Are Loot Boxes Gambling Under US Law?

Under the court decisions so far, generally no: the federal courts that have ruled on loot box suits under California law dismissed them, holding that items that can only be used inside a game are not a "thing of value" under the state's gambling statutes. The answer changes when what is won can be turned back into play or money. In 2018 the Ninth Circuit held that virtual chips in a social casino app were gambling under Washington law, and New York's attorney general sued Valve in 2026 on the theory that tradeable, resalable items make its loot boxes gambling too. There is no federal statute written for loot boxes, so the question runs state by state.

What makes something gambling under US law?

Most state gambling laws are built on three elements: consideration (paying to play), chance (an outcome the player does not control) and a prize (winning something of value). The Ninth Circuit, in a Washington case, quoted a Washington Supreme Court decision for the principle that "all forms of gambling involve prize, chance, and consideration."

Loot boxes satisfy the first two easily. A player pays real money, directly or through a purchased in-game currency, and receives a randomly selected item. The dispute is almost always about the third element: whether a virtual item is a prize of value.

States answer that question with their own statutory definitions, and the wording matters. California's slot machine statute, Penal Code §330b(d), defines a slot machine as a device in which, "by reason of any element of hazard or chance," the user "may receive any piece of money, credit, allowance, or thing of value." Washington defines gambling as "staking or risking something of value upon the outcome of a contest of chance" under an agreement that someone will receive something of value (RCW 9.46.0237), and its definition of "thing of value" (RCW 9.46.0285) expressly includes credit "involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge." That last clause, found in Washington's statute, does much of the work in the case that went the other way.

Why did Kater v. Churchill Downs go the other way?

Kater v. Churchill Downs Inc., 886 F.3d 784, decided by the Ninth Circuit on March 28, 2018 (Ninth Circuit opinion, No. 16-35010), did not involve a loot box. It involved Big Fish Casino, a social casino app in which players bought virtual chips, in bundles priced from $1.99 to nearly $250, and used them to play casino-style games. The app's Terms of Use said the chips had no monetary value and could not be exchanged for cash. Cheryl Kater alleged she bought and then lost more than $1,000 worth of chips.

The district court dismissed the case. The Ninth Circuit reversed. Its reasoning turned on Washington's definition of a "thing of value." When a player wins chips, the court explained, the player wins the privilege of continuing to play without paying. "In sum, these virtual chips extend the privilege of playing Big Fish Casino," which put them inside the statutory definition. The court relied on a Washington appellate decision, Bullseye Distributing, which had reasoned that the points at issue there were things of value "because they extend the privilege of playing the game without charge." Because the game met all three elements, Kater could seek to recover her losses under Washington's Recovery of Money Lost at Gambling Act. The court also noted that "all online or virtual gambling is illegal in Washington."

Two parts of the opinion limit its reach. First, the court distinguished cases decided under other states' laws, including Mason v. Machine Zone (Maryland law, Fourth Circuit), Phillips v. Double Down Interactive (Illinois law) and Soto v. Sky Union (California law), noting that those statutes were worded differently. Second, in footnote 2, the court declined to rest its decision on the fact that chips could be sold on a secondary market: "the sale of virtual chips for cash on a secondary market violates the Terms of Use. The virtual chips cannot constitute a 'thing of value' based on this prohibited use."

Kater therefore stands for a narrow proposition: in Washington, a game where paid chips buy more play on games of chance is gambling, because Washington's statute treats extended play as a thing of value.

Why have loot box suits against app stores failed?

In 2020, plaintiffs filed parallel class actions in the Northern District of California against Google, Apple and the developer Supercell, arguing that loot boxes are illegal slot machines under California law. All three were dismissed in the district court.

The fullest explanation is the January 10, 2022, order by Judge Beth Labson Freeman in Coffee v. Google LLC, No. 20-cv-03901-BLF, which dismissed the first amended complaint without leave to amend and the action with prejudice (order, via GovInfo). The plaintiffs alleged that loot boxes in games distributed through the Google Play Store violated nine statutes, including California's slot machine provisions and two federal laws. The court found that the claims failed because loot boxes are not illegal slot machines under California law.

Three strands of reasoning in Coffee recur across the cases.

Subjective value is not enough. The plaintiffs argued that loot box items have real value to players. The court quoted the Taylor v. Apple order on that point: "While that undoubtedly is true, the lack of any real-world transferable value to the items takes them outside the meaning of the statute." It also quoted Soto v. Sky Union: "Added enjoyment simply does not have measurable worth, and it cannot be a 'thing of value' under [California Penal Code] section 330b(d)." Absent any case holding that "a player's subjective enjoyment" makes an item a thing of value, the court found the theory "untenable."

Prohibited resale does not count. The plaintiffs also argued that items could be traded in "gray markets." The court took judicial notice of Google Play's terms prohibiting the sale or transfer of in-app content and applied Kater's footnote 2: "a virtual item cannot be considered a thing of value based on its alleged market value where the terms of use preclude transfer of the item." It held that differences between the Washington and California statutes did not change that conclusion.

Buyers got what they paid for. On the consumer-protection claims, the court found the plaintiffs had not plausibly alleged they lost money or property, since they received the virtual currency they bought.

Coffee cited the other two cases as reaching the same results. In Taylor v. Apple, No. 20-cv-03906-RS, the court dismissed without leave to amend, on the thing-of-value ground and for lack of standing. In Mai v. Supercell Oy, No. 5:20-cv-05573-EJD, the court found in a September 20, 2021, order that "any items obtained from loot boxes can only be used within the games themselves" and are "not prizes that can be cashed out for real-world money to be spent elsewhere."

Does the ability to resell items change the analysis?

It may, and that is where the open questions now sit. Both Kater and Coffee refused to count resale that a platform's terms prohibit. Neither addressed a system where the platform itself runs a market for the items.

That is the situation with Valve's games. Counter-Strike's weapon "skins" have long been bought, sold and traded for real money; an FTC complaint in 2017 described exactly that in a case about a skin-betting site. In a July 13, 2016, statement, Valve said that "Steam does not have a system for turning in-game items into real world currency" and that using its OpenID API "to run a gambling business is not allowed." But Valve also runs the Steam Community Market, where players resell items.

On February 25, 2026, New York Attorney General Letitia James sued Valve in state court in Manhattan, alleging that loot boxes in Counter-Strike 2, Team Fortress 2 and Dota 2 are illegal gambling under New York's constitution and penal law, according to a report published by Virginia Lawyers Weekly. The complaint argues that players pay for keys to open cases with random contents and that the resale of won items on the Steam Community Market and third-party sites reinforces the gambling model. The case is a state enforcement action, not a private suit, and was pending at the time of writing. Its outcome will test whether a first-party marketplace supplies the "real-world transferable value" that the California courts found missing.

Does federal law reach loot boxes?

Not directly. No federal statute addresses loot boxes by name, and the federal gambling statutes that could apply depend on state law.

The Unlawful Internet Gambling Enforcement Act defines a "bet or wager" as "the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance," with an agreement that someone will receive something of value (31 U.S.C. §5362(1)). But it reaches only "unlawful Internet gambling," meaning a bet that is unlawful under federal or state law where it is made. The Illegal Gambling Business Act, 18 U.S.C. §1955, likewise turns on violations of state law. The Coffee court made the same point, noting that most of the statutes the plaintiffs invoked did not define gambling themselves but adopted definitions from state law. The Wire Act, as read by the First and Fifth Circuits, covers only sports betting.

Federal involvement has instead come through consumer protection. The FTC's 2017 order against the owners of CSGO Lotto addressed undisclosed endorsements of a skin-gambling site, not the legality of skins. The practical result is that a loot box's legal status depends on where the player is, how that state's statute defines a thing of value, and whether the items can be turned into money or more play through means the platform allows.