Investors in technologies and services for the Metaverse hope that a significant portion of the existing lucrative electronic gaming market will migrate to Metaverse platforms.1 Game companies regularly rely on the sale of loot boxes to generate significant revenue. "Loot boxes" are virtual items that contain random rewards—usually the user has a higher probability to receive "common" items and a much lower chance to receive the most highly desired, powerful, or rare rewards.
Plaintiffs' lawyers have brought lawsuits against service providers and game companies, alleging that their loot boxes constitute illegal gambling. To date, most of these claims have failed, although courts have offered different reasons why. Nonetheless, the successful defenses in earlier internet cases also likely apply to the Metaverse.
Platforms Will Seek to Use Section 230 to Avoid Liability
The structure of the Metaverse is yet to be determined: will it be one Metaverse like the world wide web or many separate Metaverses like the instant-messaging clients of the 1990s?2 Regardless how many Metaverses there will be, a likely scenario is that there is an interactive, base-level platform run by a single provider. Third parties would operate within those platforms, selling additional goods or services, potentially including loot boxes. If plaintiffs tried to sue platforms over loot box sales, the platforms likely would seek to dismiss those suits under Section 230 of the Communications Decency Act of 1996.
Indeed, putative class actions have already alleged that platforms are responsible for alleged harms flowing from loot boxes in games distributed on their services.3 Platforms have argued that they cannot be held liable for loot boxes sold in games that they distribute under Section 230. Under Section 230, a defendant can obtain immunity if 1) the defendant is a "provider … of an interactive computer service"; 2) the content at issue is "provided by another information content provider" (i.e., a third-party); and 3) the claim under consideration should seek to treat the interactive computer service provider as a "publisher or speaker" of that third-party content.4
In Coffee v. Google, the court held that Google was immune under Section 230 because the plaintiffs were seeking to hold Google liable for publishing third-party content—i.e., the apps through which loot boxes were accessible. By contrast with the straightforward application of Section 230 immunity, the court in Taylor v. Apple reached the opposite result, claiming that the "plaintiffs are seeking to hold Apple liable for selling allegedly illegal gaming devices, not for publishing or speaking information." The plaintiffs appealed in both cases, but the United States Court of Appeals for the Ninth Circuit granted the parties' joint motions to dismiss in the respective appeals.
Territorial Legislation About Loot Boxes May Fracture the Metaverse
A selling point of the Metaverse is that it would allow people to feel as though they are in the same room no matter where they actually are. However, the introduction of loot boxes might be in tension with that premise because loot box regulation is territorial. Some countries, particularly in Europe, have begun imposing regulations or even bans on loot boxes. For instance, loot boxes are banned in Belgium and may be banned or regulated in the Netherlands and Spain.5 Recently, Activision Blizzard launched a mobile version of its hit Diablo series, Diablo Immortal, but Blizzard declined to publish Diablo Immortal in Belgium and the Netherlands, citing "the current operating environment for games in those countries."6 Publishers of Metaverse content may similarly decide whether to include loot box content or to avoid jurisdictions that regulate them.
Alex Corluyan contributed to the preparation of this advisory.
[1] See, e.g., Cameron Costa, Inside the Metaverse Economy, Jobs and Infrastructure Projects Are Becoming Real, CNBC (Jan. 15, 2022), https://www.cnbc.com/2022/01/15/inside-the-metaverse-economy-this-is-what-will-be-for-real-in-2022.html (“Gaming and metaverse crossover investments grow”).
[2] See Thomas Martin Pflock et al., Antitrust: Into the Metaverse, Wilson Sonsini Goodrich & Rosati Client Alert (Mar. 18, 2022), https://www.wsgr.com/en/insights/antitrust-into-the-metaverse.html.
[3] Brian J. Levy et al., Recent Rulings Suggest Defendant Wins in Loot Box Cases Are Common, Appeals All Pending, Wilson Sonsini Goodrich & Rosati Client Alert (Apr. 7, 2022).
[4] 47 U.S.C. § 230(c)(1); accord, e.g., Universal Commc'n Sys. v. Lycos, Inc., 478 F.3d 413 (1st Cir. 2007).
[5] Aaron Hendelman et al., ESRB Introduces New Disclosure for Loot Boxes on the Heels of Regulatory and Litigation Developments, Wilson Sonsini Goodrich & Rosati, https://www.wsgr.com/en/insights/esrb-introduces-new-disclosure-for-loot-boxes-on-the-heels-of-regulatory-and-litigation-developments.html (Apr. 24, 2020); Andy Chalk, The Netherlands Moves Toward an Outright Loot Box Ban, PC Gamer (July 5, 2022), https://www.pcgamer.com/the-netherlands-moves-toward-an-outright-loot-box-ban; Emma Pinedo, Spain to Crack Down on Videogame ‘Loot Boxes' Blamed for Pathological Behaviour, Reuters (June 1, 2022), https://www.reuters.com/world/europe/spain-crack-down-videogame-loot-boxes-blamed-pathological-behaviour-2022-06-01/.
[6] John Porter, Diablo Immortal skips Dutch and Belgian launches and loot boxes might be to blame (June 1, 2022), https://www.theverge.com/2022/6/1/23149771/diablo-immortal-loot-boxes-belgium-the-netherlands-gambling.
