MHA Proposes To Set S$100 Prize Cap on Mystery Boxes, Clamp Down on Skin-Betting Sites

The Ministry of Home Affairs (MHA) announced on Monday, 12 Jully 2021, that it is planning to set a S$100 prize cap on mystery boxes, arcade games and claw machines as part of its proposed amendments later this year on Singapore’s gambling legislation.

Credit: Hougang Mall

“This cap will be sufficient to address the inducement effect of high-value prizes, without increasing the regulatory burden on operators,” said the ministry.

It noted how it has recently become more common for the aforementioned games to put high-value prizes up for grabs, including smartphones and game consoles, to name a few. Given how these prizes are only won by chance, it can possibly induce gambling behaviour among the public.

“We are careful not to over-regulate. We recognise that many Singaporeans consider mystery boxes, arcade games and claw machines as a form of entertainment,” the ministry added.

“However, there remains a need for safeguards to ensure that these activities do not induce gambling behaviour and cause social problems.”

Meanwhile, it is also setting its sights on online games with virtual prizes, specifically how those prizes can be transferred out and be exchanged for money. The ministry proposes to add new conditions to the existing law to ensure that transferable virtual items are retained in the context of gameplay and entertainment.

“Online games of chance that allow players to use virtual items from other games as a form of stake on casino games or match outcomes, such as skin-betting sites, will not be allowed,” said the ministry.

Credit: Blizzard Entertainment

It mentioned how a lot of today’s most popular online games incorporate gameplay and rewards systems that seemingly resemble gambling.

One such system is the loot box system, sometimes referred to as the gacha system, a monetisation scheme where players spend in-game currency to buy a random set of items dictated by chance. Depending on the game, the items are usually cosmetic in nature, meaning their only purpose is to enhance players’ in-game appearances and are therefore not essential to gameplay. This, however, is not necessarily the case with all games as some might offer gameplay boosts or lock certain features or experiences behind paywalls, forcing players to spend.

In almost all cases, players can earn the in-game currency to purchase these loot boxes by simply playing the game. Despite this, a lot of games still offer a way for players to exchange real-world cash for in-game currency through microtransactions, speeding up the process to which they can buy these loot boxes.

There are also third-party websites that allow players to bet their in-game items on games of chance like roulette, with the potential of winning higher-value items. These are the so-called skin-betting sites that the MHA look to clamp down as part of its proposed amendments. Skin is just another term for in-game cosmetics that players collect in online games.

Credit: Loot.Bet

Singapore is not the only country that wants to regulate loot boxes in online games. Belgium, for example, outlawed its sale in 2018, citing violations against the country’s gambling legislation, as reported by the BBC. In the same year, the Australian Senate approved an investigation into loot boxes, bringing attention to how gaming companies could reportedly exploit gambling disorders in children.

The law presently does not consider online games with loot box systems as gambling as long as players are not allowed to exchange virtual prizes for real-world payouts.

Additionally, the proposal wants to raise the penalties for repeat offenders who facilitate or operate illegal gambling services. The penalties will follow the Remote Gambling Act’s three-tier penalty structure which differentiates between operator, agent and punter. When caught, operators face the most penalties due to them having more liability than agents. Punters, on the other hand, will not be slapped with increased penalties yet, according to the ministry.

To ensure consistency, this penalty structure will reportedly apply across all forms of gambling, whether it is online or physical.

The only form of gambling not punishable by the law is social gambling. The ministry makes it clear that it only intends to regulate or prohibit gambling activities that pose a risk to law and order or have the potential to cause harm.

“We recognise that gambling amongst family and friends in homes is socially acceptable amongst many Singaporeans,” it said.

Credit: Getty Images

While social gambling in physical spaces is permitted, the ministry reiterates that online social gambling remains prohibited.

“Explicit exemption of online social gambling will pose enforcement difficulties, as it will be difficult to establish if individuals are sufficiently and meaningfully acquainted with each other in the online context to qualify as social gambling.”

It also warned that it will take strong enforcement action against any entity or individual that exploits this exemption.

Lastly, MHA is revising the definition of gambling to make it technology-neutral so that it can cover existing and emerging gambling products.

“This broader definition of gambling may, however, cover products that MHA has no intention of treating as gambling products, for example, financial products already regulated by Monetary Authority of Singapore,” it said.

“We will carve out these products from the definition of gambling.”

The proposed amendments is in line with the MHA’s plans to set up a new gambling regulator by 2021. It also comes after the ministry stated last year that it wants to review and amend the current gambling legislation to keep up with evolving gambling products and business models.

Along with the amendments, the ministry shared that gambling related-crimes in the country remain low and that problem gambling among Singaporeans is “under control”.

“To continue to enjoy these good outcomes, we need to make sure that our laws and regulations can address two trends in the gambling landscape,” it said.

“First, advancements in technology. The Internet and mobile computing have made gambling products more accessible. Second, the boundaries between gambling and gaming have blurred. Business models have adapted to suit changing customer preferences by introducing gambling elements in products that are traditionally not perceived as gambling.”

MHA is welcoming public to provide their feedback on the proposed amendments before the eventual review of the gambling legislation later this year. Feedback can be sent via email at MHA_Gambling_Feedback@mha.gov.sg or via physical mail to MHA by 10 August 2021.

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Written by Kyle Chua