Many video games incorporate 'micro-transactions', a broad concept extending to any model that provides a consumer with the option of making small purchases within a game or other application. Micro-transactions are typically made using game points, real-world money, or both.

Micro-transactions may involve the direct purchase of specific in-game content or features, including items (i.e. outfits, vehicles, weapons, tools, etc.), mission or quest packs, new game modes and extra play time, among other things. Micro-transactions may also involve the purchase of a virtual item that contains a variable selection of other virtual items (chance-based items), which are sometimes called 'loot boxes', 'loot crates, 'mystery boxes', 'prize crates' and other similar names.

Gaming micro-transactions for chance-based items, called loot boxes for the purposes of this inquiry, are included in some video games to provide players with a way to obtain virtual items for in-game use. The items in loot boxes vary, but typically include collectibles, character outfits, game points, player bonuses, and weapon camouflages or 'skins'. Some virtual items are functional 'sidegrades' or upgrades that players may use functionally in game play (i.e. useful tools, armour, weapons or abilities), whereas others are simply cosmetic items.

This report comprises 5 chapters as follows:

• Chapter 1 provides an introduction and overview of gaming microtransactions for chance-based items, recent public concern regarding the issue, and international responses;
• Chapter 2 explores whether gaming micro-transactions for chance-based items constitute gambling under Australian regulatory frameworks;
• Chapter 3 examines the evidence received that gaming micro-transactions for chance-based items meet the psychological definition of gambling, and the  potential for harms associated with interaction with these mechanisms;
• Chapter 4 outlines possible government responses to the issue; and
• Chapter 5 provides a committee view and recommendations.