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Valve Corporation and the no good very bad day

Valve Corporation and the no good very bad day

The Washington State Gambling Commission just sent Valve to its room without dinner. The Bellevue-based company is facing legal action in regards to its facilitating role in Counter-Strike: Global Offensive’s skin betting scene, an activity the Washington State Gambling Commission now deems illegal.

Though Valve has denied involvement in the skin betting community—“we have no business relationship with any [skin betting] sites,” Valve’s Erik Johnson said in July—the Gambling Commission found Valve responsible insofar as the company allows these sorts of skin transfers to happen. A letter issued by Commission director David Trujillo on September 27 warned of the consequences: if Valve fails to comply, its employees could face criminal charges, as well as the seizure of any property related to the illegal gambling activity.

an “oh, shit” moment

Valve has until October 14 to respond with a detailed report of how it’s in compliance with Washington State’s gambling law. Trujillo, in the letter sent to Valve co-founder Gabe Newell in September, reported that Valve had ceased communication with the Commission in late February.

The September letter was likely an “oh, shit” moment for the company, given that the Steam Marketplace has allowed item trading since 2011. CS:GO was released in 2012, and cosmetic items were introduced in 2013. Item trading—and skin betting—using the Steam platform has been around since then, making it relatively surprising to see the Commission getting involved only now. CS:GO betters aren’t throwing down nickels and pennies; at the time of writing, there’s a sniper rifle skin, Dragon Lore, going a top price of $10,800 on CSGO Analyst.

But the numbers make it less surprising. Looking at CS:GO Lounge, formerly one of the top CS:GO skin betting sites, a report by ESBR and Narus Advisors found the site brought in a staggering $1 billion “in handle” just in the first half of 2016. I don’t need to say this, but: That’s a lot of money.

But it’s a lot of money circulating around an “unregulated black market,” Washington State Gambling Commissioner Chris Stearns said. “That carries a great risk for the players who remain wholly unprotected in an unregulated environment.” This unregulated environment has been criticized just this year for more than just its illegal gambling; a bunch of popular YouTube personalities, including Trevor “TmarTn” Martin and Tom “ProSyndicate” Cassell have been accused of unethical business practices regarding CSGOLotto, a site both of which have promoted heavily—posting videos of them gambling and winning on the site—without disclosing their ownership in the business.

“an unregulated black market”

Not to mention underage aspect of it all; Ryan Morrison, a New York lawyer specializing in legal issues involving videogames, has received “more than two dozen inquiries” from folks looking to sue Valve for money lost while gambling with CS:GO skins. Many of those angry, Morrison told Bloomberg in April, are parents of underage kids buying skins with a Steam account linked to their parent’s credit card. However, just yesterday, a class-action lawsuit against Valve (and CSGOLotto, actually) regarding skin betting losses was dismissed by the federal government.

CS:GO Lounge and CSGOLotto were two of the sites implicated in the cease-and-desist letter sent out by Valve in attempt to placate the law. Twenty-one other skin betting sites were named by Valve, some of which shut down, while others skirted around the issue. CS:GO Lounge, in particular, shut down for a short bit while it restructured its betting system around coins, not skins. Real world value of these coins has yet to be determined, though it offers some insight on the industry’s will to preserve: the people who make money from CS:GO will find ways to workaround the rules.

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