Goodwin Gaming
August 8, 2016

Valve Strikes Back: A Strong Response to Allegations of Skin-Betting “Gambling”

In response to allegations that it has tacitly endorsed gambling via secondary markets, Valve Corporation (“Valve”), the maker of popular e-sports games such as Counter-Strike:  Global Offensive (“CSGO”), has launched a crackdown on third-party trading sites.  On July 13th, Erik Johnson, a business development authority for Valve, posted a letter online disavowing any business relationship with third-party skin-betting websites. These third-party sites allow players to bet virtual skins from CSGO in lieu of cash or casino chips against both the third-party sites and other players on the outcome of professional CSGO matches or in casino-style games, lotteries, and jackpots. Johnson’s letter specified that running a gambling business runs counter to Valve’s Application Programming Interface (“API”) and User Agreements, and announced that Valve would be asking the sites to stop operations. The following day, Valve distributed cease-and-desist letters to 23 skin betting websites. The cease and desist letters read:

We are aware that you are operating one of the gambling sites listed below. You are using Steam accounts to conduct this business. Your use of Steam is subject to the terms of the Steam Subscriber Agreement (“SSA”). Under the SSA Steam and Steam services are licensed for personal, non-commercial use only. Your commercial use of Steam accounts is unlicensed and in violation of the SSA. You should immediately cease and desist further use of your Steam accounts for any commercial purpose. If you fail to do this within ten (10) days Valve will pursue all available remedies including without limitation terminating your accounts.

The sites served letters include CSGOLounge, CSGOStrong, CSGODouble, CSGO500, CSGOCosmos, CSGOCasino, CSGO2x, CSGOHouse, CSGOAtse, CSGODiamonds, SocietyLogin, Dota2Lounge, CSGOCrash, CSGOBig, CSGOFast, CSGOSweep, CSGOMassive, CSGOBattle, Skins2, CSGOPot, CSGOWild, and CSGOLotto. Some of these sites were already embroiled in scandal, with CSGODiamonds admitting in early June that it gave a sponsored player advance notice of the outcomes of virtual dice rolls to ensure he achieved winning results.  Owners of CSGOLotto were similarly accused of fraud when evidence arose that they were misleading viewers about their ownership of the site. While many of these sites have suspended operations or closed, others have continued to operate. Some sites have even defiantly announced their continued operation, like CSGOCrash, which posted a letter on its site saying it will not cease operations and will do whatever it takes to comply with Valve’s Terms of Service.

Valve’s actions come on the heels of an ongoing class action lawsuit against the company—McLeod v. Valve. Notably, of the three sites listed in McLeod’s original complaint—CSGOLounge, CSGODiamonds and OPSkins—and the three sites added in the amended complaint—CSGOSpeed, CSGOCrash and Skin Arena—only three of the six were served with cease-and-desist letters. OPSkins, CSGOSpeed and Skin Arena did not receive a letter. OPSkins is not per se a gambling website; instead, it allows users to exchange their skins for real-world cash.  But CSGOSpeed and Skin Arena are two of the most popular skin-betting websites. The number of skin-betting websites that did not receive a cease–and-desist letter outweighs the number of sites that did, and thus the continued operation of such sites and the state of the skin betting industry as a whole remain uncertain.

There is still no credible evidence that shows Valve has received any revenue from the operation of third-party skin-betting websites or is otherwise somehow engaged in gambling. It is not entirely clear how sites like CSGOCrash can alter their behavior to comply with Valve’s API and user agreement, but Valve’s current position keeps open this possibility. There is room to eliminate unlicensed, unregulated skin-betting operations, while finding ways to allow for the continued operation of legitimate skin-betting websites, albeit in a more regulated fashion that blocks users’ ability to transfer skins into real world currencies. Valve’s response is an important first step—given the recent onslaught of negative publicity surrounding the second most popular esport in the world. By beginning to confront the unregulated world of skin-betting, Valve may help prevent further backlash.

The post Valve Strikes Back: A Strong Response to Allegations of Skin-Betting “Gambling” appeared first on Goodwin Gaming.