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n 2017, Electronic Arts (EA) had paywalled popular characters from their flagship game, Star Wars Battlefront II. While the practice of locking content behind an upfront cost, or paywalling, had existed for newspapers beginning in the mid-2010s, having to make an additional payment for a game players had already bought was unheard of.

In a now infamous Reddit thread, a user expressed their dissatisfaction for having to spend extra money to obtain Dark Vader. EA’s comment stated that the introduction of loot boxes were meant to “provide players with a sense of pride and accomplishment for unlocking different heroes,” (Darth Vader is not a hero in the game) which went on to become the most downvoted comment in the entire site with over half a million downvotes.

The rising trend of micro-transaction and loot boxes mechanics in both paid and free-to-play games has proven to be a sour note for many players. But why, if they are so unpopular, do an increasing amount of games include them?

Short answer: they make a lot of money.

According to Newzoo, a data provider for video games companies and studios, the gaming industry accounts for over $187 billion dollars annually in total revenue globally, with the U.S. being the biggest spender, at $47 billion. About half of all gaming revenue comes from mobile at $92.6 billion, with 80% of revenue from free-to-play games coming from micro-transaction, making these transactions the largest single slice of gaming revenue at $74 billion.

Among the top ten highest grossing games of the previous year, all were free-to-play games and all were either exclusively mobile or had a mobile-version available. While each of these games included micro-transactions and loot boxes, they are not marketed as “gambling”, and hence don’t have to be regulated in the same way as casinos. But players are gambling billions of dollars worth of micro-transactions in every other way.

“It's hard to find a video game that doesn't have some form of gambling, loot boxes, gacha games – they're incredibly profitable for the video gaming industry,” said Devin J. Miles, a professor at University of Nevada, Las Vegas, who specializes in behavioral addictions.

Gacha games are video games that use a randomized item prize for in-game content, similar to Japanese vending machines called gachapon and not unlike slot machine gambling. All of the top ten games from 2023 used this mechanism to some extent. For example, when Monopoly GO! launched in 2023, the game offered dice rolls, sticker packs, and in-game cash for players to progress through the game quicker. Thanks to these micro-transactions, Monopoly GO! went on to become the fastest game to cross the $1 billion revenue mark within only three months, surpassing the previous game, Genshin Impact, at less than six months.

In 2015, Cheryl Kater alleged that Big Fish Casino, a social casino application that allows players to purchase virtual chips and gamble despite not offering any real cash-outs, conducted illegal gambling under Washington State law, and that she and other players deserved reimbursement under Washington’s Recovery of Money Lost at Gambling Act and Consumer Protection Act.

One of the plaintiffs, Suzie Kelly, said in an interview that she had spent a total of $400,000 dollars on the game, and after she tried to email the company to ban her from spending any more, they instead assigned her a VIP representative who would push her to keep on spending. Big Fish Casino argued that because their chips did not have any monetary value, it cannot be constituted as gambling. 

Kater’s claim was originally dismissed, but the Ninth Circuit Court of Appeals overturned the decision, stating that virtual chips counted as “something of value” under Washington law resulting in a $155 million settlement.

Aristocrat Leisure Limited, Big Fish Games’ parent company based in Australia, has doubled its market cap since acquiring the company at over $28.3 billion. According to Statista, the revenue for online casinos is expected to reach $35 billion this year, with an annual growth rate of over 5%.

Online gambling is a growing industry within a larger growing industry. As more of these games make it onto people’s phones, regulations struggle to keep players protected from similar tactics that legacy casinos use.

Cheating out of regulations

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ambling is a heavily regulated activity in the U.S., and while percentages may differ between states, the chances of winning are decided by legislatures. For example, slot machines in Las Vegas casinos are required by law to pay back at least 75% of the machine’s total earnings. However, the average holding, or percentage of bets that casinos retain, is closer to 7.5%, making the pay back ratio over 90% and far greater than the mandatory 75%.

Because traditional forms of gambling have a history of problematic habits and addiction, many states have introduced laws that protect gamblers such as self-exclusion, which is a process where you can formally submit yourself to not be allowed in gambling establishments for a set period of time. However, regulations have not caught up with the recent introduction of gambling addiction to the online space.

“There's so many [online casinos] I would ban myself from, and the new one would pop up, and I would register on that. [Banning] doesn't even mean anything anymore,” said Abdul.

Many countries outside of the U.S. have begun implementing protections for problematic gamblers, especially for games that are targeted to minors and young adults. Last year, British Prime Minister Rishi Sunak proposed reforms on gambling to tackle the “smartphone era”, offering greater protections for 18 to 24 year olds who were at increased risk of addiction. But for people like Daniel Jones, a video creator based in the U.K, limits weren’t enough.

Jones had gathered up his savings and quit his job to work on a novel. In between his writing, he found himself with more free time and on a whim, downloaded a slot machine game on his phone.

In the beginning, he found himself entertained with the mindless action – entranced by the kaleidoscopic visual of the spinning wheel, the virtual clatter of a roulette table, and the characters popping up on his phone egging him to spin again. The online casino had advertised him free spins so he kept on spinning. 

“I eventually ran out of free offers and started using my own money to gamble. And then I got more and more addicted,” said Jones.

It got to a point where companies began emailing him to play their newest game, and Jones obliged. He had watched this habit form with his family, both his dad and sibling frequented casinos and dished out large portions of their salary to gamble. Except Jones didn’t have to leave his own room to spend upwards of £100 a day on these games. Eventually, he had used up all his savings, and having been recently unemployed, was left with no money.

“I set myself deposit limits, but because of … so many websites I was going on, it pretty much didn't really matter the limit,” Jones said.

Jones was finally able to put a stop to his addiction through the program GamStop. This program lets users register their details on a public registry that will then ban them from licensed gambling sites. While this program is only available in the United Kingdom, other countries have enacted similar laws.

In the Netherlands, where a nation-wide study found 17% of players under the age of 25 had an addiction, the federal government placed limits on bets and a ban on most gambling sites advertisements for anyone under the age of 24. China’s government also had plans to ban loot-boxes and limit player rewards for frequent logins, but was met with backlash and ultimately abandoned after tech giants Tencent Holdings and Netease saw a decrease in their stock value at 16% and 25% respectively. South Korea recently implemented regulations requiring companies to be transparent on the probability of their loot-boxes, but found a total of 266 games that violated these rules.

Officials and campaign groups have attempted to get similar protections in the United States, but with little to no success.

In 2019, Sen. Josh Hawley of Missouri proposed a bill to regulate micro-transactions in free-to-play games that target kids and young players. And in 2018, when other countries began cracking down on loot boxes, Sen. Maggie Hassan of New Hampshire asked the Federal Trade Commission to increase transparency of winning odds for players purchasing loot boxes. Campaigns aiming to protect young children from these predatory practices have also called the FTC to investigate and crackdown on these companies, However, none of these proposals have been met with legislative action.

Earlier this year,. Rep. Andrea Salinas of Oregon and Sen. Richard Blumenthal of Connecticut introduced the Gambling addiction Recovery, Investment, and Treatment (GRIT) Act, to help direct federal funding from sports wagers to combat gambling addiction that affects 7 million Americans. As many states in the U.S. began legalizing online gambling, they also saw a rise in gambling addiction cases. With no dedicated federal funding and more people being introduced to the hobby, states were left to their own devices to help curb problematic gambling.

According to the Bridge Michigan, after the state had legalized online betting in 2021 with the Lawful Internet Gaming Act, Michigan went on to become the top state for online gambling spending 6.5 billion last year overall. The state has also seen an increase in calls to hotlines by triple the amount before the law passed, and the state is now doubling its spending on “compulsive-gambling efforts.” 

In spite of multiple attempts to regulate online gambling and social games with gambling-like features, video game and sports-betting companies have lobbied against these policies making it challenging for regulations to pass.

Abdul claims he “easily ” spends four or five hours a day in online casinos or sports betting. He’ll find himself betting throughout the duration of an hours-long tennis match despite never having taken an interest in the sport before his addiction.

As online gambling increases throughout the U.S., the lack of regulations has allowed for many players to discover social casinos without protections. But individuals, as well as friends and family, can use similar patterns used to spot a problematic gambler in casinos to protect themselves and others from developing an addiction.

Patterns such as spending more than a player can afford and an increase in frequency can lead to potential problems. When players start spending not only more time placing bets, but with greater intensity and bigger risks to try and chase that dopamine from a previous win is when gambling goes from a hobby, to a habit.

When hobby becomes habit

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ddiction is a spectrum, and the telltale signs for players are harder to spot when you are not betting money for more money, but money for tokens or other in-game items. Gambling addictions are known for being harder to spot and easier to hide than other more visible forms of addiction. The World Health Organization has only recently introduced online gambling as an addiction disorder, but the American Psychology Association (APA) has not.

For some problematic gamblers like Jones, a history of gambling within the family can make one more likely to develop similar patterns in the future, but players can become addicted to gambling without any prior history.

The same risk behaviors that can influence a teenager to develop a bad habit of playing video games are the same risks that can make them develop a gambling addiction. Adolescents who are more likely to take risks, be impulsive, and utilize video games to regulate their emotions are more likely to transition to gambling regardless of previous exposure to it, according to research done by the APA.

“It was with everything. When I would play a video game, I would just play it till I just couldn't anymore,” said Abdul. “I remember once I discovered hockey with my friends … I loved it so much that I wanted to play more and more and more. And the friends that introduced it to me, they're like Hey, man, just calm down. It's just just a sport.”

For people with already addictive personalities, gambling can bring out the worst of people’s natural tendencies.

Chaz Donati, a 33-year-old mental health advocate and recovering addict from Arizona, grew up nurturing his competitive nature through the use of sports. He had gone to casinos in his late teens with no problem, but it wasn’t until his twenties when he wasn’t able to compete in sports anymore that his addiction to sports betting became a problem.

“I don't know what or who I am without competition in my life,” said Donati. “ I felt that maybe being involved with sports, even if it was just sports gambling, I would still get that feeling of being a part of sport.”

Even before sports betting became legal, Donati would bet on games through international accounts using VPNs or “bookies”, a person responsible for receiving and paying off bets.

“The bookie business and the underground gambling business is still just as strong, even with the legalization happening across the country,” said Donati. Betters might still prefer to use a bookie because sports bettings sites like FanDuel or DraftKing don’t allow you to bet on credit. “Unfortunately, that's when it becomes very dangerous, because now you're essentially betting on credit, and if you lose, you have to pay up.”

By the age of 22, Donati was taking out loans to pay off his debts and has since lost over $1 million dollars on his addiction. He felt that the only way to pay off his debt was to gamble some more.

“You will see they don't offer you the chance to play 25¢ slot machines; they offer you the chance to play $250,000 or $250 million. The numbers just get bigger and bigger because people react to those bigger numbers,” said Jacobson. “And then more so than that, you'll find that the first few hours no matter what you do, you will win.”

Winning early on gives players a false sense of security that they will win in the future, and this allows for players to feel more confident placing bigger bets. That initial win gives the brain a rush of dopamine that will have the player desiring to chase that same feeling. 

“It's so sudden with the dopamine hits and … the rush of winning something that you forget about what the long term play is,” said Donati.

The game will then introduce a loyalty system, rewarding you with in-game currency or items the more bets you place, as well as a leveling system that steadily increases the prize as the cost of placing bets does too. By then, games will have adjusted their payback ratio to make the player win less frequently, but players will already have become addicted to chasing that first win.

Abdul recalls the night he won seventy thousand dollars in one night: “That seventy grand that you feel, you feel unstoppable,” said Abdul. “When I won that, that's when it went downhill, because I would still keep playing $10,000 bets, and $10,000 bets. You lose seven in a row, and the seventy grand is gone.”

In less than two days, Abdul had ended up losing his seventy grand. But it didn’t make future bets any smaller.

Targeting players

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hat happens is that you have decades of research into the psychology of gambling and how people's brains interact to different outcomes … That type of research is factored into the regulation that's written throughout the laws and regulations that govern the casino industry,” said Jacobson, who worked in the gambling industry for over 15 years and has closely experienced how casinos prey on individuals who are susceptible to gambling addiction.

In legacy casinos, there is a minimum amount of money needed to place bets, but online, without the need for dealers and maintenance costs, the minimum amount needed to place a bet is near zero.

“I just find that online gambling is more convenient, " said Kirsten Forte, a 43-year-old Louisiana resident, “a real casino for me is over an hour away. So it takes a lot of planning and you have to have the money to go and spend and have a good time.”

Foret instead likes to gamble in social casinos using her daily free virtual chips or with as little spending as possible, but it comes at the cost of her time.

Foret switches between ten different social casino apps as part of her daily routine, but she used to play more before Louisiana banned the use of sweepstakes for online gambling. Not wanting to pay for the virtual credits, Kirsten spends her nights watching as many livestreams as she can where gambling content creators give out free credits.

Many social games will also send push notifications to players' phones to remind them to collect their daily reward. This habit can make players feel like they need to constantly be playing the game, increasing their likelihood of becoming addicted.

“You're basically chasing that red dot (notification) just to claim some new freebie, and that sort of thing to help keep you hooked onto the game, and it's very addictive,” said Maxwell Wichen, a 23-year-old who frequently plays gacha games.

One of the pillars of gambling is that you are risking something of value for something of greater value. However, when you are dealing with digital assets, Jacobson believes this is where regulators, many of whom did not grow up in the Digital Age, get stumped.

“Point here is that digital assets should be considered something of value, at which point you would look at regulating gotcha games in the same fashion as gambling,” said Jacobson.

Targeting players

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early two-thirds of children aged 12 to 18 have been exposed to games with gambling or gambling-like features, often falling victim to the same practices that casinos will use to keep players spending according to the APA.. Because most social games don’t allow players to gamble for real money, there is no minimum age requirement to start playing. 

“We're now seeing that players, video game players, can experience gambling harms without ever stepping into a casino, without ever opening a traditional gambling app, because they can do it all on through their video game,” said Devin J Milles, professor at University of Nevada, Las Vegas, who specializes in behavioral addictions. 

Companies use artificial scarcity making certain events or characters available for a limited time, making players feel like they need to spend money.

"If you don't pull [the character] on this two week event you're never going to get them again,” said Wichen about a limited-time event on one of his favorite games, Arknights. “And you know, now that the banners are over, we have no way of knowing if they're ever going to bring them back.”

Video game companies use their characters to attract players into purchasing loot boxes or micro-transactions for the chance to obtain them. This can be through visual appeal (custom skins or unique designs), gameplay (certain characters have different move sets or abilities), or emotional appeal (unlocking a character also unlocks their story and/or gameplay). 

“I guess they call it fear of missing out, right? I'll admit I'm a victim to it, sure,” said Colby Sapera, a 19-year old student. “But I don't know. I just get the characters, and then I enjoy using them. I enjoy collecting them. I enjoy their gameplay, I enjoy their visuals. I just enjoy everything about them.”

Sapera has purchased microtransactions in games since middle school with his parent’s permission and has spent well over a thousand dollars on Mihoyoverse’s Genshin Impact since 2020 trying to collect as many characters as possible.

Mihoyoverse and other gacha games have recently introduced a pity system that allows players to know what is the maximum amount of in-game tokens they will need to get a specific character they want. While the number can still be upwards of 90 pulls, or chances, to get an item, players still prefer it over loot boxes with completely random chances. 

“It is 100% gambling, but it is nice that I have these guarantees to go off of. I can then budget in my head,” said Wichen.

This pity system has proved effective for players without damaging revenue as Mihoyoverse is the third largest video game company in China behind Tencent and NetEase with a revenue of over $2.1 billion USD.

Wichen has also found himself playing games with gambling-like mechanics just for the sake of it, like the game Pixel Heroes, which he believed to be a “bottom of the barrel” gacha game. He was looking for a gacha game where he could just press a button and get a reward, and thought it was a good option if he “wanted to burn an hour or something, and just give in to the gambling addiction,” said Wichen.

For him, these games were more about collecting the rewards than playing the actual game itself.

“Gaming is like a hobby, right? So it's like fifty bucks for a hobby; that sounds like what any other person would spend on their hobby,” said Wichen.

While feeding a gambling addiction might just be a hobby for some, to others it can lead to a relapse or worse.

“There's sports on 365 days a year, including Christmas and holidays. So you can bet on anything at any given time,” said Donati. It was during the pandemic when his sports gambling addiction had driven him to plan his suicide. “There were no sports going on, and that's when the addiction really took over because I was betting on things such as Russian ping pong, UFC soccer, things that I normally wouldn't bet on.”

His gambling had gotten to the point where he didn’t see a way out and giving up had become his own reality. On his way out the door on what he thought would be his final day, Donati’s dog blocked his doorway and that small disturbance is what led him to get help and eventually be gambling free for the past three years.

“My addictive personality, in the long run, was hurting me,” said Donati. “So how do I switch that addictive personality into a better option for myself and then for maybe other people who are struggling?”

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onati now helps others in their recovery by sharing his story and creating a recovery program. He believes that while everyone’s journey looks different, taking care of oneself can help the process such as: exercise, sleeping well, and partaking in activities that are healthy extensions of gambler’s addictive personalities.

A part of recovery might involve relapses, so sitting down with yourself when that happens and analyzing the emotion behind gambling could help prevent future relapses.

“I try to be as transparent as possible with [those in recovery] because our reality as sports fans, is that it's going to be in our face every single day,” said Donati. “If I have a relapse, I immediately think of What was the emotion that I was feeling after I placed the bet? Why did I place the bet? 

For players looking to break out of the habit, companies being more transparent with their customer’s spending patterns could help give autonomy back to the player.

“Certain regulations that mimic legacy casinos, like allowing players to see their own spending habits or barring yourself from a specific game, can drastically improve their self-awareness to a developing problem,” said Milles.

While not currently available in most modern mobile games, Jacobson believes the implementation of “analytic monitoring tools and the ability for people to more easily access their spending patterns” could help combat addiction and prevent problematic spending.

Other regulations seen in other countries like allowing players to set spending limits or being transparent over winning probabilities can help with problematic gambling. 

“We need to give players more control and more ability to to help support more of a positive play experience, rather than the current Wild West framework that allows game developers to really utilize these addictive features without any sort of player safety,” Milles, who believes that because video games have become more immersive, it reaches people who “never have to actually experience traditional forms of gambling in order to experience gambling related harm.”

But ultimately, once a player has been hooked, it’s hard to stop for good. As the industry grows and online gambling becomes less restricted, it will be harder to escape it.

“If someone wants to get better,” said Abdul, “they go talk to a therapist and all, and it works for a few. The moment you get on TV… I don't even know how many ads there are for gambling.”