The Legality of ‘Loot Boxes’ and In-Game Purchases: Is Gaming Gambling?

Imagine opening a shimmering digital chest in your favourite game, the screen erupts with colours, the soundtrack peaks, and for a split second, everything feels like a guaranteed win. But then the reveal happens: sometimes you get a rare, powerful item; other times, nothing more than a trivial cosmetic. And just like that, the cycle resets. You feel the tug to try again-because the next box might finally contain the reward you want. This carefully engineered dance between hope and disappointment mirrors something much older and far more regulated: the risk-reward cycle of gambling. With real money spent on outcomes left entirely to chance, loot boxes have quietly transformed gaming into a digital arena where players, especially minors stake resources against uncertainty. The thrill keeps them hooked, but the law remains divided: is this gaming, or gambling with better graphics?

India’s online gaming sector has witnessed explosive growth over the past decade, and monetisation models have evolved rapidly. Among these, loot boxes-digital containers that provide randomised in-game rewards have emerged as a central legal and ethical debate. Players pay real money or in-game currency without knowing the contents in advance, creating a chance-driven mechanism that mirrors the uncertainty of traditional gambling.[1] Loot boxes combine monetary consideration with random outcomes, incentivising repeated purchases. While the rewards are virtual, their desirability ranging from rare equipment to cosmetic upgrades creates a high-stakes digital ecosystem. Legal experts argue that the addictive, opaque nature of loot boxes, particularly when marketed to minors, warrants regulatory attention[2]. Yet, Indian law has not specifically defined or addressed virtual items or digital chance-based rewards, leaving enforcement unclear.

Statutory and Legal perspective

Statutory framework in India gives a grey area. Writing in the colonial period, the Public Gambling Act, 1867 criminalises taking part in games of chance as well as running gambling establishments.[3] It does not specifically mention online property or systems reliant on chance, but the applicable law addresses the physical gambling facilities. Such loot boxes that seldom require cash payments or conventional betting can be beyond its literal scope. Equally, the Indian Contract Act, 1872 invalidates wagering contracts. Wagering contracts are usually a two-way contractor bet of an uncertain event, with the contractor winning or losing based on the outcome. Loot boxes however are not betting but purchases of a product: consumers do not make a bet but buy an item and will always get something in the purchase.[4]

According to legal scholars, loot boxes can be discussed as similar to blind packs or collectible card boosters as opposed to a standard form of betting. Courts in India have on numerous occasions drawn a distinction between games of skill and games of luck. As in State of Bombay v. R.M.D. Chamarbaugwala, the Supreme Court ruled that contests whose result mostly depends on skill do not constitute gambling because of the ban.[5] In the case of K.R. Lakshmanan v. State of Tamil Nadu it was ruled that horse racing has been a skill-based game because there was a necessity to possess skill in guessing the game. Though a game can be skill based, the loot box is strictly the result of a game of chance where no one performs any better than the other.[6] The rulings of the High Courts in cases like Head Digital Works Pvt. Ltd. v. State of Kerala[7] and Varun Gumber v. Union Territory of Chandigarh[8], also explain that skill-based games will retain their useful status on-line, yet microtransactions by chance such as loot boxes are closer to the definition of gambling.

According to legal experts, the loot boxes are not necessarily gambling. It is never a gamble where one can victor or loses everything, and it is also not a gambling game but it is modelled after the real-life concept of a blind box, such as trading card packs, which do not qualify as gambling.[9]

Global Perspective

Other jurisdictions around the world provide useful lessons to us, as they are also not dealing with loot boxes in the same way.

In China developers are required to disclose drop rates to ensure players are aware of the likelihood of receiving a rare item. In South Korea, they restrict age and use warning labels, to make people understand the reward mechanics. Belgium sets an example for all other countries to follow by treating loot boxes as gambling, when outcomes resemble a wager, and prohibitions apply.[10] Netherlands initially had the same stance as that of Belgium by treating loot boxes as gambling but has changed its stance and allowed loot boxes but under strict compliance of rules. In the United Kingdom it is totally based on Industry regulation and consumer-based reforms.[11]

Way forward

All the loot boxes, though they might not fit the definition of the existing gambling laws, pose threats: there is a lack of transparency, they respond to minors, addictive spending and compulsive consumption, and unchecked monetisation. The regulatory framework is necessary since Indian courts in the past had placed consumer welfare and youth protection in priority.[12] An equitable solution can involve loot boxes and virtual rewards to be statutorily defined, requiring their odds to be publicly presented, age-gating and parental consent, disclosure of advertising, and consumer rights, such as a refund policy, spending limitations, transaction history, and parental dashboard. This reduces the risk to the users, especially minors, but it allows the gaming industry to be innovative in a responsible way.[13]

The characteristic feature of modern digital games is loot boxes that blur the boundaries between entertainment and gambling. Although their format resembles traditional gambling with regard to the elements of chance, according to the principles of Indian law, especially the element of skill vs. chance, loot box cannot necessarily be regarded as gambling. Their dangers, however, make it necessary to regulate them. Through the application of a focused, transparency-oriented regulatory structure, India would safeguard players, fulfill the rights of consumers and promote the development of the gaming industry. Loot boxes may not be equivalent to gambling in the eyes of existing law, however they pose a burning legal challenge that should be dealt with at the moment.

REFERENCES

1. Spin, Win, & Sin? Enter Level 1: The Legal Landscape of Loot Boxes in India Under Gambling Law, Saikrishna & Associates (2024).
2. Public Gambling Act, No. 3 of 1867, India Code.
3. Indian Contract Act, No. 9 of 1872, India Code.
4. State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699.
5. K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226.
6. Head Digital Works Pvt. Ltd. v. State of Kerala, 2021 SCC OnLine Ker 1701.
7. Varun Gumber v. Union Territory of Chandigarh, 2017 SCC OnLine P&H 5372.
8. Raja Ishwarya B. & Gnanaa Soundar K., Legal Landscape of Loot Boxes in India, International Journal of Law, Management and Humanities 986 (2024).
9. Comparative Analysis of Loot Box Legislation in Different Countries, Coredo (2024).
10. Loot Boxes as Emerging Challenges in Digital Gaming, Law Journal Digital (2023).
11. Loot Box Regulation Overview, Fintech Harbor Consulting (2024).

[1] Spin, Win, & Sin? Enter Level 1: The Legal Landscape of Loot Boxes in India Under Gambling Law, Saikrishna & Associates (2024), https://www.mondaq.com/india/gaming/1513750/spin-win-sin-enter-level-1-the-legal-landscape-of-loot-boxes-in-india-under-gambling-law

[2] Ibid

[3] Public Gambling Act, No. 3 of 1867, India Code.

[4] Indian Contract Act, No. 9 of 1872, India Code

[5] State of Bombay v. R.M.D. Chamarbaugwala, AIR 1957 SC 699

[6] K.R. Lakshmanan v. State of Tamil Nadu, (1996) 2 SCC 226.

[7] Head Digital Works Pvt. Ltd. v. State of Kerala, 2021, (W.P (C) No. 7785 of 2021)

[8] Varun Gumber v. Union Territory of Chandigarh CWP No.7559 of 2017

[9] Raja Ishwarya B. & Gnanaa Soundar K., Legal Landscape of Loot Boxes in India, Int’l J. of Law, Management & Humanities 986 (2024), https://ijlmh.com/paper/legal-landscape-of-loot-boxes-in-india

[10] Coredo, Comparative Analysis of Loot Box Legislation (2024), https://coredo.eu/comparative-analysis-of-loot-box-legislation-in-different-countries/.

[11] Ibid

[12] Law Journal Digital, Loot Boxes as Emerging Challenges (2023), https://www.lawjournal.digital/jour/article/view/428.

[13] Fintech Harbor Consulting, Loot Box Regulation Overview (2024).