Loot boxes have always existed in a grey area within the U.S. regulatory landscape. However, as video game industry revenues grow and legislators across the political spectrum begin to pay more and more attention to child protection concerns in digital media, it was inevitable that purveyors of loot boxes would have to defend the practice in court. Recently, both the New York Attorney General and private litigants Washington have filed lawsuits against Valve with respect to their loot box system.

            The current status quo understanding within the video game industry with respect to whether loot boxes constitute “gambling” rests on whether loot box mechanisms fulfill the three core elements common to all gambling laws: (1) consideration, (2) chance, and (3) prize. So long as one of these three elements is not met, a loot box system is not “gambling”. The “chance” element is inevitably met in any form of loot boxes, but the “consideration” element can arguably be avoided by making loot boxes acquirable only by exchanging virtual currency that itself arguably has no “value”, and the “prize” element can arguably be avoided by making the loot box drops account-locked. Where the loot box drop cannot be transferred, sold, or “cashed out”, there is arguably no “prize” no matter how rare the drop is or how useful it is for in-game purposes.[1]

            It’s important to note that this status quo understanding is based on collective statutory interpretation among video game attorneys and is not settled law. Indeed, not even the question of whether trading card packs constitute gambling is actually settled.[2] In the 1990’s and 2000’s, many plaintiffs sued trading card manufacturers under RICO laws. All of these cases were eventually dismissed for lack of standing because the plaintiffs could not prove an injury—they had received “the benefit of the bargain” by receiving physical cards in exchange for the money they paid. They did not suffer a “gambling loss” sufficient to sustain a RICO claim. These cases did not rule on the merits of whether trading card packs fall under the definition of “gambling” as such term is used in various gambling laws.

            Cue New York v. Valve Corp., Index No. 450952/2026 (N.Y. Sup. Ct. Feb. 25, 2026) NYSCEF No. 2. On February 25, 2026, New York’s Attorney General Letitia James accused Valve of violating both Article I, Section 9 of New York’s Constitution, which prohibits gambling, and Penal Law §§ 225.05 and 225.10, which criminalize unlawful gambling activity and promotion of such unlawful gambling activity. The 49 page complaint contains substantial factual allegations detailing how Valve’s loot boxes and the secondary marketplaces work, but this is the core of the argument: New York alleges that Valve sells “keys”, which open loot boxes for cash, meeting the “consideration” element; and that Valve enables transfers and sales of the skins obtained from loot boxes, meeting the “prize” element, as the ability to sell a skin would arguably be a method of “cashing out” winnings. The “chance” element is of course met because loot box drops are determined seemingly at random with no ability of the buyer to influence the outcome.

            Valve has issued a public statement in response to the complaint, essentially analogizing their loot box system to physical trading cards.[3] As mentioned above, since the issue of whether trading cards are themselves “gambling” is not settled law, this argument may not alone win the day. There is also the potentially meaningful distinction between how physical trading cards are wholly owned by the purchaser and digital skins are technically licensed, not owned, by the purchaser. The winning arguments in the trading card RICO cases, which hinged on the purchasers receiving the “benefit of the bargain” because they received physical trading cards, may not carry the same weight in the context of merely licensed digital items.

            Valve is also subject to a consumer class action complaint in Washington.[4] This complaint alleges, upon similar facts and arguments, violation of: (i) Washington’s RCW 4.24.070, which allows “all persons losing money or anything of value at or on any illegal gambling games” to have a cause of action to recover such losses; (ii) RCW 19.86.010, which is Washington’s general consumer protection law prohibiting “unfair methods of competition or unfair or deceptive acts or practices”; and (iii) common law prohibitions against unjust enrichment. With respect to RCW 4.24.070, the issue is most similar to the trading card RICO cases, in which case the plaintiffs may face a similar standing issue if Valve can demonstrate that all loot boxes provide at least some “benefit of the bargain” to purchasers such that there are no “losses” even if a loot box purchaser does not receive the drop they specifically were after. If, however, the plaintiffs have standing under RCW 4.24.070, then the Western District of Washington would have occasion to also weigh in on whether Valve’s loot boxes constitute “illegal gambling” under Washington law.

            Unless these cases are settled out of court, we may see novel case law providing the video game industry with much needed clarity on whether certain loot box mechanisms would put loot boxes inside the boundaries of gambling laws.