Loot boxes in games: the law in Israel

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A loot box is a purchase inside a game, with money or with the game’s currency, whose content is decided at random: a character, a “skin”, a weapon or another item. This guide deals with Israeli law only: when such a mechanism may be considered a prohibited lottery, what the seller must do, and what parents can do when their child has bought loot boxes.

Is a loot box gambling under the Penal Law?

Article 12 of Chapter H of the Penal Law, 5737-1977 deals with prohibited games, lotteries and betting, and does not mention computer games or virtual items. It defines three arrangements (section 224):

• Prohibited game: a game in which a person may win money, money’s worth or a benefit according to the results of the game, and the results depend more on chance than on understanding or ability.
• Lottery: any arrangement under which, by drawing lots or by other means, a person can win money, money’s worth or a benefit, and winning depends more on chance than on understanding or ability.
• Betting: any arrangement under which a person can win money, money’s worth or a benefit, and winning depends on guessing something.

A person who organizes or runs a prohibited game, a lottery or betting is liable to three years in prison or a fine (section 225). A person who plays a prohibited game is liable to one year in prison or a fine (section 226). These provisions do not apply to a game, lottery or betting that meets three conditions together: it is aimed at a particular circle of people, it does not go beyond amusement or entertainment, and it is not held in a place for prohibited games or a place for holding lotteries or betting (section 230).

The Penal Law does not define the terms “money’s worth” and “benefit”, and does not address items that exist only inside a game.

What the Consumer Protection Law requires of those who sell loot boxes

The Consumer Protection Law, 5741-1981, protects a “consumer”: a person who buys an asset or receives a service from a dealer for use that is mainly personal, domestic or family use (section 1). It prohibits a dealer from doing anything, by act or omission, that may mislead a consumer on any material matter in the transaction. Among the material matters the Law lists: the quality, nature, quantity and type of what is sold, and the use and benefit that can be gained from it, including a representation or number that appears physically or digitally (section 2(a)(1) and (4)). The prohibition also applies to advertising (section 2(c)).

The Law does not expressly require publishing the chance of getting each item. But if the game shows odds, numbers or a description of the content, they must not be misleading on a material matter (section 2(a)). In distance marketing, for example inside an app, the dealer must disclose to the consumer at least the main features of the asset or service, the price and the payment terms (section 14C(a)).

If it turns out that the transaction involved misleading that was material in the circumstances, the consumer may cancel it within a reasonable time from when they learned of the misleading (section 32(a)). A breach of the prohibition is also a tort under the Torts Ordinance, that is, a cause of action for a damages claim (section 31(a)).

And what about the 14 days to cancel a remote purchase? The right to cancel a distance sale (section 14C(c)) does not apply, among other things, to “information as defined in the Computers Law” (section 14C(d)(3)). In the Computers Law, 5755-1995, “information” means data, signs, concepts or instructions, except software, expressed in a computer-readable language and stored in a computer or another storage medium (section 1). The Law does not say expressly whether virtual content bought in a game falls under this exception.

Advertising and marketing to children: what is prohibited

A person shall not publish an advertisement or use another marketing method that may mislead a minor, exploit their age, innocence or lack of experience, or encourage an activity that may harm their body or their physical or mental health (section 7A(a) of the Consumer Protection Law). Section 7A is in Chapter B of the Law, and a breach of the provisions of that Chapter is a tort (section 31(a)).

In the regulations made under that section, a “minor” is a person under 18. “Marketing methods” means an approach by a dealer, directly or indirectly, including by electronic communication of any kind, whose purpose is to make a transaction or promote sales (regulation 1 of the Consumer Protection Regulations (Advertising and Marketing Methods Directed at Minors), 5751-1991 (תקנות הגנת הצרכן (פרסומת ודרכי שיווק המכוונים לקטינים), התשנ״א-1991)). Among other things, they prohibit advertising and marketing methods directed at minors that involve:

• Abusing minors’ imagination and impressionability, trust, innocence or lack of experience (regulation 3(1));
• Encouraging minors to persuade their parents, or to press them, to buy the product or service for them (regulation 3(5));
• Making minors feel deprived, inferior or unaccepted compared with other minors if they do not buy the product (regulation 3(6)).

Also prohibited are advertising and marketing methods aimed at encouraging minors to take part in gambling, games of chance or lotteries, except one-time lotteries that are not for commercial purposes (regulation 5(3)). In such an advertisement or marketing method that states the price, the total price must be given clearly and accurately, without a minimizing expression such as “only” or “just”, unless there is a significant discount (regulation 2(7)).

A child bought loot boxes: can the purchase be canceled?

A person under 18 is a minor (section 3 of the Legal Capacity and Guardianship Law, 5722-1962), and parents are the natural guardians of their minor children (section 14). A legal act of a minor, such as a purchase, needs the consent of their representative. The consent can be given in advance or after the fact, for a particular act or for a particular type of acts (section 4).

An act done without consent can be canceled by the representative within one month from the day they learned of it (section 5(1)). But this way of canceling is not available for an act that minors of that age usually do, or for an act with someone who did not know, and did not have to know, that they were dealing with a minor. The exception is when the act caused real damage to the minor or to their property (section 6). Buying an asset on credit, “including payment in installments”, has no effect as long as the representative has not consented to it (section 6A).

A class action and a complaint

When the same mechanism harms many consumers, you can consider a motion to certify a class action. A claim against a dealer as defined in the Consumer Protection Law, in connection with a matter between the dealer and a customer, is one of the subjects in which a class action may be filed (item 1 of the Second Schedule to the Class Actions Law, 5766-2006). Filing it requires the court’s approval (section 3(b)). You can also file a complaint with the Consumer Protection and Fair Trade Authority. The steps are set out in the guide Filing a class action.

If approaching the company did not help, you can read about a consumer claim, personal or class, on the page Class actions and consumer claims.

Frequently asked questions

Are loot boxes legal in Israel?

The Penal Law does not deal with them expressly. Running a “prohibited game”, a “lottery” or “betting” is an offense (section 225 of the Penal Law). In a prohibited game and in a lottery, you can win money, money’s worth or a benefit, and winning depends more on chance than on understanding or ability (section 224). The Law does not define when a virtual item is “money’s worth” or a “benefit”.

My child bought loot boxes without permission. Can the purchase be canceled?

A legal act of a minor, meaning a person under 18, needs the consent of their representative, and the consent can also be given after the fact (sections 3 and 4 of the Legal Capacity and Guardianship Law). An act done without consent can be canceled by the representative within one month from the day they learned of it (section 5). There is no such cancellation for an act that minors of that age usually do, or when the other side did not know, and did not have to know, that they were dealing with a minor. The exception is when the act caused real damage to the minor or to their property (section 6).

Must the game company publish the odds of getting each item?

The Consumer Protection Law does not set such an express duty. It prohibits a dealer from doing anything that may mislead a consumer on a material matter in the transaction. This includes the quality, nature, quantity and type of what is sold and the benefit that can be gained from it, including a representation or number that appears digitally (section 2(a)(1) and (4)). In distance marketing, the dealer must disclose to the consumer at least the main features of the asset or service and the price (section 14C(a)).