Some thoughts about gacha

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There’s been a lot of talk about something called ‘gacha’ or ‘complete gacha’ this month, after the Japanese government announced that they intended to regulate it – which directly affected the share price of Japanese social/mobile gaming giants like GREE and DeNA.  So, what is it and why did the Japanese government decide to regulate it?
 
What gacha is
 
Rather than give you a long explanation, I encourage you to read this Quora answer which does so very well. 
 
In a nutshell, gacha is a game mechanic by which you pay real money in return for a random (physical or virtual) item – if you collect a complete set of particular items you get bonuses in the game (hence the phrase “complete gacha”).  Historically you could play complete gacha using a vending machine, but increasingly these days it’s all done online.  I understand it’s pretty popular in Japan and constitutes a significant proportion of some companies’ revenue streams.
 
What happened?
 
The original story came via the Yomiuri Shimbun newspaper, which you can read here.  It reported the Japanese Consumer Affairs Agency had decided to investigate the matter after a number of consumer complaints about the amount of money being spent on complete gacha.  The inference from their statements (at least as recorded in that newspaper) seemed to suggest this was being investigated as a gambling law issue.
 
The Agency invited companies involved in the activity to stop it, which several duly did.  I’ve since seen reports the Agency has decided to press ahead with regulation anyway (though I can’t verify those reports just yet).  
 
Some commentators have speculated on the impact that this could have on businesses profitting from complete gacha (example here) – I’ll leave that to them.  (To my mind, complete gacha was such an unknown concept in the West until this matter became public, I’m not sure speculation on it could really be that informed).
 
Some thoughts on the legal position
 
I can’t comment on the purely Japanese legal issues here, but speaking more generally this does sound like one of the first high profile examples of games and gambling law colliding here.  Games lawyers have known for some time that this would happen, as have those parts of the gambling industry who’re interested in games (quite a bit) and those parts of the games industry who’re interested in gambling (not quite as much) – but no one expected it to be complete gacha that started it off.
 
Why is complete gacha an example of games and gambling law colliding together?  Because, in my view, there’s a reasonable argument that complete gacha would be regulated under gambling law under at least some (if not most) Western jurisdictions, while at the same time being a very lucrative game mechanic.
 
For example, in the UK we have the Gambling Act 2005.  The Gambling Act defines three kinds of gambling activity which all require legal authorisation before you can offer them publicly: “gaming”, “betting” and “lottery”.
 
“Gaming” means “playing a game of chance for a prize“.  A person plays such a game if (i) “he plays a game of chance and thereby acquires a chance of winning a prize“; and (ii) “whether or not he risks losing anything at the game“.  So, if you take part in a game of chance that offers you the chance to win a prize – even if you don’t actually pay anything to participate – you’re involved in gambling.  I think this could cover the complete gacha mechanic in principle.
 
“Betting” broadly means making “making or accepting a bet on— (a)the outcome of a race, competition or other event or process, (b)the likelihood of anything occurring or not occurring, or (c)whether anything is or is not true.”  Complete gacha probably isn’t betting since it doesn’t involve betting on an outcome.
 
A lottery involves persons required to pay in order to participate in the arrangement” and in the course of the arrangement one or more prizes are allocated to one or more members of a class” (a “prize” includes “any money, articles or services“);  and the prizes are allocated by a process which relies wholly on chance” (or, if this is a more complex lottery) “the first of those processes relies wholly on chance“.  There’s a reasonable argument that complete gacha could constitute a lottery, too.
 
In other words: in my view, there at least two avenues under which complete gacha could constitute gambling under UK law, in which case from a purely legal perspective anyone offering complete gacha would require authorisation from the Gambling Commission.  Other EU countries and the US may take a similar approach and potentially reach a similar answer. 
HOWEVER, that’s a real oversimplification of the position: any meaningful legal analysis would need to look closely at the game and the legal provisions of the relevant legislation (in other words dear readers: don’t automatically assume complete gacha = regulated in the West).  For example, you need to have servers based in the jurisdiction for a start.  It’s also worth bearing in mind that requiring authorisation isn’t the end of the world at all: it simply means you need to seek a licence from the national gambling regulator, or seek a way to restructure your game so that it doesn’t fall under the legislation.
 
The point of this brief analysis is more to demonstrate that, at least from a UK/EU perspective, you can see how regulators could decide to slot complete gacha or similar games mechanics into their regulatory outlook. Of course, one vital ingredient which is missing of course from most national regulators is familiarity with games and how games work – they’re not necessarily the same as say a fruit machine or a casino and therefore maybe shouldn’t be treated like them from a regulatory perspective.
 
Mind you, the return argument to that might be that, even if games are sometimes different to ‘gambling games’, they could both involve addictive play and therefore potentially could both be regulatable.  Which gets us to the most difficult question of all: should game mechanics which involve varying levels of addictive/repetitive play be regulated by the law?  I’m aware this argument has at times excited a lot of vigorous debate in the games industry, but in the meantime Japan is blazing a new path regarding it – watch this space…
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