The Swedish Gambling Authority (Lotteriinspektionen) has recently received many questions from the general public about random prizes in computer games, where players are randomly assigned virtual items (i.e. loot boxes). We are therefore making an assessment about what the Swedish Lotteries Act says about the legal definition of a lottery and how a decision can be made about what is permitted and what is forbidden.
The Swedish definition of a lottery
According to the Swedish Lotteries Act, a lottery is an activity which is determined in whole or in part by chance and in which one or more participants, with or without a stake, may obtain prizes with a higher value than any other participant.
What is considered a prize?
According to the definition of a lottery, a prize involves winning money or something that is worth money. The implication of this is that prizes must have a certain economic value in the real world. Anyone who participates in a computer game event determined by chance must therefore win something that, outside of the computer game's virtual environment, can be bought and sold for real money for it to be considered a prize in accordance with the Swedish Lotteries Act.
In Sweden it is forbidden to arrange lotteries without permission
You need a permit to organize a lottery in Sweden. If permission is not granted, it is forbidden to arrange the lottery. In principle, permits to organize lotteries are only awarded to non-profit associations that operate for the benefit of the general public.
When is a lottery considered to be arranged in Sweden?
If you are in Sweden and participate in an online lottery, it does not necessarily mean that the lottery is arranged in Sweden. This is because the arrangement of an internet game often can be attributed to several countries. For example, the arranger of the game may have his company registered in one country, conduct his business and have his headquarters in another country while the gaming server is set up in a third country. In such a case, the arrangement of the lottery should be attributed to the country in which the main business is conducted. In this assessment, for example, the part of the business that involves the organization and management of the business will be given particular importance. However, the country in which the arrangement of the lottery can be attributed is ultimately an issue that may be judged in the light of all the circumstances of the individual case.
If an arrangement such as being allocated virtual objects randomly in computer games would fall under the definition of a lottery in the Swedish Lotteries Act as stated above, the next step is to assess if it is considered to be arranged in Sweden (i.e., that the main business is conducted in Sweden). If this is the case then such an arrangement would be covered by the Swedish Lotteries Act and then it would be forbidden to have such an arrangement without a permit.
Eva has a user account on a computer game platform called Gaming. She can play various computer games on the platform. On the Gaming platform it is possible to buy virtual Gaming coins with real cash. Eva can use the virtual coins to buy virtual objects that have varying value in the computer game. In one of these computer games, Eva takes part in an activity that is determined by chance. Eva wins a virtual object. She sells this virtual object to another user on the Gaming platform in exchange for virtual Gaming coins. She then cashes in the Gaming coins for real money that the Gaming platform transfers into her bank account.
In the above example, Eva has taken part on the Gaming platform in a lottery according to the Swedish Lotteries Act for the following reasons. Firstly, she has won something through chance. Secondly, her prize has financial value in the real world because she sold the prize and this resulted in real money being transferred into her bank account.
The next step is to decide if the Gaming platform has arranged a lottery in Sweden. This would be the case if the operator of the Gaming platform (a limited company, for example) had its main business in Sweden. If it is considered that the operator of the Gaming platform has conducted a lottery in Sweden, then the event is considered to be covered by the Swedish Lotteries Act and thus it would be forbidden to arrange such an event without a licence.