussion of gambling law, we will see that the balancing act between loot boxes and gambling can hardly be separated from the protection of minors.

Gambling law and loot boxes

The debate surrounding loot boxes in computer games has become particularly heated since the question of whether they could constitute illegal gambling has been regularly raised. In German law, the regulations on gambling are primarily governed by the Interstate Treaty on Gambling (GlüStV 2021), supplemented by the German Criminal Code (e.g. Section 284 StGB for unlicensed gambling) and the respective implementing laws of the federal states. Whether a monetization mechanism in the form of random rewards is actually to be classified as (illegal) gambling depends on several criteria.

Legal definition of gambling and loot boxes as a dispute

According to the GlüStV 2021, a game of chance exists if, in the context of a paid game, the decision on the prize depends entirely or predominantly on chance and the prize is represented by an asset. Put simply, three points must be cumulatively fulfilled:

1. Stake in cash (or cash equivalent).
2. Random outcome.
3. Winnings with an economic value that can exceed the stake or at least represent a significant monetary advantage.

It is undisputed that loot boxes can involve a monetary stake: In most cases, the boxes are purchased for real money or previously acquired in-game currency. The second point, randomness, is also regularly fulfilled: The specific content of the box (rare or common items) is determined by a random generator. The big question of contention revolves around the prize: is it an economic advantage if a player draws a rare virtual weapon or a rare character, for example? From a legal point of view, the answer is yes if the item can be converted into money. However, most providers try to prevent this by designing their terms and conditions in such a way that virtual trading between players is either not possible at all or only possible to a limited extent.

Argumentation for classification as a game of chance

A number of lawyers and representatives of the authorities are of the opinion that loot boxes are in fact gambling because:

• Very similar to lotteries: The player pays for a random outcome, hopes for a “win” (rare item) and in practice can receive a “riveting item” in the worst case.
• High risk of addiction: The reward system is similar to that of a wheel of fortune or casino principle (short dopamine release on potential winnings, repeated purchases). According to some studies, this poses similar risks to classic gambling.
• Factual intrinsic value: Rare virtual items can be sold or exchanged on unofficial markets, which takes place de facto despite the prohibition of terms and conditions. This gives the item a real monetary value. Whether this gray market is officially permitted or not does not change the fact that players can have a real financial interest.

Argumentation against classification as a game of chance

On the other hand, there are publications and statements that do not classify loot boxes as classic games of chance:

• No direct chance of winning money: unlike lotteries or casinos, it is not possible to win real money back with the item itself. In an online poker or slot machine game, the capital invested potentially increases. With loot boxes, you only ever get virtual items that have no monetary value in the official system.
• An integral part of the game: Loot boxes are embedded in the regular gameplay and are primarily used for entertainment, not to make a profit as in gambling.
• Pure in-game values: The legal asset value is questionable as long as there is no official exchange back into euros and any transaction outside the GTC (grey market) is illegal or unauthorized.

Current legal situation in Germany

German gambling supervisory authorities are monitoring loot boxes but – unlike the Belgian Gambling Commission, for example – have not yet issued any blanket bans. Decisive court proceedings have so far failed to materialize or have been terminated at an early stage. Although there are statements from individual state authorities that suggest a proximity to games of chance, a clear classification is still open (as of 2025).

In 2018, the Ministry of the Interior, Rural Areas and Integration in Schleswig-Holstein temporarily investigated whether FIFA Ultimate Team packs and similar loot box systems were in breach of the GlüStV. Ultimately, a ban was not imposed. The official explanation was that they wanted to wait for further expert opinions first. This resulted in a kind of toleration. The German Association for Telecommunications and Media repeatedly emphasized that loot boxes are a legitimate financing model and do not fall under gambling law as long as no real cash flow is possible.

The role of § 284 StGB

§ Section 284 StGB (Unlawful organization of a game of chance) could theoretically apply if loot boxes were organized without permission, provided they are a game of chance within the meaning of the StGB. Many see the element of “gain of pecuniary value” as not being fulfilled here, as one can rarely speak of a clear increase in pecuniary value. The threshold under criminal law is high; it is unlikely to be regularly exceeded in the case of loot boxes. Here too, there is no judicial precedent in Germany.

GlüStV 2021 – No explicit regulation on loot boxes

The GlüStV 2021 has expanded and covered the legal spectrum of online gambling (poker, virtual machines). Loot boxes are not explicitly mentioned. Most providers are of the opinion that the GlüStV is simply not applicable. Nevertheless, there is a risk that loot boxes could be classified as “other public gambling” in a future dispute. The consequences would be far-reaching: offering such mechanics without a license would be prohibited. Obtaining a license for loot box games seems impossible, as the GlüStV 2021 only provides for certain forms of gambling to be eligible for licensing (online poker, online slots, online sports betting).

Result: In practice, loot boxes will remain tolerated in Germany as long as no court finds otherwise or a new political will emerges. Many developers protect themselves by making the in-game items non-convertible and disclosing the drop rates – at least under pressure from platform operators.

Austria: Hermagor and OLG Vienna – opposing trends

In Austria, the situation has worsened significantly. After the District Court of Hermagor (ruling of 23.2.2023) ruled that FIFA Ultimate Team packs (FUT packs) constitute illegal gambling within the meaning of the Austrian Gambling Act (GSpG), a certain “chain reaction” was set in motion. The district court argued that the randomly obtainable rare player cards had a considerable monetary value, as they could in fact be traded via secondary markets or account sales. The criterion of pecuniary advantage required for a game of chance was therefore met.

At second instance, the Regional Court of Klagenfurt confirmed this view, but spoke of an individual case in which the specific player had demonstrably generated money with the virtual cards via exchange platforms. In late summer 2023, however, the Higher Regional Court of Vienna (judgment of 10.10.2024) ruled against the gambling argument in a comparable case: it rejected the classification as gambling and said that the packs were part of the overall game, which was primarily about soccer competition and not about winning money. This inconsistent case law means that the matter continues to smoulder in Austria. Some of the proceedings are pending before the Supreme Court (OGH), meaning that final clarification is not expected until the next few years.

The Austrian case shows how differently courts can assess the intrinsic value of virtual items. For publishers serving the German-speaking market, this creates a certain degree of legal uncertainty, as there is a risk of being sued in Austria. In fact, several proceedings are underway with reimbursement claims in which class action plaintiffs want to be reimbursed for their expenses for FIFA packs or other loot boxes. If higher courts confirm the Hermagor court’s line, publishers could be forced to deactivate loot boxes in Austria (similar to the practice in Belgium).

Belgium, the Netherlands and EU level

Belgium is regarded as a strict example: the Belgian Gaming Commission declared loot boxes illegal in 2018, unless they are subject to strict gambling rules (18+ age restriction, official license). Major publishers such as Electronic Arts, Blizzard and Valve subsequently switched off loot box purchases in Belgium. This solution – deactivating certain features only in certain countries – shows that companies do use geotargeting-enabled blocks when a market is strictly regulated.

In the Netherlands, the legal situation was initially similarly strict until the Raad van State (highest administrative court) ruled in 2022 that FIFA packs did not constitute a game of chance in their own right. The reason: the pack system was just one element among many in a (skill-based) soccer video game. The court therefore annulled the fine against Electronic Arts.

At EU level, there is no separate directive just for loot boxes. However, institutions such as the European Parliament emphasize in resolutions that loot boxes can be questionable in terms of consumer protection law and call for more transparency and regulation. Directive 2005/29/EC on unfair commercial practices and other consumer rights directives (e.g. Directive 2019/770/EU on digital content) could potentially be applied, but have no explicit provisions on loot boxes.

USA: Voluntary self-regulation instead of a ban

In the USA, the Federal Trade Commission (FTC) has been following the topic of loot boxes since around 2018. There have been workshops and investigations, but no nationwide regulation banning loot boxes. Various legislative proposals have been introduced at state level (e.g. in Hawaii and Washington), but have been unsuccessful. US law attaches great importance to self-regulation: the Entertainment Software Rating Board (ESRB) has introduced a label “In-Game Purchases (Includes Random Items)” to inform parents. In several class action lawsuits (e.g. “Taylor v. Apple”, N.D. Cal. 2021, or “Mai v. Supercell”, N.D. Cal. 2022), the attempt to portray loot boxes as illegal gambling failed. The courts did not see sufficient monetary value of the virtual “prize”.

This means that the gambling argument in the USA remains relatively weak. Restrictive regulation is not foreseeable there. Unlike in Belgium or Austria, US courts make a sharp distinction between “simulated gambling” (i.e. pure casino simulations, possibly 18+) and “random items” in a more general gaming context. However, the FTC reserves the right to take action against manipulative or deceptive designs if deceptive statements are made about the chances of winning. Within the industry, there is an obligation to publish drop rates. Violations of this could lead to exclusion from the platforms (Apple, Google).

Summary of gambling law

• Germany: Tendency towards toleration, in the absence of clear supreme court decisions, loot boxes remain possible as long as there is no real cash return.
• Austria: Inconsistent court decisions. Partly classification as gambling, partly rejection. High risk for publishers, depending on the individual case.
• Belgium: Fundamental prohibition of loot boxes without a gambling license, which is why providers deactivate such mechanics there.
• Netherlands: No gambling according to court ruling, provided there is a strong overall concept for the game and not a pure casino operation.
• USA: Focus on self-regulation, loot boxes not yet classified as gambling.
• EU: No specific EU regulation, but growing pressure in the area of consumer protection (transparency obligations, protection of minors).

From a publisher’s point of view, the result remains: loot boxes are in a gray area. If you want to position yourself more securely, you can use transparent drop rates, consistently prevent the resale of items and pay attention to the protection of children and minors. At the same time, developments in Austria should be closely monitored so as not to be surprised by a ban. Providers with a global reach sometimes have country-specific variants (“Belgium version without loot boxes”).

International comparisons beyond gambling law

The developments described so far already illustrate the cross-border differences. Nevertheless, it is worth taking a summarizing look at other aspects of the international comparison in the gaming sector in order to capture all relevant regulatory strands.

USA: Federal Trade Commission, ESRB and class actions

In addition to the loot box debate, there are other mechanisms that are relevant in the USA:

• The protection of minors is strongly based on parental responsibility and self-regulation (ESRB). Unlike in Germany, state youth protection laws only exist in certain areas, such as bans on hardcore pornography or real violence. However, computer games with hardcore content are not restricted by the state, but are only rejected by retail chains if they carry the Adults Only (AO) rating.
• FTC and misleading practices: The FTC can intervene in the event of misleading or aggressive practices (Federal Trade Commission Act Sec. 5: Prohibition of unfair practices in commerce). Previous proceedings against app store operators (e.g. Apple 2014, Google 2014) mainly concerned child protection for in-app purchases (children made expensive purchases without their parents’ knowledge). At the time, the FTC forced refunds in the millions. In the future, it is conceivable that the FTC will target dark patterns in games if they deceive consumers on a massive scale.
• Class actions against developers have often been attempted, but have usually resulted in settlements or dismissals because courts did not classify loot boxes as illegal gambling and no sufficient harm was shown. A well-known case was Epic Games in 2019: Epic abolished the random loot boxes in “Fortnite: Save the World” and switched to predictable content in order to settle class actions.

Japan, China and South Korea

Specific solutions have developed in the Asian region:

• Japan: “Gacha” games are ubiquitous. Back in 2012, the Japanese Consumer Affairs Agency banned the so-called “Kompu Gacha”, a particularly aggressive form of gacha system (players have to draw several different rare items to get a top prize – i.e. chain gacha). Following this ban, the major providers voluntarily switched to soft gacha mechanics, where you are guaranteed a top prize after drawing a certain number of boxes.
• China: Strict regulations, including the obligation to disclose loot box drop rates for many online games. There are also playing time restrictions for minors (max. a few hours per week).
• South Korea: High awareness of online gaming and shopping addiction. Legislators have implemented mechanisms that restrict night-time gaming for young people or require identification. Monetization is permitted, but is closely monitored. The issue of gacha has been the subject of several government investigations, with operators being required to publish probabilities.

EU consumer protection and CPC network

At EU level, the focus is increasingly shifting to consumer protection in addition to the gambling aspect. The European Commission and the CPC network (Consumer Protection Cooperation) have repeatedly taken coordinated action against “free” games with non-transparent in-app purchases. As a result, some app stores changed their labeling (“Free” was replaced by “Install”). In 2023 and 2024, CPC actions were taken against certain publishers who were accused of deliberately pushing children to make purchases and concealing prices. This also shows that voluntary commitment and transparency are important keys to avoiding tougher measures. Future EU regulations on dark patterns are being discussed, which could potentially cover manipulative monetization methods in games.

Differences by platform (browser, mobile, PC/consoles)

In addition to the geographical legal fragmentation, there are also platform-specific differences. Although the laws generally apply to all forms of gaming, the technical and sales implementation can lead to deviations.

Browser games

• Open web: Browser games are not subject to prior checking by stores. They can therefore be published very freely.
• Protection of minors: The open web makes age control more difficult. Providers may have to go through self-regulation procedures for the protection of minors (USK.online) or ensure that problematic content can only be accessed via technical protection measures.
• Payment systems: Formerly often billing via telephone/SMS services, today PayPal, credit card or prepaid. Legally relevant here are information obligations from e-commerce law (imprint, withdrawal policy, price transparency).

Mobile apps (iOS, Android)

• App store guidelines: Apple and Google set strict rules for labeling in-app purchases. They also oblige developers to specify drop rates for loot boxes. Violation of these policies leads to rejection or removal from the store.
• Age rating: Mobile apps must classify themselves via systems such as IARC. This rating is then automatically displayed in the store (e.g. USK 12, PEGI 12 etc.). Monetization is a rating point.
• Children’s accounts: Both stores offer parents the option of blocking purchases or setting limits. Developers should clearly communicate whether the app is aimed at children in order to avoid warnings due to direct appeals to children to buy (see BGH “Runes of Magic”).

PC/console games

• Retail and download: Traditionally, PC/console games are tested by the USK for packaging and retail. Digital distribution platforms such as Steam, PlayStation Store or Xbox Marketplace also require age ratings.
• Additional platform conditions: Console manufacturers (Sony, Microsoft, Nintendo) sometimes have their own requirements for in-game purchases. They require disclosure of loot box rarities, parental control settings and options to limit spending.
• Patch and update capability: Modern console or PC games can also introduce monetization retrospectively (e.g. via an update). Sometimes there is a conflict with the original USK approval if new mechanics similar to buying or gambling are added. Strictly speaking, a new review would have to be carried out if the relevance for the protection of minors changes.

Conclusion platform comparison

The legal framework is not fundamentally different depending on the platform, but self-regulation instruments (app store guidelines, console manufacturer policies, online platform terms and conditions) act as a pre-filter that leads to more transparency and measures, especially in mobile and console areas. There are fewer such hurdles for browser games, which on the one hand facilitates development and distribution, but on the other hand can increase the risk of regulatory control (e.g. warnings, protection of minors). Developers should clarify at an early stage on which platforms the game is to be released in order to comply with the respective regulations.

Economic context: Startup vs. AAA and ethical boundaries

Monetization with loot boxes, microtransactions and the like is of considerable economic importance. Young start-ups and indie developers in particular rely on free-to-play models because they make it easier to enter the market. AAA publishers also use them to generate long-term revenue. Here is an overview of the economic opportunities and risks:

Advantages of monetization

• Continuous income: Instead of one-off purchase prices, microtransactions or battle passes offer recurring income. This enables the ongoing financing of a live service game (updates, new content).
• Low entry barrier for users: A free download lowers the inhibition threshold; after successful onboarding, the monetization offers can be directed at an already engaged community.
• Fair pay-by-choice model: With purely cosmetic purchases (skins, costumes), the potential for abuse or deception is low. Players are happy to pay for customization and the game remains fair.

Risks and ethical concerns

• Loss of reputation: Excessive pay-to-win mechanics or loot boxes can damage a studio’s reputation. Players often harshly criticize manipulative designs, which reduces sales or engagement.
• Regulatory uncertainty: As shown, the assessments of authorities and courts fluctuate. Companies could suddenly be affected by bans or warnings (especially Austria, Belgium).
• Risk of addiction: A large part of the revenue often comes from a small group of so-called whales who spend very high amounts. This can be lucrative from the developer’s point of view, but raises ethical questions (exploitation of potentially addicted people?).
• Youth and player protection: Aggressive mechanics can be particularly stressful for young people and lead to uncontrolled purchasing behavior. This can be problematic both legally and morally.
• Long-term loyalty vs. quick profit: Some studios ruin their chances of building a loyal community with ruthless monetization. Short-term monetization success stands in the way of long-term brand trust.

Startup vs. AAA publisher

• Start-ups: Often have less capacity to integrate sophisticated payment and youth protection mechanisms. At the same time, they are under high financial pressure. They therefore tend towards free-to-play models with the most attractive “hooks” possible. However, a misstep in terms of legal requirements can threaten their existence, as high fines or negative publicity can hardly be absorbed.
• AAA publishers: Have large budgets and their own legal departments. They can make monetization very complex, but are also the focus of the authorities and media. Take FIFA Ultimate Team from Electronic Arts, for example: huge sales, but the target of loot box criticism worldwide. Large publishers can afford country-specific solutions (switching off some features, e.g. in Belgium), which is hardly possible for smaller companies.

Ethical compliance and CSR

Increasingly, studios are making voluntary commitments or following the principles of corporate social responsibility (CSR). For example, they voluntarily limit the maximum number of loot box purchases per day or provide users with clear expense overviews. This approach can both reduce legal risks and boost reputations, as players are less likely to make accusations of “cash grabs” that are damaging to the studio.

Summary and outlook

Monetization in gaming has become a key issue in the modern games market. In view of the sometimes high development and operating costs (servers, updates, community management), microtransactions, loot boxes and pay-to-win offers are economically attractive. At the same time, this practice is attracting the attention of consumer advocates, youth protection groups and legislators.

• Unfair competition law (UWG): sets limits on misleading, aggressive influence and targeted appeals to children to buy. The well-known BGH ruling on “Runes of Magic” has sensitized case law.
• Protection of minors in the media (JuSchG, JMStV): Now also considers interaction-related risks such as gambling-like mechanics or excessive cost traps. The USK now also awards age ratings based on purchase and addiction risks. The KJM monitors the online sector, but has so far not intervened harshly.
• Gambling law (GlüStV 2021, AT-GlücksspielG): The central dispute as to whether loot boxes should be classified as gambling has not been clearly resolved. While Belgium is enforcing a ban, German authorities have so far refused to classify them. Austria has shown itself to be inconsistent, which means a high risk for publishers.
• International comparisons: The EU tends towards consumer protection-driven regulation; the US relies on ESRB self-regulation and FTC intervention only in cases of fraud. Asia already has comprehensive transparency obligations for loot boxes.

There is a consensus that minors are susceptible to manipulative incentives to buy. A major concern of all laws is therefore to avoid unfair pressure mechanisms and excessive gambling elements towards children. In addition, the transparency of costs is playing an increasingly important role in consumer law.

The trend is probably towards providers disclosing more drop rates, clearly labeling purchase options and incorporating tools to protect minors (parental accounts, limits). However, it remains to be seen whether there will be more extensive, explicit regulation of loot boxes in Germany or at EU level. Comprehensive regulation could have considerable economic consequences for the games industry, which relies heavily on in-game purchases.

Practical recommendations for game developers on legally compliant monetization

Finally, concrete recommendations are given on how game developers can shape their monetization strategies in the area of conflict between economic requirements and legal limits.

Drafting contracts and general terms and conditions

1. Clear labeling of costs: The terms and conditions and the user interface should clearly indicate that the game offers additional paid content. In the case of a free-to-play release, it should be made clear that there are optional purchases, what sums may be incurred and whether regular payments may be necessary.
2. Parental control clauses: For games with younger users, it is advisable to include an explicit clause stating that children may only make purchases with the consent of their legal guardians. An age verification mechanism or blocking option can also be integrated.
3. Notes on the right of withdrawal: Digital content (e.g. cosmetic items) is subject to special rules. According to Section 356 (5) BGB, the right of withdrawal expires if the consumer agrees that the execution of the contract begins immediately. This should be clearly and verifiably regulated in the general terms and conditions in order to prevent subsequent reclaims.
4. Prohibition of item trading: If you want to minimize the risk of a gambling classification, T&Cs should prohibit the resale of virtual items and the technical implementation should largely prevent this. Anyone offering official marketplaces with cash payouts is quickly moving in the direction of real money gambling.
5. Fairness clauses: Voluntary assurances can be included to safeguard reputation, e.g. maximum loot box purchases per day, disclosure of drop rates, etc.

Monetization: transparency and protection of minors

1. Publish drop rates: This step is mandatory on many platforms (iOS, PlayStation) anyway. Regardless of platform rules, transparency about the probability of rare items is also recommended in order to refute misleading accusations.
2. No aggressive appeals to buy: Pop-ups should not appear every minute to urge users to buy. Slogans such as “Buy now or you lose!” can be considered inadmissibly aggressive (Section 4a UWG).
3. No direct appeal to children: Any wording that is recognizably aimed at children (“Ask your parents to buy you this package!”) is inadmissible per se (Annex to Section 3 (3) UWG No. 28).
4. Optional spending limits: Technical settings that allow parents or the user themselves to set a monthly limit for purchases have a preventive effect against over-indebtedness or impulsive purchasing behavior. They reduce the risk of negative press and regulatory intervention.

Comply with platform rules

1. App store requirements (Apple, Google): The review guidelines there make drop rate ads for loot boxes mandatory. In addition, they usually require a content classification (IARC questionnaire). A violation can lead to the removal of the app.
2. Console guidelines (Sony, Microsoft, Nintendo): Comply with all parental control settings, implement appropriate payment blocks for children’s accounts and ensure that you do not aggressively advertise in-game purchase mechanics.
3. PC distribution platforms (Steam, Epic Games Store): Read the respective developer agreements carefully to avoid unauthorized practices (e.g. manipulation of reviews, unclear pricing policy).

Protection against regulatory risks

1. Legal review: In the case of games with intensive loot box use, it is advisable to seek advice from specialist lawyers at an early stage in order to rule out or minimize possible qualification as gambling.
2. Regional adjustments: Check whether you need to adapt the monetization mechanics in countries such as Belgium or the Netherlands. This may mean deactivating loot boxes altogether or only offering alternative reward systems.
3. Monitoring case law: Follow current rulings, especially in Austria. This will allow you to react promptly if a Supreme Court ruling either negates or affirms loot boxes.
4. Cooperation with self-regulation and authorities: Open communication with the USK and the state media authorities can prevent proceedings from being initiated. Anyone who turns to the USK for advice is signaling a willingness to cooperate.

Corporate culture and long-term strategy

1. Ethics in game design: Monetization should be seen as an integral part of the game mechanics, not as an afterthought “cash-in function”. Maintaining a balance and not ripping players off will gain their trust and brand loyalty in the long term.
2. Community work: Many developer studios involve psychologists and youth protection experts as early as the conception phase in order to avoid dark patterns (unfair game design tricks).
3. Long-term reputation: A studio that constantly produces negative headlines due to loot box scandals undermines its brand. Fair, transparent monetization can become a unique selling point and improve customer loyalty.

Closing words

Monetization in gaming is a legally, economically and ethically complex issue. From a legal perspective, general competition law, consumer protection, the protection of minors and – depending on how it is structured – gambling law have dominated to date. Specific cases and judgments are gradually increasing, which means that the requirements for transparency and fairness are rising. Some countries are already taking a more restrictive approach (Belgium), while others are relying on behavioral control measures (China) or self-regulation (USA).

Developers and publishers should not rely solely on the absence of a general loot box ban, but should actively implement compliance measures: Honest communication, avoidable purchase incentives, compliance with youth protection criteria and adherence to the respective store policy are essential building blocks for operating in a legally compliant and at the same time economically successful manner. In this way, a model can be implemented that reconciles both entrepreneurial pressure – game financing through ongoing revenue – and responsibility towards players.