The recent controversy over “skin gambling” has blown up and forced Valve to take direct measures. We look at what led to this and what developers and publishers should really consider before adding any sort of gambling element to their game.
Skin in the Game
This saga truly began in 2011. That was the year that Valve added features to Steam to allow users to trade in-game items in for credits that would let them get the items they wanted. Team Fortress 2 turned free-to-play and made money from various cosmetic purchases, becoming the model that would later be integrated into Dota 2 and Counter-Strike: Global Offensive (CS:GO).
Steam does not allow users to trade in items for money, but third-party websites cropped up that let players do just that. This currency of some of these “skins” eventually exceeded the $400 maximum in the Steam Marketplace, which was a tacit encouragement to use these third-party websites that used the Steamworks application programming interface (API) to link to the players’ inventory to these sites to manage the trading of CS:GO skins while enabling these users to spend more and receive money through other sites such as PayPal. With the value on some of these items quite high, and combined with the competitive environment in the game, it is perhaps unsurprising that gambling would be a natural output.
Betting on sporting events is common around the world, and esports are no different. While betting on the outcome of matches is the most frequent way that people gambled, it wasn’t the only way. Some sites offered a lottery system via which players wager skins, where putting in more increases the chance of winning. Others resemble that of roulette, with similar betting methods. Despite numerous laws that make gambling illegal or restrict it heavily depending on country, state and region, few of these sites put serious barriers in front of players that wanted to play.
This is a very new phenomenon so there isn’t much legal precedence, but it has been determined that using virtual goods for betting is legal and does not run foul of various gambling laws (mostly in the U.S.). Blizzard Entertainment and Riot Games have gone out of their way to differentiate virtual currencies from real-money in order to stay within these prior rulings. By comparison, Valve has toed the line.
Valve have seen tens of millions of sales worth of CS:GO, which despite the preponderance of microtransactions is NOT a free-to-play game. An estimated 3 million people wagered $2.3 billion worth of skins on the outcome of esports matches in 2015, and Valve has benefited from this as whenever CS:GO skins are sold, Valve collects 15 percent of the money. While they wouldn’t benefit from the cash outs, all of this encourages the purchase of keys for “weapon cases” which is a way to receive a random skin in CS:GO – they cost $2.49 apiece and there are no guarantees over the quality of the item received.
Collusion and Greed
Despite the general popularity among a dedicated community, it wasn’t until the recent controversy with YouTube stars ProSyndicate and TmarTn in addition to m0E that brought this issue into the light. Put simply, ProSyndicate and TmarTn were revealed as owners of a gambling site which they’ve been promoting heavily via their YouTube channels. They put up videos showing themselves winning big from the site, running afoul of YouTube’s guidelines requiring disclosure of interests and payments, and bringing up issues of veracity of their claims, with some suggesting they used insider info to rig the outcomes in their favor. There was no debate over the conflict of interest for m0E – a site where gamers use skins to bet on virtual dice rolls admitted to tipping m0E (a sponsored player, broadcaster and online personality) to promote the site to his over half-million followers. m0E admitted that he used the advance knowledge to win on the site.
When the first set of lawsuits cropped up, naming Valve along with the offending CS: GO sites, it forced the company to distance themselves from the gambling entities. “Using the OpenID API and making the same web calls as Steam users to run a gambling business is not allowed by our API nor our user agreements,” said Valve’s Erik Johnson. “We are going to start sending notices to these sites requesting they cease operations through Steam, and further pursue the matter as necessary. Users should probably consider this information as they manage their in-game item inventory and trade activity.”
Valve followed that up with a cease-and-desist letter to 23 Counter-Strike gambling sites that have been using Steam’s API to conduct business in violation of the service’s user agreement. This will force these sites to either radically change their business or completely shut down. While some sites have folded, CSGO Lounge will seek a gambling license, which will limit the regions it can legally operate in. What’s happened has been enough to attract the attention of an Australian politician looking to label CS:GO as gambling. Whatever the result, it will no doubt tamp down the “skin gambling” industry, which was expected to reach $20 billion by 2020 before this crackdown occurred.
The legal action is truly what has forced Valve to take action. It’s sad that it wasn’t some greater moral stance against such sites; it took a lot of negative attention and two lawsuits for Valve to do the right thing. They could have made moves to shut this sites down long ago but haven’t – in fact, evidence points to Valve having provided technical support to at least some of these sites. In fact, they made moves to ban seven players involved in match fixing activities in the CS:GO professional environment and announced that professional players and team staff should not gamble on matches, associate with high-volume gamblers, or share inside information, but made no move against the gambling sites themselves.
I learned it by Watching You!
While Valve is seeking to put itself on the right side of this situation, it should be noted that their games have lottery-style gambling elements themselves. For Dota 2, some cosmetic items can be bought outright, but some can only be had through treasures, typically priced at $2.49, that contains between five to ten random items. While standard items you receive won’t be duplicates, there are a random amount of rare items which CAN be duplicates, meaning there’s no set amount of spending that can net all of the rare items.
Players can resell the items they receive on the Steam market, and in that case they can only use the currency they receive on other items or Steam games. Some items can cost tens or even hundreds of dollars on the Steam market, making one treasure into potentially large windfall. CS:GO is similar to this scheme, though it does not enforce the no duplicate policy on non-rares. While this isn’t strictly gambling for money, it is certainly gambling of a sort.
Valve has often taken a laissez-faire attitude towards offerings on Steam. It happened with early access games: originally, the developer could promise any number of features until Valve were forced to step up and refine their own guidelines. The mass of games coming to the site made curation an issue, something Valve has attempted to correct with community driven Steam Greenlight and the like. However, the Steam community itself is becoming increasingly toxic, making approval a contested and highly charged issue.
By enabling these sorts of sites, Valve ceded control of aspects of their game. It frankly shouldn’t have taken a public controversy and a lawsuit for Valve to make this move. This serves as a warning to all future developers who enable gambling or gambling-like features: draw a hard line between real-world money and in-game currency. If you’re betting with play money, keep it at that, do not try and skirt the law. Minors cannot be allowed to gamble – this is not just a legal imperative but a moral one. Children both lack the capacity and the experience to make adult decisions and they should be protected.
A Casual Connect USA panel recently concluded that esports publishers and tournament organizers would have to exercise more control over their games and events to avoid similar issues with unregulated gambling in the future. Already it’s had an effect: while Rocket League developer Psyonix says the game will have random drop crates containing cosmetic items designed to fund esports prize pools, there will not be Steam Marketplace integration to cut off the issue of third-party gambling off at the bud. This issue certainly isn’t going away – Overwatch, which fast became a popular esport, had a loot crate system integrated from its launch. While the game isn’t on Steam, it does constrain certain rare items to the loot crate, rather than being able to buy them directly. That’s a slippery slope particularly for what’s already a premium paid game, and given Overwatch’s popularity among teens, hopefully that will be the limit of it. We need to act responsibly as an industry, not merely looking to hit up customers (many of whom are very young) for any extra money we can because its convenient.
David Radd is a staff writer for GameSauce.biz. David loves playing video games about as much as he enjoys writing about them, martial arts and composing his own novels.