Members of the Culture Select Committee accused the Government of being “complacent” over the features, which they said were exposing children "to all the emotions of gambling".
In an at times tense hearing, digital minister Margot James told the committee she did not believe there was enough evidence to class loot boxes, which appear in games certified suitable for children as young as three, as gambling.
However, she said the Government would act if a link emerged between children buying loot boxes and later becoming problem gamblers.
“I would contest the assumption that loot boxes are gambling," added Ms James. “ I don’t think that all the evidence that I have read would support that assumption either.
“Loot boxes are a means of people purchasing items, skins, to enhance they gaming experience, not through an expectation of an additional financial reward. Also, importantly they cannot be traded offline for money.
“So I think there are big differences and I don’t think it is true to say that loot boxes are gambling.”
Loot boxes are features in video games that dispense random items such as weapons, characters for costumes.