The Dutch Supreme Administrative Court has not classified FIFA Ultimate Team (FUT) as gambling requiring a licence after an appeal by EA – but how did this verdict come about? A commenting analysis by Niklas Aßfalg.

For years, law enforcement officials in various countries have been fighting against so-called loot boxes in video games in order to have their gambling mechanisms legally sanctioned or even banned. Lootboxes also include FUT packs, which can be purchased with FIFA Points and thus with the use of real money.

FUT packs are based on the random principle, the players do not know at the time of purchase which content will be presented to them – with the exception of the preview packs, which EA SPORTS had introduced in FIFA 21. Chance determines the content, ergo it could be assumed that gambling subject to licensing is present.

Raad van State contradicts KSA and The Hague
It was precisely this assumption that led the Dutch Gaming Supervisory Authority (KSA) to impose a fine – totalling up to ten million euros – on FIFA developer EA in October 2019. The District Court of The Hague confirmed this measure in October 2020 and dismissed the appeals filed against it as unfounded.

However, the highest national instance – the Raad van State, the highest administrative court in the Netherlands – overturned this decision on 9 March. The court upheld EA’s appeal, saying that the FUT mode and its pack practice did not constitute gambling subject to licensing. The sanctions were lifted.

Fatal signal effect in the fight against gambling

The KSA has thus had to accept a hefty defeat in the fight against online gambling mechanisms and also for the corresponding prevention of addiction. However, this ruling could have a fatal signal effect not only for the Netherlands, but also for Germany’s handling of the problem.

In itself, the judgement is quite sensible and legally correct. The KSA had ultimately complained in vain about a violation of Article 1 paragraph 1 preamble and under a) in the Dutch Gaming Act.

“For the purpose of enabling contests for prizes or awards where the winners are determined by a determination of probability over which the participants regularly cannot exercise a preponderant influence, unless permission has been granted for this purpose under this Act”, the prohibition reads at this point.

Separation and trade as a pillar of argumentation

The KSA characterised basic gambling by “content determined by chance” as well as a “prize with economic value”. In its argument against FIFA Points and the associated pack purchase, the authority relied on two overarching pillars – segregation and commerce.

The criticised practice was to be considered detached from the actual game, since no packs could be bought or opened on the virtual pitch – the core of FIFA and FUT. Furthermore, the “economic value” of the profit was given by the possible trade on the external black market.

EA, on the other hand, classified the packs as “part of a comprehensive game of skill”, as a “marginal element of chance” – and precisely not as a separate game. Furthermore, the developer stressed that the contents of the packs could not be legally converted into cash and were therefore closed to the economy.

Court does not recognise a “closed process “

In fact, EA does not allow trading of FUT objects outside of the integrated and regulated transfer market, infringements have led to penalties for players in the past. Moreover, there is no question of profit, as the contents of the packs have no value in commercial transactions.

The Raad van State agreed with the video game giant in this line of argument. Packs were not an end in themselves, but rather a means to an end to play the game. The “closed process” that the KSA criticised in the purchase and opening of packs was thus not recognised by the highest administrative court.

Majority’s practice breaks KSA’s neck

The ultimate point, however, is probably a formulation that the Hoge Raad – the highest court of the monarchy – once applied to the criterion: “What is relevant to the element of probability is how a game is played in practice by the majority of players.” This aspect broke the neck of the KSA.

In 1991, the Hoge Raad had ruled against the “Golden Ten Game”, at that time the signs were reversed: the defence was based on the argument that the chances of winning could be maximised through long observation. The decisive factor, however, was that the majority of players did not act in this way in practice.

92 percent of pack purchases without real money

In reverse, the Raad van State now ruled that the reality, contrary to what the KSA portrayed, provides for an overwhelming majority of players earning packs through game engagement. EA cited 92 per cent as the percentage who earn the packs without spending real money.

At this point, the only thing left for the public to do is to trust the Dutch Supreme Administrative Court to have properly verified this information. In addition, the FIFA developer presented a study by Prof. Dr. RH Koning on the game practice in FUT.

This also comes to the conclusion that Ultimate Team is a “mixed skill game”. The pack environment is therefore not separate, but can be found directly in FUT.

KSA case collapses like a house of cards

The KSA has again failed to prove that packs are bought and opened “on a large scale” separately from the actual game. Such proof is also unlikely to be forthcoming; few players are likely to invest in FUT objects without subsequently also sending them to the digital pitch.

The gambling authority relied so vehemently on the thesis that the pack practice in FUT could be separated from FIFA that the entire case collapsed like a house of cards after EA conclusively refuted this assumption. Now the KSA is empty-handed – and bears the costs of the proceedings to boot.

“Extensive document” remains unconsidered

So, instead of being able to impose a heavy fine on the billion-dollar company and cast it in a questionable light for the long term, it has to resort to the stock exchange itself. It remains to be mentioned that the KSA had submitted yet another “extensive document” on 18 November 2021.

However, the scope and timing of the submission led the Raad van State to disregard this document for the trial. It violated the Rules of Procedure because EA could not respond adequately – the KSA could arguably have submitted it earlier, to match.

Continuing to tilt at windmills

Speculating that said document would have meant a paradigm shift for the negotiation is idle – and irrelevant. The KSA may have fumbled after the favourable ruling from The Hague, EA had the more conclusive arguments at the highest level. But it is also possible that the attempt was doomed to failure from the outset.

The gambling supervisory authority and the District Court of The Hague had apparently assumed the widest possible scope of application and therefore wanted to classify the pack practice as a game in its own right. That this interpretation would fail and FUT would not be sanctioned in its entirety seems almost obvious in retrospect.

Legal action against the gambling mechanisms in FUT remains a battle against windmills. And much like Don Quixote in the world-famous novel by Miguel de Cervantes, the KSA might come to a late realisation after the conclusion of the trial – on the metaphorical deathbed of the hope of prohibition.