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Man Convicted Of Wire Fraud, Bilking EA Of $16 Million Worth Of FIFA Coins

November 17, 2016

Four US men wrote computer software that allowed them to illegally obtain millions of dollars in virtual currency related to a sports video game, and then sold that currency for liquid cash, according to a statement from the Department of Justice.

The US Attorney’s Office for the Northern District of Texas on Wednesday convicted 24-year-old Anthony Clark of Whittier, CA, on one count of conspiracy to commit wire fraud in connection to his involvement in a FIFA coin scandal.

Prosecutors presented evidence at a recent three-day trial that they said indicates Clark and three co-conspirators “defrauded” Electronic Arts, the maker of the popular FIFA soccer video game series, of coins.

How FIFA Ultimate Team works

During FIFA gameplay, gamers can earn FIFA coins. This virtual currency can be used to acquire new players for a team, particularly in what’s called FIFA Ultimate Team mode.

FUT mode emphasizes the marketplace-driven acquisition of new players using a virtual currency.

Gamers in FUT mode develop their own team and acquire coins upon the completion of various milestones. The most coins a player can win purely from match play is 500.

They can then use coins to improve their teams by acquiring new players when they purchase “player packs.”

While coins are not sold by EA for cash, FIFA “points” are sold by the game maker for cash. Points can be used to purchase players packs.

Prosecutors say that these transactions bring in millions of dollars per year for EA.

Clark, conspirators acquired $16 million in coins

Prosectors said Clark and his co-conspirators at some point beginning in 2013, “created software that fraudulently logged thousands of FIFA Football matches within a matter of seconds.”

Resultantly, EA credited the four men with so many “improperly earned” FIFA coins that they were able to turn around and sell them for $16 million, prosecutors said.

Coins are not intended to have a real-world value outside of the game’s ecosystem.

However, third-party virtual currency markets such as MMOGA, BuyFifaCoins and FifaUTStore have sprung up in recent years, allowing players to acquire coins (usually for cash) outside of EA’s online marketplace.

While there is no widely adopted coins-to-USD exchange rate, as there is with a currency like Bitcoin, 100,000 coins from the newly released 2017 version of the game appear to sell for around $20.

The actual number of coins obtained by Clark and the others is unclear. Prosecutors did not mention the specific third-party sites the men used to liquidate the coins, but did say that they sold to buyers in China and the United Kingdom.

The other conspirators are each 24 years old as well: Nick Castellucci of New Jersey, Ricky Miller of Texas, and Eaton Zveare of Virginia. Sentencing is scheduled for Feb. 27.

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Unsealed indictment specifies tactics used

An unsealed indictment, first reported by Vocativ’s Joe Lemire, illustrates exactly how the men constructed a program to illegally obtain coins.

The men obtained a copy of FIFA’s source code. They then used that to created something called a FIFA Server Tool Application that utilized cloud computing and a match simulator to make it appear as if they were playing a massive volume of matches.

Multiple accounts, all simulating a high volume of matches, would “farm” points, and share them with a master account. At one point, the group boasted it acquired 67 million coins through this process in one hour.

Authorities seized approximately $3 million from multiple bank accounts registered in Clark’s name, as well as two cars found at his home.

Authorities also seized assets from seven separate accounts connected to Zveare. Three of those accounts were registered under not just Eaton’s name, but also that of an Eric Zveare and Janet Zveare. A fourth account was registered as the Zveare Family Trust.

It’s unclear if Eric and Janet are Eaton’s parents, but the trio appear to have bought a house in Sarasota, FL, in 2015 for $2 million.

The group referred to themselves by the acronym RANE, and formed a Virginia-based company called RANE Developments, LLC.

The registration documents for RANE Developments lists as its principal office address the Florida home purchased by Eaton, Eric, and Janet.

Indictment lays out Wire Fraud violation

Clark was found in violation of 18 U.S.C. § 1343, a statute of the US Criminal Code which prohibits defrauding or obtaining money through the transmission of anything over a wire, radio, or television communication.

The indictment reads:

“The defendant, Anthony Clark, knowingly and intentionally combined, conspired and agreed with others known and unknown to the Grand Jury, to execute and attempt to execute the above described scheme and artifice to defraud, and attempting to do so, and transmitted and caused to be transmitted, by means of wire and radio communications in interstate and/or foreign commerce, certain writings, signs, signals and sounds, including causing an “application” to be executed on EA’ s servers from various locations throughout the United States.”

Other FIFA coin fraud persists

This is not the first time regulators have cracked down on gamers for conducting illegal commerce using FIFA coins.

Two UK men associated with the site FutGalaxy were charged earlier this year by the UK Gambling Commission with violating that country’s national gambling law.

Their site allowed FIFA players to buy player packs, just as EA’s online FIFA marketplace does, but also allowed gamers to use coins to bet, sportsbook-style, on the outcome of real-life soccer matches.

EA explicitly prohibits the sale of coins on third-party websites. It is believed to have taken action against some individual gamers, banning those who it has found to have purchased coins with real money.

EsportsPools Founder Scott Burton Talks About The Future Of Esports Betting

October 24, 2016

The fantasy sports industry has spent 2016 in significant flux following increased regulatory scrutiny, intense legislative lobbying, potential criminal probes, and ultimately waning growth.

Scott BurtonThe shifting landscape has not spared fantasy esports. The two largest operators, Vulcun and AlphaDraft, have shuttered despite each attracting multi-million dollar investment rounds last year.

The former abruptly stopped offering real-money contests at the beginning of the year and ceased all fantasy esports by July.

The latter, which FanDuel bought just one year ago, announced last week that it would close this month. The closures have led some to speculate that the industry is dying.

One website, EsportsPools, is still offering daily fantasy esports, and has no plans of stopping.

The site’s founder, Scott Burton, spoke to ESBR about the challenges facing the industry, how fantasy can serve as a compliment to broader esports betting, and the benefits of esports being a truly global game.


 

ESBR: Yours is one of the last fantasy esports sites still standing. Why is that?

Scott Burton: We’ve always had a different sort of approach to what we were doing. We had our site live prior to Vulcun and AlphaDraft, and esports betting is actually the path we’ve been on. We were previously an offshore licensed betting company, but for traditional sports.

In 2014 we decided to shift our focus to esports exclusively, and actually decided to start with a fantasy site at that time. That way, we knew we could put something out that didn’t require licensing in a lot of places, until we tested the market and saw whether there was an appetite for things like betting and fantasy around esports.

ESBR: Why was fantasy the market entry point for you as opposed to other forms of betting?

Burton: There’s quite a burden to getting your license. We wanted something that wasn’t going to require us to go through the cost and effort of getting a license, but still could give us a sense of whether [betting] would support esports and viewers.

We knew we could test monetization in some areas, and once we were satisfied, we’d go back to the route of… adding the more traditional style betting stuff.

ESBR: Should we expect, then, a more traditional betting product from ESportsPools in the future?

Burton: At the beginning of next year we plan to introduce the rest of our products, so that will be betting and some additional game play around esports. We’ve been fairly public since the beginning that that’s where we’ll be heading.

Betting will be our main focus. Fantasy will still be there. We’ll have community aspects as well—forums, embedded streams, an esports news aggregator for content.

ESBR: What format of esports betting are we talking about, here? Cash? Bitcoin? Virtual coins? Skins?

Burton: We’ll actually have the ability to do all of the above. There will be cash betting. We will have alternative currencies like Bitcoin.

We’ve always had a focus around the virtual goods and skins. I know there’s some flux in the industry around that, but we would have the ability to do that if we chose to, and if we had support.

ESBR: Even if you have the functionality to offer skin betting, though, you still need the consent of game developers, no? Valve, for example, recently sent cease and desist letters to websites that used its API for commercial purposes, like skin betting.

Do the risks of delving into skin betting outweigh the rewards?

Burton: Potentially, which is why we have the ability to either use them or not. Nowhere in Valve’s cease and desists is there anything anti-gambling, necessarily. They’re going into the terms of service of the API.

It doesn’t have to be Valve or Counter-Strike: Global Offensive skins. I know they had that letter recently from Washington state and they responded recently to Washington state. That was an interesting response. But we’re only going to operate in places that allow and have approved our activity, and we’re looking for the support of publishers.

I think there’s potential opportunity with other game publishers, and other items, as well as the fact that we will be fully licensed. We have full KYC in place, so we do, age, identity and location verification.

I think one of the bigger issues is around a lot of those sites not being regulated, not trying to block underage users from getting in, not having any transparency behind the scenes and who you can go to if you have complaints. All of those things will be in place for us, which I think would open up some opportunities to reengage with virtual currencies in the future.

ESBR: What type of license would allow you to run skin betting, and in what jurisdictions?

Burton: If you look from the regulatory side to what recently came out of the UK Gambling Commission, I think the regulators are quite open to it if it’s managed properly. We wouldn’t offer any type of betting in the US.

ESBR: Are you in talks with game developers to get their consent on a skin betting or virtual betting product?

Burton: That’s one thing I can’t talk about at the moment.

ESBR: What countries does ESportsPools expect to be running betting in next year?

Burton: We’ve talked to a number of different jurisdictions and regulators. Really it’s not about that it’s skins or virtual goods, it’s that it’s a currency. It could be Bitcoin, or anything that’s non-cash.

As long as you’re following anti-money laundering, counter-terrorism financing rules and have all the KYC in place, you’re going to get a positive response from most jurisdictions. Some of them are writing new legislation now.

A lot of sites have a misconception that because they deal in virtual goods, they don’t need to be licensed, because it’s not real money. But as soon as you can show a real-money value, which you can clearly show for skins, it doesn’t matter what currency you’re using.

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ESBR: Do you expect to see jurisdictions like the UK, the Netherlands, France or elsewhere coming up with a regulations that use the words “skin betting” in them, or at least address a host of new betting-related currencies?

Burton: I think you’ll see some other countries and gaming commissions come out with laws that cover it. I don’t know whether you’ll see it specifically say “skins,” but I think you’ll see laws that say something like, “cash or cash-like equivalents” for a number of things, that would include skins.

ESBR: In light of other major fantasy esports sites shutting down recently, and in light of your move toward esports betting, does fantasy esports have a future, both for your company and in general?

Burton: It does, but it’s complimentary. We always thought that if this was going to be a space we could be in and there was a market, it would be betting. That’s where the money is going to be made. We still think fantasy and other game play is a nice complimentary product to a betting site. We have no intention of abandoning fantasy, but ultimately betting is going to drive us going forward.

EBSR: Of the game titles you offer contests across, which is the most popular?

Burton: Counter-Strike is our most popular title, currently. When we put out our first testing in 2014 we started with CS:GO. Vulcun and AlphaDraft first started with League of Legends, and then DraftKings came on with League. We also give away a lot of skins, so you can enter for free and win skins. We also do cash as well, where that’s legal.

We found we have much more activity when we’re giving away skins versus giving away cash. Even if you could win more cash value than skins value, people could like the skins better. We like the economy around CS:GO and Dota 2, and we liked that there was already some evidence of betting activity around that space more so than others.

EBSR: Skins are not only more convenient for players to bet with, but your average 18-year-old gamer could be more likely to have disposable skin income than disposable cash income. In the wake of the crackdown on skin betting, do you feel you’ll be able to attract this core contingent of young, mostly CS:GO and Dota 2 players, to a cash-based product?

Burton: It’s one of the concerns you would have going through this. We have a pretty significant user base now, and I would say 80 percent of the users we have are over 18. So I think most will have the ability to get payments into our system and will start to get more into cash betting.

I think it’s very early days for these people. There’s going to be an education process. It’s not going to be the sportsbook guys coming over. It’s more about a high volume of micro-transactions, and in-play stuff, and trying to convert slowly. We don’t expect to have the same numbers as a sportsbook at all.

ESBR: Speaking of micro-transactions, many of your fantasy prize pools at this time are small as well, around $15 or $25 total. In the era of million-dollar prize pools, why is a small number like that an effective target point for you guys to hit? Are players more receptive to perhaps a less risky, smaller buy-in?

Burton: We are going to be increasing those. What we have now is more proof-of-concept and testing conversions and getting some payments in jurisdictions where we’re allowed and getting some data points. We’re really saving most of our efforts for marketing and prize pools for when we get the full product out there.

We find the lower entry fees seem to do better and [players] tend to come back more often, playing multiple times in a day or a week. Another part of it is financing for us. We don’t want to blow too much of it before we’ve got the ability to fully monetize and convert.

ESBR: You mentioned you don’t offer betting in the US. Do you believe esports betting will have a place in the upcoming, broader sports betting regulatory effort in the US in 2017?

Burton: The thing we liked about esports is that it’s a truly global product. It’s all over the world. It fit well with us being a company that’s focused outside of North America.

So, from a European focus, with esports betting, we thought it was better to be early in an emerging market than to offer traditional sports betting and be small in an old, established one.

From a US focus, we’ve kind of ignored it almost the whole life of this company. You can’t bet in the US online outside of Nevada. Sports betting legality still seems far away, and if it does come I think it’s going to be messy.

How The Esports Betting Landscape Has Shifted In Advance Of ELEAGUE Season 2

October 21, 2016

The second season of Turner / WME | IMG’s ELEAGUE kicks off Friday and could underscore different forms and volumes of esports betting than this summer’s Season 1, which coincided with several skin wagering scandals.

Season 1 champion Virtus.Pro will look to defend its title and capture the $400,000 first-place prize.

The Counter-Strike: Global Offensive tournament’s prize pool will expand to $1,100,000 in Season 2.

TBS will continue to nationally broadcast the action on Friday nights at 10 p.m. ET, but will air a portion of each group’s play, as opposed to each group’s final match. Twitch will stream all group play action live online.

Season 1 betting handle dominated by skins betting

While exact cash betting figures from licensed casinos aren’t available for ELEAGUE’s first season, the majority of betting traffic on the matches this past May, June and July was believed to have come from the skin betting sector.

Skin betting involves the wagering of virtual items, most often from CS:GO itself, as currency on the outcome professional esports matches. Skins were introduced by Valve Corp. in 2013 as an element of the in-play, CS:GO experience, and have since morphed into a form of virtual currency.

Skins have a real-world value to due to their ability to be bought and sold on third-party sites for $USD.

Season 1’s 103 matches took in the equivalent of $63 million in betting handle from the wagering of approximately 6.5 million skins on one website alone, according to research from EsportsBettingReport and Narus Advisors.

Several matches boasted individual handles of over 100,000 skins/match on CSGOLounge, which was the world’s largest skin betting sports book before it shut down skin betting earlier this year in the wake of a cease and desist letter from Valve.

Organizations such as Virtus, as well as FaZe Clan, Fnatic, SK Gaming and mousesports drew in some of the largest handles last season, and could do so again.

Smaller total action expected due to skin betting crackdown

Lower levels of skin betting are expected during season 2.

The industry ground to a sort of stasis earlier this year in the wake of four separate skin gambling scandals that eroded consumer trust and raised concerns of skin wagering’s legality.

Owners of several gambling sites, including CSGOLotto and CSGOShuffle, were found to have bet on their site and won with the likely advantage of inside information. m0E, a sponsored gambler on another site, also used to do color commentary for TBS during Season 1’s national Friday night broadcast (he was not asked back this season).

CSGOLounge no longer offers skin betting as a product. That site now operates a popular coin betting function, as well as a skin trading platform. Another popular skin betting site, Fanobet, converted to a Bitcoin and real-money esportsbook after it claimed Valve disrupted its ability to transfer skins via the game maker’s API.

Furthermore, regulators are attempting to eradicate the unregulated, unlicensed form of betting altogether. The Washington State Gambling Commission became the first US regulatory agency to investigate the legality of skin gambling, which includes not only sportsbook-style betting but also the betting of skins on casino-style games of pure chance, like roulette.

It told Valve earlier this month to stop facilitating skin wagering on third-party websites in all forms by policing such sites, which leverage its API in illicit and violative ways. Valve responded to the commission by expressing confusion over the allegations and by saying that it does not facilitate skin gambling.

Interestingly, despite several forces pushing sites to stop offering skins betting, some sites have recently pivoted to skin betting as a product.

CSGOFast, CSGOPolygon, CSGOSpeed, Bets.gg and Eazy.gg are among several sites now offering sportsbook-style skin betting in addition to their casino-style games. With the exception of Fast, these sites aren’t believed to attract large skin betting volumes yet.

New format provides fewer matches to bet on

Season 1 featured 24 teams across six groups.

Each group featured 15 matches each Tuesday through Friday. The top team from each group qualified for the single-elimination stage, while second place teams competed amongst themselves for a few final wild card spots.

Season 2 will work a little differently. Sixteen teams will compete across four groups.

Each group this season will only feature five matches, which will run Friday and Saturday. The top two teams from each group will advance to the eight-team, single-elimination playoff stage.

The eight-team final bracket will be single elimination, and conclude in a Dec. 4 “Grand Final” which of course airs on TBS.

Fewer groups means a more compact timeline of group play (from Oct. 21-Nov. 19, as opposed to last season’s May 24-Jul. 1), and could increase engagement.

Between fewer matches, increased regulatory scrutiny over skins, and fewer skin options for bettors, we should see much lower total skin handles for Season 2.

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New esports could fuel new kinds of esports betting

This could open up a critical door for esports cash betting, likely at regulated, licensed casinos. Pinnacle, SkyBet, Bet365 and many other shops offer a full esports menu.

They also are far better equipped to offer odds on other esports beyond CS:GO, such as League of Legends, Dota 2, Hearthstone and others.

The potential betting volume shift from skins to cash also comes at an interesting time in the US regulatory calendar. The Nevada Gaming Policy Committee is in the process of promulgating regulations affirmatively governing esports betting.

Those regulations could very well include sportsbook-style betting on esports, and could force the committee to treat the matches as either a sport or as an “event.”

Another factor potentially fueling the shift from skins to cash betting on esports matches is ELEAGUE’s shift to other events, and potentially other esports.

Sportsbook-style betting with CS:GO skins was boosted by the growing prevalence of CS:GO matches through ventures like ELEAGUE, as well other massive tournaments like MLG Columbus and ESL One Cologne.

Similarly, ELEAGUE’s experimentation not only with different formats and tournament types, but different esports, could help popularize other, non-skins forms of esports betting.

ELEAGUE will host the next CS:GO major tournament in 2017, meaning it’s officially recognized by Valve and is one of the top two or three tournaments of the calendar year in the world.   

But it also hosted an Overwatch tournament between its CS:GO seasons one and two earlier this year.

Turner, WME | IMG and other stakeholders have vowed to bring the best in-class esports experience for teams, players and fans. It just happened to pick CS:GO as the title it chose to launch with last May.

As the venture grows (in both revenue and popularity) it very likely could shift to embrace new seasons with new titles, which in turn could popularize new forms of betting—skins, cash or otherwise.

Valve Responds To Washington State Regulators: ‘We Do Not Facilitate Gambling’

October 18, 2016

Valve Corporation has formally responded to the regulatory agency investigating its proximity to and alleged enabling of skin betting, and has insisted it does not facilitate gambling—legal or illegal.

Valve counsel Liam Lavery wrote in a three-page letter to the Washington State Gambling Commission that the operation of its Steam API, which unlicensed third-party gambling sites use to facilitate casino and sportsbook-style betting, is lawful under Washington state law.

Techraptor posted the letter Monday night. It is available here.

The WSGC had originally ordered Valve to respond by Oct. 14, and told the company to stop allowing the transfer of skins, which are virtual in-game items, via Steam.

Valve questions legal basis for WSGC’s demand

Lavery asked the commission to provide it with a specific law that it was violating, and said Valve did not understand the “legal and factual reasoning” supporting the commission’s position.

He also said he was unsure of how the WSGC expected it to shutter illegal gambling.

In the following sentence, however, the letter alluded to one way of doing this: shutting down Steam entirely.

“The commissions (sic) main argument seemed to be, ‘Valve could stop this, so it should.’ We do not want to turn off the Steam services,” Lavery wrote.

Valve reiterates lack of financial, promotional connection with skin sites

Lavery wrote that Valve is aware that websites offer gambling propositions “outside of Steam and, we believe, outside of the United States,” and that those websites may accept skins “as wagers from other users.”

He told the WSGC that Valve neither receives revenue from these sites nor promotes them.

The comments echoed the only public comment the company has made regarding skin gambling this year, which came in mid-July when it posted a note on Steam itself threatening action against gambling sites that continued to use Steam.

On Tuesday, Lavery wrote that skin gambling sites utilize the API in two ways.

The first is in using it to facilitate the transfer of skins. This can occur between two players trading skins, or it can happen between two players buying or selling skins for Steam Wallet funds, which constitute Steam’s virtual currency to use in its marketplace.

(Another method of transferring skins, between a player and a trade bot, allows an automated bot to trade skins to a player as payout for winning a gambling bet. Steam’s API prohibits this.)

The second way, Lavery said, is by facilitating Steam authentication. This allows users to identify themselves by their Steam credentials without having to give that website their personal information. Many other tech companies also employ this “OpenID” system.

“None of these activities are illegal in Washington or any other jurisdiction, and we do not believe the commission contends to the contrary” Lavery wrote.

But the WSGC did not ask if Valve made money off of, or partnered with, these sites. Nor did it ask if third-party sites’ use of Steam was legal. It asked that Valve stop facilitating the use of skins for gambling through Steam.

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Valve says it’s not necessarily able to identify all bot accounts

Lavery noted that Valve has taken several steps to address the use of skins. He cited a July note that threatened action against Steam accounts that violated its user agreement, and the two cease and desist letters it sent later that month to 42 skin gambling sites.

But Lavery characterized the extent and scope of the problem as too vast for Valve to control.

“We do not know all the skins gambling sites that may exist or may be newly created, and we are not always able to identify the ‘bot’ accounts that particular skins gambling sites may use to effectuate trades,” his letter read.

“Cleverly designed bots can be indistinguishable from real users performing legitimate trades.”

Despite Lavery and Valve’s confusion over how to comply with the WSGC, the letter concludes by describing yet another way the game maker can do just that.

Lavery appeared to address the potential identification of bots based on the gambling site in connection with which they were used to facilitate trades.

“Valve can enforce its user agreement against the Steam accounts of skins gambling sites, where we can identify the site and identify the corresponding account. In fact, we would be happy to cooperate with the commission, if it is able to identify more skins gambling sites that are illegal in Washington,” Lavery said.

This policing of skin gambling sites could require significant time and legwork, and it’s unclear if the WSGC would identify the sites for Valve as the game maker appeared to ask.

Either way, it could foreshadow a potential way forward in combatting skin gambling not just in Washington, but all over the US.

Effect of the C&D letters was muted at best

A few of the sites in Valve’s July cease and desist letters reported trade bots being banned, but the majority either voluntarily shut down or brazenly kept running.

Those letters noted that the sites in receipt were gambling sites, and told the sites to stop utilizing its API for any commercial purposes. The C&Ds did not specify gambling (legal or illegal) as the specific use it was referring to.

After the letters were sent, Valve’s apparent enforcement of its own user agreement came to a halt. Now, the problem of skin gambling is growing for Valve, regulators, and others, not shrinking.

Three months after Valve sent its C&Ds, roughly half of the sites it ordered to shut down were still operating commercial gaming or gambling products using Steam and CS:GO skins.

Just in the time since the WSGC sent its Oct. 5 C&D letter, at least four new skin gambling websites have launched:

  • CSGO4Rolls
  • CSGOLuminance
  • CSGOASD
  • CSGOUber

As many as 100 skin gambling sites are believed to be in existence.

Do not expect swift action to Valve’s response

Sources close to the investigation have indicated that regardless of the content of Valve’s response or non-response, it will likely proceed with especial caution. The timetable could be reflective of a slower, step-by-step approach that’s already underscored the WSGC’s investigation so far.

Despite the WSGC saying that Valve’s communication and cooperation broke down soon after the February meetings with Lavery, and despite the skin gambling industry growing over the first half of 2016, it wasn’t until Sept. 27 that the WSGC sent a blunt letter to Valve CEO Gabe Newell.

That letter threatened search and seizure of gambling-related property. While that specific action still appears unlikely, it would require time-consuming preparation, the cooperation of other law enforcement agencies, and possibly the securing of a warrant.

Following the February meetings, further attempts to contact Lavery and the corporation were not successful, according to the commission.

That account contrasts with Lavery’s letter, which alludes to conversations ongoing between both parties for 18 months, since April 2015. Lavery wrote that Valve and the WSGC last spoke on Oct. 3, two days before the WSGC send its cease and desist notice.

The WSGC could also be looking to other game developers’ reaction to the third-party use of in-game items as guidance.

Last week, game maker CCP changed the in-game license agreement for its game Eve to prevent items from being bought and sold, with the aim of discouraging skin gambling.

Another reason the process could take inordinate time is the makeup of Washington state’s gambling laws, which are among the most expansive and rigorous in the nation.

A two-part response

WSGC Executive Director David Trujillo expressed disappointment at the company missing the initial deadline. The game maker first responded to the WSGC on Friday in a brief email, in which it said it needed until Monday, Oct. 17, to prepare everything it needed for its full response.

“I am disappointed that Valve Corporation missed Friday’s deadline, but encouraged that they have committed to responding today. I look forward to reviewing their response in detail,” Trujillo said Monday, before Valve’s full response came through.

“The type of approach Valve decides to take will be very important,” said WSGC Commissioner Chris Stearns on Monday in regards to the investigation.

Stearns’ remark could foreshadow the wide-open nature of the investigation, and the special and detailed scrutiny the commission is giving to Valve’s response.

The same sources that spoke to the potential timetable of the investigation characterized Valve’s response prior to Monday’s letter as “extremely cavalier.”

The WSGC did not respond to comment Tuesday morning following Valve’s full letter, but said in a statement it was considering Valve’s response to see if it satisfactorily addressed its concerns.

The commission said it will “continue to evaluate its options” regarding the violation of Washington’s gambling laws.

Real-Money Pac-Man, Tetris Social Gaming Arcade Now Available On iOS

October 17, 2016

A new social gaming app that licenses familiar titles like Tetris, Scrabble and Pac-Man and allows players to win real money is now available for download on iOS for iPads and iPhones.

Sparcade, the free-to-play, free-to-download app from GSN Games, features traditional arcade skill-games in the convenience of your smartphone.

The social gaming platform is the product of a nearly three-year development effort, and officially launched earlier this month.

Sparcade’s senior VP and general manager Greg Canessa said the app leverages growth in the mobile gaming market, while also tapping into the growing enthusiasm around competitive video gaming.

Arcade meets mobile app

Sparcade features five titles altogether, and also includes Wheel Of Fortune, as well as a Solitaire game developed in-house. It plans to roll out additional games in the coming months.

Users are prompted select an avatar from a menu of hip, millennial-looking creatures, and either challenge friends and acquaintances to various games or be matched up against other players online.

New users receive 10,000 “tokens” upon signing up as a welcome gift.

Users acquire tokens based on three factors

  • Volume of play
  • Winning token matches against opponents
  • Achieving various in-game and in-app performance goals

Users must spend tokens to play practice games, which train them for real-money contests. Tokens are not redeemable for real money or redeemable for entry in real-money contests.

Once players spend all of their daily allotment of tokens, or play 35 practice games in the same title, they’re cut off from playing non-real-money matches within that title. 

The more users play, the more “Fans” they acquire through “Fan Mail.” Fan Mail earns players either a one-time amount of tokens, a “Fan” that pays them tokens daily, or “Fame” rating points.

Similarly, the more a user plays, the higher Fame rating they receive, graded on a level of 1-100. The higher someone’s Fame level, the higher the complimentary daily payout of tokens to that player.

Unlocking various in-game achievements allows users to attain different statuses, such as “Sparcade Pioneer,” “Ace,” and “Hero.” Obtaining these titles award players even more tokens and Fan Mail.

Real-money and virtual currency entry fees

The game offers a variety of different entry formats based on players’ available balance and skill level.

In Pac-Man, for example, players can enter $1 tournaments with two other players, or $3 tournaments with one other player. If users challenge a friend to a game, they can up the entry to $5.

A 200 token four-player tournament, 1000 token three-player tournament, and 5,000 and 20,000 two-player tournaments are also available for practice matches.

Sparcade takes a 15 percent cut of every total prize pool across all game formats in all titles.

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Restrictions on real-money game play

Users can play Sparcade games for real money in 36 states. This is reflective of the national patchwork of state-based laws that govern skill gaming.

First-person player games, like the ones offered by Sparcade, are generally considered games of skill because they involve the user staking either real money or tokens on their own in-game performance.

As regulators see it, this contrasts with a matter of chance, such as betting on the outcome of a third-person sporting event.

In some states, though, it’s a different story. Two states (Indiana and Maine) allow real-money gameplay in all games except Solitaire.

The remaining 12 states in the US do not currently allow real-money game play, and instead only allow free practice matches.

Those states are:

  • Arizona
  • Arkansas
  • Connecticut
  • Delaware
  • Florida
  • Illinois
  • Louisiana
  • Maryland
  • Montana
  • South Carolina 
  • South Dakota
  • Tennessee

Canadians of at least 18 years of age may also play for real-money games as long as they are not residents of Quebec. A bill passed in May in that province mandated that internet service providers ban access to all real-money gaming sites other than the provincial lottery corporation.

Sparcade makes users confirm that they are over 18, and enables geolocation technology to ensure users are in the jurisdiction they claim to be in. 

Users can deposit real money via either PayPal or credit card. Withdrawals are only processed by PayPal or by check.

The symbiosis, and separation, between $USD and tokens

Sparcade’s use of dual currencies for entry fees ($USD and tokens) strikes a unique balance between the real and virtual worlds.

Like other social gaming and video gaming developers, Sparcade’s tokens have no monetary value and cannot be sold for $USD.

Users never own tokens outright. They only have a limited revocable license to use them.

But unlike many other games’ use of virtual currencies, Sparcade tokens cannot be bought for real-world money, either.

Thus, not only is convertibility of tokens to real-world dollars impossible, but so too is their purchase, eliminating all connection between tokens and $USD. This is despite fact that both are used (separately) as concurrent forms of entry in the same games.

Because the game is a skill-based game, and thus legal to bet real-money on, the only in-app purchases are real-money deposits themselves. Only bets can be made with real money. Virtual items cannot be purchased.

This could help shield Sparcade from legal vulnerability.

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Preventing secondary currency markets

Several who have felt wronged by games utilizing virtual currency have recently brought suit against game makers, including in the the Gears Of War-related case Mason v. Machine Zone, and the recent class-action suit against Valve Corp. regarding the use of Counter-Strike: Global Offensive skins.

Plaintiffs in those cases have argued either that the virtual currencies from those games are redeemable for a real-world value, or are purchasable with real-world money.

Furthermore, they have brought to light the growing trend of unauthorized third-party markets facilitating the buying and selling of virtual items for $USD.

Concerns have been raised by users of not only CS:GO and GoW, but also EA Sports’ suite of sports video games FIFA and Madden.

Users of online virtual casinos in Washington (Big Fish Casino, Inc.) and Illinois (Double Down Interactive LLC) have also brought suit against companies that either allow the real-money purchase of virtual goods, or whose goods are exploited by others on real-money third-party marketplaces.

Since Sparcade’s tokens cannot gain players access to real-money matches, and since the only prize winnable in token-based games are more tokens, the game is likely well-insulated from the development of these marketplaces.

Nonetheless, ensuring that the use of it virtual currency is restricted to within the app itself, and actively combatting the development of any outside marketplace for its virtual goods, should only help Sparcade in the long run.   

Image credit: Tinxi / Shutterstock.com

Skin Wagering Scorecard: 19 Named Sites Still Using Steam For Commercial Purposes

October 13, 2016

As game maker Valve has come under fire in recent weeks for facilitating unlicensed gambling via its Steam API, the skin wagering landscape has shifted dramatically, with commercial gambling operators filtering into separate camps of compliance and contravention. 

ESBR’s October Skin Wagering Scorecard catalogues reactions by websites instructed by Valve in July to cease-and-desist using Steam.

It also embellishes how the skins market could react as regulators begin to take notice, and as courts begin to address skins as a virtual currency.

More, not fewer, sites appear to be violating Valve’s C&D orders

As of mid-August, roughly half of the named sites the game maker told to stop using its API had shut down. Eight were still operating in apparent violation of Steam’s terms of service by virtue of using Steam to conduct commercial activity.

Several more were either in the process of pivoting to a new business model, or had future plans that were unclear. 

Now:

  • At least 19 sites are utilizing Steam in connection with commercial gaming or gambling.
  • Five of those sites appear to US users as if they’re shut down, but are offered to users in other countries around the world.
  • Five of those sites initially shut down and appeared to obey Valve’s C&D demand, but have since relaunched with equally violative products.
  • Three of those sites not only failed to shut down, but have expanded their Steam-related gambling offerings to include sportsbook-style betting on matches.
  • Three of those sites do not accept skin deposits themselves, but only accept as gambling currency coins from third-party, skin-to-coin deposit sites, which still involve Steam.

This illustrates not only the selective policing by Valve of the skin gambling ecosystem, but also the recurring, potentially unenforceable problem of operators popping up faster than Valve, or even regulators, can shut them down.

In fact, dozens of skin wagering sites not named in July’s two C&D letters are also operating, largely unfettered.

Some sites continue to comply, or have since complied, with Valve’s C&D

An additional 19 sites that formerly utilized Steam in connection with commercial gaming or gambling are now shut down.

Two other sites, CSGOLounge and Fanobet, are still operating the type of sportsbook-style match betting that made them popular, but are no longer using Steam or skins to do so.

Two other sites appear to have been targeted incorrectly, and never used Steam or facilitated gambling in the first place. Therefore, those sites have not altered their operational model.

19 sites still utilizing Steam in connection with commercial gambling

The Washington State Gambling Commission last week instructed Valve to explain how it has not violated Washington State gambling laws by virtue of owning and operating Steam (the company is based in Bellevue, Wash.).

If Valve cannot give the WSGC a satisfactory answer, it risks criminal charges and seizure of property, among other inconveniences.

One of the ways in which Valve might try to make its case is by arguing the C&Ds it sent to 42 skin wagering websites constituted an act in good faith to prohibit those websites from operating.

But it could prove challenging for Valve to argue even this point when regulators consider that nearly half of the sites named in the C&Ds are now using Steam in connection with commercial gaming or gambling transactions.

In fact, more of the named sites are using the Steam platform in connection with skin gambling now than were using it in the direct aftermath of the C&Ds.

Even though some sites don’t directly accept skin deposits via Steam, they nonetheless rely on users’ Steam accounts in various forms to transfer some form of virtual currency, or turn skins into some form of virtual currency.

CSGOFast

CSGOFast appears to American users to be offline. A message on its website reads:

“In light of the recent announcement from Valve CSGOFAST has decided to close operations. All bots are stopped now, games are not functioning.”

But to users elsewhere in the world this message not only doesn’t appear—it’s flat out wrong. Instead, the site is not only functioning, but is bigger than it was before.

Fast runs both real-money and skin gambling operations using the G2A Pay suite of payment options, which include real-money processors like MasterCard and Discover.

Users can also deposit skins on the site via Steam.

Users convert either real money or skins to Fast Coins, which are then used to bet on the site. The site uses Steam, in part, to facilitate not only the conversion of skins to coins, but of coins back to skins.

Because coins hold no real-world value outside of the Fast ecosystem, users cashing out must purchase skins with coins in the Fast marketplace in order to derive anything of real-world value from their winnings.

Once a skin is purchased, it’s transferred to one’s Steam wallet, which again establishes the API as a tool by which to transfer items won in connection with commercial gambling.

Separately, in conjunction with HLTV.org, Fast also facilitates sportsbook-style skin betting on the outcomes of professional esports matches, against leveraging the Steam marketplace in a violative manner to transfer skins for the direct purpose of betting.

For more on Fast, see page 8 of this new report from ESBR and Narus Advisors.

CSGOBig

After disabling its casino-style skin gambling games just days after the first Valve C&D, CSGOBig relaunched on Aug. 31 and is once again using Steam to offer unregulated skin gambling across jackpot, raffle, coinflip, roulette and other games. 

Users on the site appear to only be able to deposit skins, and not other forms of virtual currency. Those in need of skins to deposit are encouraged to visit Bitskins, where they can purchase skins with real money and then deposit those skins into their Big account, which in turn turn to virtual coins players use to wager on the games.

Similar to Fast, users from the US are met with a site that appears dead. But gamblers from other countries can access Big in its fully-functioning entirety.

This could be problematic for Big, Fast, and other such sites because Valve mandated in July that they stop using Steam to facilitate commercial gambling the world over, not in the US only.

Big’s terms of service, which visitors are prompted to agree to after signing in through their Steam account, mandate users be over 18 and not a resident of the US, but the site employs no verification process to ensure this.

The ToS say that users are also “responsible for compliance with any applicable local laws,” and that the terms themselves are construed in accordance with the laws of the European Union.

“Any disputes relating to these terms and conditions will be subject to the exclusive jurisdiction of the courts of European Union,” the terms read.

Big is one of many sites that offer cash back promotions to users who include the phrase “csgobig.com” in their Steam profile name, which effectively advertises for the site directly on the API whose terms it’s in violation of in the first place.

CSGOStrong

CSGOStrong, a skin gambling roulette site, continues to block US users but operates elsewhere using a workaround it first employed in early August. Users may only deposit and gamble with coins from skins-to-coins site Skntrades, also known as SKN points, and not skins themselves.

Users receive SKN points by depositing their skins on Skntrades and receiving SKN points in return. They then transfer those coins to their Strong account. Cashout functions in the reverse form.

Despite this workaround, gamblers must still log in with their Steam account in order to use the site and receive or transfer their SKN points. In other words, Strong is still using Steam to facilitate commercial gambling even if Steam is not directly facilitating the transfer of skins to Strong itself.

Strong maintains its game is legal because SKN points have no monetary value. However, SKN points are earned in exchange for skins.

Skins, in turn, do have a real-world value thanks to third-party marketplaces like OPSkins, Bitskins and others that facilitate the purchase of skins for $USD.

Strong’s terms of service say the site is “governed by and construed in accordance with the laws of Costa Rica, and any disputes relating to the Terms and Conditions will be subject to the exclusive jurisdiction of the courts of Costa Rica.”

The ToS also forces users to agree that:

  • They are 18 years old or of different legal age as might be required at the jurisdiction from which they access Strong in order to engage in its activities.
  • They are not accessing the website from jurisdiction from which it is illegal to do so (the website is freely accessible from the US).
  • The owner of the website is not a financial institution and that, “no legal requirement to obtain any type of licence in order to provide services offered at the Website are in force at the jurisdiction from which the Website is being accessed.”

CSGOCrash

According to this site, Valve personally targeted the site in mid-August after it failed to comply with the company’s first C&D.

CSGOCrash said someone, likely the game maker, was blocking its trade bots—the automated mechanisms websites create to facilitate gambling pay-outs and pay-ins over Steam.

This disruption rendered the site effectively unable to conduct skin gambling. It also illustrated a key tool Valve has in its arsenal to end skin gambling, but has not yet chosen to use: The ability to manually block every trade bot associated with every skin wagering website or transaction. 

The Crash site appeared to either shut down or to block users in the US in late August. Its accessibility vacillated throughout the month of September.

Now, like Big, Fast and Strong, Crash has blocked itself to US users while those from other countries are allowed on, and prompted to sign in with their Steam account.

Oddly, the site’s FAQ page, which US users are also blocked from viewing, discusses problem gambling and links to the National Council on Problem Gaming, an American organization that advocates for programs and services to assist problem gamblers.

The FAQs also freely admit that coins used to bet on Crash:

  • Are “backed” by Steam skins.
  • Are acquired by the depositing of skins, via Steam, onto its platform.
  • Have a $USD monetary value of 1/10th of one cent.

The site even allows users with large YouTube or Twitch followings (minimum 10,000 subs and 100,000 views) to receive “special perks” if they connect their Crash account with their streaming account.

Popular esports figures streaming their gambling on a site to their following serves as a critical driver of traffic to skin sites. It’s unclear to what extent YouTube or Twitch endorse, or police, casters using their platforms to promote esports wagering.

CSGO500

CSGO500 is one of the few skin gambling websites operating that has blocked itself in more countries than just the US.

Attempts to access the Wheel of Fortune site from the UK and Canada also did not work.

Log-on attempts from Eastern European countries like Poland and Romania, or from Scandinavian countries like Sweden, on the other hand, did work.

Despite not being available in most countries where English is spoken, 500 prompts users to read its terms of service in English before entering.

Similar to CSGOStrong, for example, users cannot log in to the website via Steam. Instead, 500 accepts “Bux,” which are obtainable by users simply by depositing their skins somewhere else (at skin exchange platform SkinX).

SkinX, however, requires users to log in with their Steam accounts.

CSGOBubble

CSGOBubble also went dark in the wake of Valve’s C&D order, but teased a new product and vowed to return. 

The coinflip site did not tweet anything between Aug. 17 and Oct. 1, but an announcement at the bottom of its home page says that its new site is now live. The site prompts users to log into Steam and utilize its trade URLs.

The site’s terms of service make it clear that Bubble does not consider itself a gambling site for real money. It reads in part:

“By using CSGOBubble.com you agree that you will deposit virtual items to play. Understand that this is not a gambling website for real money.”

In the next line, Bubble acknowledges that, based on data collected from Steam, the items players win on its site have values.

“Skins (sic) value are for comparison purposes only. The values of each virtual item are based on analytics collected from steam market transactions.”

But the terms do not acknowledge the real-world value those items have on marketplaces outside of Steam, such as OPSkins.

The site is one of many that lists the G2A marketplace as a partner. The capacity of that partnership, which could range from skins marketplace and pricing provider, to a full payment solutions system, is unclear.

CSGO2X

To be clear, CSGO2X is not currently utilizing Steam in connection with any commercial endeavors. Yet.

CSGO2X had shut down following its receipt of the first Valve C&D on Jul. 19, and has not been active since.

But on Monday it announced it would relaunch on Oct. 15 and that it would be giving away a $400 skin.

Its exact product offerings are unclear, but based on the nature of the announcement it appears that skins, in some form, will be a component of the new CSGO2X.

No skin gambling website, either one that accepts skin deposits via Steam or one that does not, has yet proven able to operate without utilizing the API at some point of the wagering ecosystem.

CSGO2X’s website currently prompts users to log in with an email and password, but attempts to sign up for an account now bring visitors to a blank page.

CSGOCasino

CSGOCasino was among the sites named by Valve that was believed to have quickly complied with the C&D. Attempts to visit the site from an American IP address in August were unsuccessful, and the site was believed to have shut down completely.

On Oct. 2, however, its Twitter account said the website had returned. Users from anywhere can access the site and must log in to their Steam accounts in order to play.

Casino offers both traditional roulette and the popular crash game, in which players attempt multiply an amount of wagered coins. They do this by selecting a multiplier that is less than a randomly generated amount, which grows and grows until it “crashes.” 

Society.gg

Society.gg also shut down in the wake of Valve’s C&D, but quietly relaunched in beta on Sept. 30.

The site prompts users to log in to their Steam accounts, and offers the standard skins-for-coins conversion, except here coins are referred to as bananas. Users can use coins to play “bust” (aka crash) “Wheel of Fortune” (aka roulette), as well as coinflip and jackpot games.

Among the more intriguing aspects of Society.gg is its terms of service.

The “most exclusive CS:GO betting platform,” as it touts itself, forces users to agree to terms that state the user of the site is at least 18 years of age, or the legal age in their jurisdiction. Like most skin sites, Society employs no age or geolocation enforcement tools.

Aside from the fact that there is no “legal age” for skin gambling in any jurisdiction, since skin gambling is not legalized or regulated, two sentences later the ToS appear to contradict themselves when they say, “you must be at least 21 years of age to use Society.gg.”

.Gg is the domain for the United Kingdom crown dependency of Guernsey, a tiny island located near France. The country has built a reputation as an “eGambling” regulatory hub and passed a set of eGambling regulations in 2009.

CSBetGo

CSBetGo is yet another site believed to have shut down following the C&D, but is now back up and running. It is accessible to users in every country and requires users to log in to Steam to place bets.

The site appears to deliberately have a low profile. It does not have a Twitter handle, and hasn’t posted on Facebook in nine months. Few users were visible on the site when it was visited this week.

Oddly, the site’s terms of service say that the website is only available to Ukrainians, but the site does not provide any geolocation capability to block users from other countries. Like most sites, it defers the responsibility to the user.

“If you want play in countries where gambling is illegal, you do so at your own risk,” the terms read.

CSBetGo is one of the few sites that list a conversion rate for coins, (or in its case, “tickets”) to USD. One $USD equals 100 tickets.

However, $USD are not directly convertible to tokens on the site. Instead, when users deposit a skin, they receive only the “ticket” amount of whatever the listed USD price is on CSGOAnalyst, a marketplace, for that skin.

CSGOSpeed

CSGOSpeed briefly went down for maintenance in mid-August and came back online around the end of that month. In a notice, the site said it intended to “return with an alternative that complies with Steam’s Terms of Service and Subscriber Agreement.”

When it relaunched, Speed offered a redesigned product with flashy skin giveaways, a jukebox playing Bruno Mars and a whopping 13 different betting games. The site now offers traditional games like roulette and jackpot, newer games with names like “scratchy” and “drag race,” and sportsbook-style betting on professional esports matches.

But it’s unclear how the new product complies with either Valve’s C&D or Steam’s terms.

Despite maintaining an email-and-password log-in at its home page doorstep, users are immediately prompted to input their Steam account’s trade URL before proceeding further on the site. Users then utilize their Steam account to deposit skins, which are converted into virtual currency.

Like several other skin sites, its terms of service say that it is governed by the laws of the European Union.

The same terms aren’t specific on age requirements, either, saying that users of the site must be “at least 18/21 (EIGHTEEN/TWENTY-ONE) years of age.”

CSGOPolygon

CSGOPolygon has quietly operated its roulette and coinflip games throughout the summer and into the fall, and has even expanded its Steam-login-reliant product offering in the interim.

The site prompts users to log in through their Steam accounts after they agree to a set of terms and conditions that state they are at least 18 years of age.

The terms also make clear that users “are responsible for compliance with any applicable laws” that may pertain to their use of the site.

On Sept. 21, Polygon launched an esportsbook feature, where bettors could wager skins on the outcome of professional esports matches.

CSGOPot

On Aug. 5, the site said it was temporarily shutting down to comply with Valve’s (and not Steam’s) terms of service.

It has since rebranded as CSGOPot.win, and offers skin gambling via users’ Steam accounts. Similar to CSBetGo, Pot equates one $USD to 100 of its virtual currency, which it also calls “tickets.”

Users can either deposit skins via their Steam accounts into their Pot account and receive tickets, or they can buy tickets outright, ostensibly with real money. PayPal is mentioned as a payment processor the site uses.

But attempts by the author to purchase tickets resulted in a warning that appeared to require proof of ownership of Counter-Strike, the game:

“In a desperate attempt to stop piracy, we require that you own CSGO before being able to buy tickets. Contact us at [email protected] if you feel you are seeing this message in error.”

The site’s terms of service force users to agree that they are over 18 years of age. The site says that if they suspect users are not of age, it will ask for “proof of identity.”

Nothing in the terms mentions players accessing the site from the US, or any other specific country. The ToS say that the site is governed by the laws of the European Union.

Bets.gg

After shutting down over the Summer, Bets.gg relaunched sometime around early September. But similar to CSGOStrong and CSGO500, the site places a third-party layer between itself and direct skins-to-gambling-currency conversion.

Users on Bets.gg are now prompted to sign in not through Steam, but through website Skrilla.io. Users deposit skins on Skrilla, earn coins, then deposit their Skrilla balances on Bets.gg.

Users can cash out their Bets.gg winnings and use the coins to purchase skins on Skrilla, which they then transfer back to their Steam account using, of course, Steam.

The site just added the popular crash game to go along with dice, roulette and coinflip gambling.

Bets.gg has also joined the growing number of sites offering sportsbook-style esports match betting, thus far only on CS:GO matches. It offers this form of betting “tax free“, ostensibly meaning it takes no vig, or fee, on wagers. 

Its terms of service state that users must “acknowledge Virtual currency (‘BETS.gg Coins’ or ‘Coins’) cannot be redeemed for ‘real world’ money or any other item of monetary value.”

That point is debatable. In fact, Bets.gg coins can exclusively be redeemed on Skrilla, which defines itself as a skin exchange, exclusively for skins.

Skins are frequently bought and sold on third-party marketplaces such as OPSkins and Bitskins for $USD, aka, real-world value.

Kickback

Kickback, a website that allows gamers to wager on their own in-game performance as opposed to playing casino gambling games, is currently running as it was before Valve sent its second C&D.

The site matches players up to compete against one another and allows players to win either cash or skins by actually playing Counter-Strike: Global Offensive, either in 1v1 or 5v5 match-ups. 

It boasts of “instant skins-to-cash withdrawals.” It also uses its own virtual currency, Rubies.

According to Kickback’s legal notice, its game is legal in 45 states because that number of states, as well as the US government, “consider video games to be games of skill.”

Valve did not order sites to stop using its API for illegal gambling transactions. It ordered sites to cease and desist using Steam for any commercial purpose

The site uses Steam to facilitate the use of skins as an entry fee in a contest. From Kickback’s terms of service:

“In order (sic) use Counter-Strike: Global Offensive (“CS:GO“) in-game items (each, a “Skin“) as Entry Fees, you must link your Steam account and deposit your Skins to Kickback. (A “Skin Contest“) occurs when a user enters Twitch Betting contest.”

Furthermore, the site facilitates the depositing of skins in exchange for virtual currency that can be used to wager. That currency can then be used in the “Ruby store” to redeem skins.

“Global Offensive Skins may be deposited to Kickback in exchange for Rubies (“Skin Deposit“). Depositing Skins on Kickback implies that you fully accept Kickback’s Skin valuation prices, and understand that you will not receive a refund in the case of a Skin price being above or below Steam market value.

You may be required to wager a minimum of 30% of all Rubies credited to your Kickback account as a result of Skin Deposits in Kickback contests to be eligible to withdraw Skins from the Ruby Store.

You can redeem Rubies for Skins in the Ruby Store by creating a trade offer from your Steam account to a Steam account owned by Kickback.”

CSGOMoment

CSGOMoment is still offering its roulette game, and is not even pretending to avoid facilitating betting through Steam. The opening lines of its terms of service announce:

Our CSGO casino is the best online service where you can always win more by depositing your CS items and skins!

1) Sign in on CSGOMOMENT.COM casino CS:GO via your Steam account.

2) Make an item deposit to your account after signing in. (It’s pretty simple, just send steam exchange offer to our trade bot by clicking homepage the “Deposit” button of our CSGO skin casino.

The terms also maintain the site awards 1000 of its virtual coins for every $1 in value of deposited skins. G2A is a site partner.

Other active, named skin wagering sites

SkinArenaCSGOHowl.usand CSGOFade also appear to be operating normally as well, and utilizing Steam.

Again, dozens of other skin wagering sites are also operating with the use of Steam to facilitate commercial transactions.

Those sites, however, have not knowingly been told by Valve to shut down. Consequently, the scope of skin wagering extends far beyond the 42 sites Valve named.

19 sites formerly using Steam for commercial gambling have shut down

CSGOLotto

CSGOLotto came under fire in July when its owner was found to have broadcast video of himself gambling and winning on his own site without disclosing his ownership position. 

Shortly after, Lotto said it would temporarily stop offering its casino-style skin gambling games. But its wagering features never came back online. As of early August, its url directed visitors to an error message. 

Both the website and the owner, noted player and streamer Trevor ‘TmarTn’ Martin, were named as co-defendants in a class-action suit against Valve.

The suit alleged that the defendants violated RICO statutes, facilitated illegal gambling, and that Martin specifically promoted gambling to minors.

A federal judge granted a motion by Martin and Lotto to dismiss the lawsuit. The plaintiffs’ attorney said the case is not dead, but will simply move to a state court.

For more on the four major skin gambling scandals of the summer of 2016, see page 4 of this new report from ESBR and Narus Advisors.

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CSGOShuffle

Another site implicated in the four skin gambling scandals of the Summer of 2016, Shuffle shut down on Jul. 29 and hasn’t returned to the market.

The casino-style gambling website was pressured into shutting down after its owner, James ‘PhantomL0rd’ Varga, was found to have gambled on his site without disclosing his ownership position.

Skype logs published by esports journalist Richard Lewis revealed Varga gambled on his own site with unlimited amounts of house money, and often asked his web developer to feed him the “percentages” of the website’s jackpots.

Such information likely increased Varga’s odds of winning dramatically.

CSGOWild

Despite shutting down all gambling features on its site in July, CSGOWild never lost its domain. Its website has promised something is “coming soon” for the past six weeks, but offers no other functionality. 

Little is known about any forthcoming projects from Wild. The site’s Twitter account, however, tweeted out a promotion for a new skin gambling site, CSGONinja, which hosts automated footraces between bot characters who users can bet skins on. It is not clear if Wild and Ninja are related.

Wild shut down in the US twice over a period of two months this past summer.

The process was plagued by scammers posing as site administrators, customers reporting an inability to withdraw skins, and complaints of arbitrarily-raised skin prices on the site’s skin marketplace. 

The site came under fire for allegedly being owned by members of a professional esports organization.

These allegations hastened its second departure from the domestic market. A site admin, ‘Gagey,’ refuted the charges in a statement.   

CSGODiamonds

CSGODiamonds, a player-vs.-house casino-style gambling site that offered betting on the outcome of dice rolls, shut down gambling operations on Jul. 29, the deadline mandated in Valve’s first C&D.

In June, a sponsored player on the site who broadcast his playing to his followers on Twitch admitted that the site’s owners told him the outcomes of “rolls” in advance.

This dramatically increased his odds of winning on the site, which in turn, made the promotional broadcasts of his playing that much more exciting (and deceptive). 

CSGOCosmos

As of mid-August, CSGOCosmos was operating almost identically to, and possibly in connection with, CSGOStrong.

It bypassed directly processing skin deposits by forcing users to deposit skins on Skntrades, receive Skntrades’ virtual currency, and then deposit that virtual currency back on Cosmos to gamble with.

At some point in either late August or early September, though, the site went offline.

Attempts to visit its website from both inside and outside the US elicit an error message.

With the fortunes of Strong, Skntrades and Cosmos thought to be linked, it’s unclear why the latter site is down while the former two continue to operate unfettered.

CSGOBestPot

CSGOBestPot was one of the 10 initial non-compliant holdouts from the second C&D letter that operated well into the month of August.

At some point since then, however, the site has stopped offering gambling. 

The website remains up, but all games are static and none of the site’s features are accessible. 

The site has not tweeted since January, and it’s unclear if the shutdown is temporary or permanent.

CSGOHouse

CSGOHouse shut down shortly after the first C&D was sent. It is one of the few skin gambling websites to acknowledge what appears to be a simple, powerful truth.

“We have been forced to close, because we have created trade bots and are using valves (sic) API for gambling,” a note on its website and Facebook page reads.

“Thank you for all your support, you are truly awesome! Stay tuned for future updates.”

The website has not hinted at any future updates or product re-launches since the announcement, which came on Jul. 26.

CSGOPoor

It’s unclear to what extent CSGOPoor is operative. Users are prompted to log in to Steam once they reach the site, but trades were blocked as of Tuesday, and a site counter said that zero users were online.

No games were visible from the home page. 

The site’s Twitter account is active, and the site appears to be in the middle of various skin giveaways. The site’s chat feature, also, was quite active.

CSGOBetBig

This site might be functioning, but it’s unclear to what extent Steam or skins are involved.

On one hand, users are prompted to log in to their Steam accounts to play on CSGOBetBig.

But in the site’s “about” section, it instructs users to deposit and win Bitcoin. Then, when users follow that link, they’re prompted to sign into their Steam accounts and input their Steam trade URL, as opposed to their Bitcoin URL.

The site appears to have a low current user base and does not have an active Twitter account.

It says it published its updated terms of service on June 28, which would have been one month before Valve sent it a C&D notice It last updated the terms, it says, on Sept. 20.

Other named skin wagering sites that have shut down

CSGOJackpotCsg0.comCSGODoubleCSGOatseCSGOBattleCSGOSweep and Skins2, also appear to have shut down.

CSGODices, CSGO.One and CSGOMassive still have functioning URLs and appear to be actively offering games. But repeated log-in attempts from multiple countries to Dices and One timed out, while Massive no longer offers any type of deposits and only allows users to bet with existing balances.

Two sites offer esports betting that doesn’t involve skins or Steam

CSGOLounge

After a chaotic summer of refusing to abide by Valve’s terms, followed by a half-hearted shut down, followed by a complete skin betting shutdown, CSGOLounge is back to offering betting—just not with skins. 

The world’s largest skin betting sportsbook, which took in the USD equivalent of $1 billion in handle in the first seven months of 2016 alone, is now a coin betting sportsbook.

Users can still utilize Lounge’s popular skin trading platform. But all bets on the outcome of professional CS:GO matches are now facilitated via Lounge’s own digital currency.

As of mid-October, these coins hold no value. It is unclear how users who win coins betting on matches will be able to cash them out, if at all.

Users who sign up for free with an email-and-password account receive 100 coins automatically with which to wager. Users cannot wager Steam items on matches, and cannot currently convert Steam items to coins.

The new format involves players making a series of bets on pro CS:GO matches with coins over time, and a rankings system to show who has made the most successful bets and who has the highest balance of coins.

For more on Lounge’s tumultuous closure and reopening, see page 5 of this new report from ESBR and Narus Advisors.

Fanobet

The former skin betting sportsbook converted to a real-money sportsbook after Valve purportedly disrupted its trade bots in early August.

Originally, Fanobet said it was converting its skin betting platform to a Bitcoin platform. While it appears to have done this, and while Bitcoin is the site’s most prominently preferred payment option, it also says it accepts Visa and MasterCard as payment options.

A spokesperson for the site confirmed on Reddit that the site also accepts G2A Pay, Skrill and Neteller.

Recent attempts to log in to the site via Steam were blocked. A message reads that the site is no longer accepting Steam log-ins from new users as of Sept. 15. It’s unclear if users prior to that date can log in via Steam or not.

But now, users must log in via a traditional email-and-password format.

The site recently became the official sponsor of professional esports organization mousesports. Since Fanobet offers sportsbook-style betting on esports events that mousesports participates in, it’s unclear if Fanobet prohibits betting on matches involving the team it sponsors.

Unlike other websites, Fanobet also offers betting on NBA, Major League Baseball and NFL games.

But since it no longer accepts skin deposits from new users, and takes action on traditional sports in addition to esports, it appears to simply function as an unregulated, real-money sports betting site.

The site has a responsible gaming section where it warns users of the dangers of problem gambling.

Much like CSGOLounge did before it shut down in mid-August, it has implemented a self-exclusion policy for gamers who want Fanobet to shut down their account. It even provides an email address for concerned parents to contact Fanobet.

The site is licensed in Curacao, and continues to block customers from the US.

Only the beginning for Valve, regulators

There is a key challenge standing between not only Valve, but also regulators, lawmakers and the courts, and the enforcement of illegal gambling laws: Defining the size, structure and scope of the skin gambling industry it’s trying to regulate in the first place.

Valve only chose to name (as far as we know) 42 of the existing skin wagering sites in its C&D notices.

But there are likely more than 100 skin gambling sites operating at any given time (See: CSGONinja, CSGORage, CSGORoll, CSGOHunt, CSGOTrinity, CSGOCoinFlip, CSGOBlackJack, CSGOWorld, SkinRaffle, etc.).

Understanding the size and scope of the market becomes even more challenging when one considers the relative transiency of these sites.

Many, including several named in the C&Ds, can go away for a short while and then pop up again under another domain, or with amended products, or appear to users in some countries as if they’re shut down while operating in others.

Because it is the creator, moderator and final gatekeeper of Steam, only Valve can observe and quantify to the fullest extent the amount of wagering-related activity being conducted via the integration of its API.

This could point to one eventual, involuntary outcome the game maker could be forced to comply with: Devoting significant time and resources to policing Steam and blocking the trade bots that are akin to the oxygen coursing through the body of the skin wagering ecosystem.

Washington State Gambling Commission Orders Valve To Stop Skin Gambling Via Steam

October 5, 2016

The Washington State Gambling Commission has ordered game maker Valve Corporation to stop the transfer of skins via its Steam API, it announced in a release Wednesday.

The commission sent a letter to Valve co-founder Gabe Newell on Sept. 27 ordering the company to cease and desist offering the popular form of virtual currency gambling related to its game, Counter-Strike: Global Offensive.

“‘Skins’ continue to be used as consideration for illegal gambling activities on third party websites,” the WSGC said in Wednesday’s release.

“The Gambling Commission expects Valve to take whatever actions are necessary to stop third party websites from using ‘skins’ for gambling through its Steam Platform system, including preventing these sites from using their accounts and ‘bots’ to facilitate gambling transactions.”

The Bellevue, Wash.-based video game company has until Oct. 14 to respond to the letter and explain how it is in full compliance with Washington state’s gambling laws.

If it does not comply, the WSGC letter said, Valve could risk the seizure and forfeiture of property used to conduct illegal activities, forfeiture of its corporate charter, as well as criminal charges.

The announcement came on the same day that a District Court for the Western District of Washington state granted a skin gambling website’s motion to dismiss a complaint related to a class-action lawsuit involving it and Valve aiding and abetting skin gambling.

WSGC, Valve, in contact since February

The WSGC first contacted Valve in February 2016. According to the Sept. 27 letter sent to Newell, it met on Feb. 17 with the company’s in-house counsel, Liam Lavery, to address its concerns that Valve was offering illegal gambling.

Specifically, the WSGC said, it was concerned with Valve’s facilitation of the use of skins as a virtual currency with which to place bets.

After that initial meeting, the WSGC said, it reached back out to Lavery on multiple occasions to learn more about how Valve’s API, Steam, helps third-party websites conduct gambling in the first place.

Those later attempts to contact Lavery, the WSGC said, elicited no response.

How skins are used to wager

Skins are purely cosmetic items used to decorate weapons in Counter-Strike.

They have since taken on real-world value—ranging from as little as one cent to hundreds of dollars—by virtue of their ability to be bought and sold on third-party sites for $USD. An ESBR analysis found that the average value of a skin is around $9.75.

Websites offering casino-style gambling, sportsbook-style betting on the outcome of professional esports matches, and even head-to-head betting, all accept skins as a form of payment.

They do this by linking to Steam, Valve’s free API. Bettors looking to wager a skin on a game of roulette, for example, would be prompted to sign in to their Steam accounts directly on the third-party gambling site.

At that point, bettors could wager a skin on the outcome of an event by first transferring that skin to the website via a “trade bot,” or an automated mechanism that accepts the transfer of a skin as if it’s being traded for something.

Unlike skin wagering, skin trading is believed to be legal, and is another popular form of engagement for Counter-Strike players who want to acquire skins. Steam functions, in part, as a skin trading marketplace, as do several other third-party sites.

Once a player wagers a skin and wins based on the outcome of a casino game or an esports match, they are usually paid out in skins, again, via bots that are “trading” the skin to the user.

WSGC: Valve failed to enforce its own trade bot policy

The WSGC alleges that Valve aided illegal gambling activities because it is aware that third-party sites use Steam to conduct activities, yet doesn’t do enough to stop it.

“Valve Corporation appears to have rules against the use of bots in its user agreement,” the WSGC said.

“However, it has not strictly enforced its user policy preventing the use of bots and continues to knowingly allow third-party websites to conduct gambling transactions through its Steam platform.”

The press release Wednesday elicited strong reactions from the esports industry.

Unikrn CEO Rahul Sood, whose company is also based in Washington state, praised the decision by the WSGC. Unikrn offers legal virtual currency betting on esports, and is considered to be among the first esportsbooks in existence.

“The bottom line is skins were the currency for what seems to be the largest underage and often fraudulent gambling ring in the history of gambling — it’s been abused on every level, and continues to be abused,” Sood said.

“Washington State took a leadership role in this decision, and knowing Valve I’m certain they don’t want any part of illegal gambling either,” Sood said.

Valve ordered 42 skin wagering sites to cease and desist in July

Regardless of the amount and efficacy of Valve’s actions to enforce its bot policy and limit skin gambling, it did take some action to that effect.

Just as Valve itself was ordered to stop abetting unlawful gambling activity, it ordered dozens of skin wagering websites throughout the world to cease and desist using its API to offer wagering via skins.

It did so in separate actions on July 19 and July 29, telling sites that they were violating the terms of Steam’s subscriber agreement. The letters gave the named sites 10 days in each instance to shut down all skin gambling-related operations.

Some skin wagering sites directly flouted Valve’s orders

The results of the C&D were mixed. Many sites, such as CSGOLotto and CSGOShuffle, shut down.

Others, such as CSGOWild, halted commerce temporarily but have vowed to come back online. Many other sites, such as CSGOFast and CSGOCosmos, have stopped operating in the US but continue to directly flout Valve’s request in other countries.

Since Valve is the creator of the Counter-Strike virtual ecosystem, it owns all skins as well as any API used to transfer those skins. But Valve does not appear to have been joined in its July C&D efforts by law enforcement.

It’s possible skin gambling operators therefore felt less pressure to swiftly comply with Valve’s order than they would have if they were contacted directly by law enforcement.

Valve has not responded to repeated requests for comment.

Skin wagering underwent exponential growth in first half of 2016

A recent report by ESBR and Narus Advisors examined the volume of skins bet at one of the world’s largest skin sites, CSGOLounge.

That report found that the site, which accepted skins as bets on the outcome of professional esports matches, took in 103 million skins, or the $USD equivalent of $1 billion in handle, in the first seven months of 2016.

Lounge was one of the 42 sites named by Valve in C&D letters. Initially it did not shut down, but only restricted some skin betting in some jurisdictions, while offering it in others.

The day after a report emerged on Aug. 15 that Lounge’s parent company had a 90 percent stake in a professional esports franchise, the site shut down all skin betting worldwide.

Lounge has since launched a new, free-to-play, coin-based betting product.

Further research from Narus and Eilers & Krejcik Gaming earlier this year estimated skin wagering on esports would take in $7.4 billion in handle.

Those estimates were later revised down following Valve’s C&D actions in July, and the belief that they would decimate the skin wagering market.

While skin wagering still exists, albeit in a much more limited form, Narus still projects that the global esports betting handle will reach $5.5 billion in 2016, and estimates that North American esports revenues in 2016 will reach $275 million.

Courts beginning to rule in matters regarding class-action suit vs. Valve

Separately on Wednesday, a US District Court in Washington State granted a motion to dismiss a complaint against former skin gambling website CSGOLotto.

The compliant was tied to a larger class-action suit in which defendants sought damages not only from Lotto, but Lotto’s owner Trevor Martin, and Valve, for aiding and abetting illegal gambling via skins.

Martin was embroiled in an ownership controversy earlier this summer that precipitated several rounds of negative publicity for the skins industry.

Martin was found to have gambled on his own site without disclosing his ownership position, and with potential knowledge of outcomes of Lotto’s casino-style games.

After winning skins from several of those games, he published video of his winning on his heavily subscribed to YouTube channel. In one of the videos, he claimed to have just “found” the site online by chance.

CSGOLounge Relaunches With Coin-Based Esports Gambling Product

September 26, 2016

After over a month removed from its abrupt skin betting shutdown in the wake of pressure from Valve and the esports community, CSGOLounge has launched a coin betting product on professional esports matches.

New users signing up for the site Monday received 100 free coins to bet with on upcoming CS:GO matches, such as the day’s ESL Pro League slate.

It is not immediately clear how players acquire additional coins to bet with, or if coins derive any real money value.

Lounge announces coin-based esports betting system

In an announcement on its site Monday morning, Lounge told users:

Dear users,

As of today, we will be releasing our new Lounge betting system.

This entails a couple of new features including; coins, betting, rankings, notifications, and more.

Users will now have the option to place Lounge Coins as a bet on csgolounge.

We have multiple tracking and ranking features so you can see the top predictors, highest winners and other stats.

With this, comes a new new look and a new notification system that will inform users about recent bet outcomes, announcements, new match posts, etc. Other features, are currently being worked on and will roll out as soon as possible.

We are working on a solution for items withdrawal, please stay tuned for upcoming updates.

Lounge Team.

The move resembles that of other sites which have pivoted to non-skins forms of esports wagering.

CSGOFast, for example, recently converted to a real-money gambling site using virtual coins, but blocked its product from US consumers. CSGOStrong and CSGOCosmos made similar moves.

Lounge’s conversion to a coin betting site also illustrates the persistence and adaptability of unregulated esports betting sites, and their willingness to take risks to offer new products.

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Payment, monetization strategies unclear

Per comments on Reddit, it appears that the site still has not worked out a system for withdrawal. It is also not clear how the new coin betting feature will make money, if it all.

The new format involves players making a series of bets with coins over time, and a rankings system to show who has made the most successful bets and who has the highest balance of coins.

As of Monday morning, the player tied with the lead for the highest successful number of bets was BOREWIK.

That is believed to be Robert Borewik, the original founder of the Lounge in 2013 and the steward who helped grow it into the world’s largest skin betting site before its closure on Aug. 16.

Lounge recently shut down all betting amidst scrutiny

According to an ESBR and Narus Advisors analysis, Lounge did just over $1 billion in skin betting handle between Jan. 1 and Aug. 1, 2016.

On Aug. 1, following pressure from game maker Valve and after being named in a cease and desist letter, Lounge said it would restrict skin gambling in 16 countries and apply for a betting license in those countries to be able to offer its product.

On Aug. 16, one day after EsportsObserver reported that Lounge’s parent company owned a 90 percent stake in a professional esports organization, Lounge shut down all skin betting worldwide.

In First Ruling, Esports Integrity Body Finds No Support For Rainbow Six Cheating Allegations

September 21, 2016

A new esports integrity body delivered its first ruling on Wednesday, finding insufficient evidence to support multiple allegations of cheating in the second season of Rainbow Six Pro League.

The Esports Integrity Coalition found “no case to answer” against the Fenix organization, which was accused of dropping out of season two to help advance another organization, Penta, in the standings a few weeks before two of Fenix’s members joined Penta’s roster. 

It also found no case against Penta which was accused of throwing a match in order to deny another team entrance to the finals of season two.

Some accusations stem from former player

A former Fenix team member accused Penta of coaxing two of his teammates, who had planned to join Penta in the future, into forfeiting Fenix’s entire season.

The action retroactively awarded Penta additional points in the league standings which allowed that team to earn one of the league’s top seeds at season’s end.

“This means Penta intentionally fixed a team in the past tense so they could profit in the long term, also earned a financial bonus by placing 4th place,” the player, known as TankNinjaz, wrote in a post on Sept. 1.

The player inferred that he went public with the accusations because he was denied recourse after going through official channels.

ESIC did not address any players by name in its ruling Wednesday.

ESL, the administrator of Rainbow Six Pro League and a formal partner of ESIC, emphasized earlier this year that players accused of wrongdoing would be considered innocent until proven guilty.

It warned that “false positives are a threat to the integrity of the anti-cheat tool.”

‘Exceptional circumstances’ prompted public statement

ESIC said it was asked to investigate whether or not either team or its players breached the coalition’s anti-corruption code. It did not disclose who asked it to investigate the claims.

The coalition said in a release on ESL’s website:

“Normally and in accordance with the Code, ESIC would not comment on investigations that are in progress or have concluded that there is no case to answer, but the allegations in this case have given rise to a great deal of accusation, speculation and comment on social media and we conclude, therefore, that exceptional circumstances exist and it is in the relevant teams’ and the League’s best interest that ESIC make a public statement.”

The investigation involved reviewing evidence outside of the public domain, ESIC said Wednesday. That evidence included recorded conversations between the teams’ players as well as anonymous sources.

ESIC said in the release it would not discuss the matter further, although integrity director Ian Smith confirmed to ESBR that the ruling was ESIC’s first regarding any esports title.

However, despite ruling that there was no case to answer regarding either claim, ESIC ended its release with an acknowledgement that the case could have new evidence which has not yet come to light

It asked anyone with information to send it to [email protected].

Betting drives match-fixing

One of the main reasons the second of the two allegations, match-fixing, was found to be unproven was that there was no betting on the match in question.

According to ESIC, 90 percent of match-fixing is motivated in some way by fraudulent betting activity. This often involves bettors willing to pay players a cut of their winnings if the players agree to throw a match.

Rainbow Six Siege is one of the less popular of the professional esports, and the title does not drive a large amount of wagering, especially compared to titles like Counter-Strike: Global Offensive and Dota2.

Those games are largely responsible for driving estimates of the global esports betting handle for 2016 into the billions of dollars.

Putting a stop to match-fixing was one of the central aims of ESIC, which formed this Summer on the back of support from companies like ESL, Dreamhack, Sportradar, and Unikrn.

UKGC’s FIFA Gambling Charges Open New Chapter Of Esports Betting Crackdown

September 20, 2016

The UK Gambling Commission late last week charged two men with violating the region’s Gambling Act of 2005 in the form of providing facilities for gambling, advertising unlawful gambling, and inviting children to gamble.

The defendants, FutGalaxy owner Dylan Rigby and YouTube caster Craig Douglas, allegedly facilitated gambling around the ecosystem of FIFA Ultimate Team, a game mode in EA Sports’ popular FIFA soccer video game series.

The case represents one of the first prosecutions by the commission of an unregulated sports betting site driven by virtual currency.

It could open up a second chapter of scrutiny pertaining to betting on sports-based video games, following a summer dominated by malfeasance of skin betting websites.

How FIFA Ultimate Team works

FUT is a mode of the FIFA game series similar to a “dynasty mode” in video games involving traditional American sports, but with an especial emphasis on the marketplace-driven acquisition of new players using a virtual currency.

Gamers in FUT mode develop their own team and acquire “coins” upon the completion of various milestones. Gamers can also purchase coins with “points,” which can be bought with real money from game maker EA.

Gamers can then use coins to improve their teams by acquiring new players when they purchase “player packs.”

Packs are acquired for different prices, and the sum of their contents (soccer players who have attached prices based on their skill level) often do not reflect the exact value gamers pay in coins for the packs.

FutGalaxy facilitated gambling in multiple ways

Sportsbook

FutGalaxy was perhaps best known for allowing gamers to wager coins on the outcomes of real-life sporting events, namely soccer matches across the major European leagues like the Premier League, Bundesliga and Serie A.

Gamers, for example, could bet 30,000 FIFA coins on the outcome of a match between two clubs at set odds, just as they could in real-money at a licensed, regulated sports book.

If the gamer won the bet, he or she could transfer their coins from FutGalaxy back to their EA account, and use them for normal gameplay functions such as purchasing players.

Player packs

FutGalaxy also facilitated the selling of player packs, just as FIFA’s in-game marketplace does.

Gamers could spend 25,000 coins, for example, to buy a “25K Pack,” and would then receive various players, similar to a pack of baseball cards. Gamers could either keep the players to put on their team or discard low-value players they might not want.

Sometimes, a 25K Pack on FutGalaxy delivered players with a total combined value several thousand coins less than 25,000.

Pack purchasing is an exciting albeit risky gamble for gamers spending hard-earned coins: You don’t know what you’re going to get. Thus, FutGalaxy could make a profit in coins off the sale of packs if it so chose.

Several gamers have complained that EA, the official seller of player packs on its online marketplace, also overcharges on packs in FIFA as well as the similarly-designed Madden NFL football video game series.

Twitch bets

The sportsbook section of the site even featured a makeshift platform for gamers to bet on the performance of other gamers.

Those wanting to bet on FIFA video game action could use the site’s “Twitch bets” feature to wager money on the outcome of two FIFA gamers playing each other on the casting site.

The Ireland-based FutGalaxy website says it is down in advance of the release of FIFA ’17, but that it will relaunch on Friday evening UK time.

A similar website, UTCoinbets.com, is also down in advance of the game’s release. No public action appears to have been taken by authorities against UTCoinbets.

The widely-anticipated FIFA ‘17 releases worldwide on Sept. 27, 2016.

UK commission recently took position on esports betting

The charges against Douglas and Rigby come one month after the UKGC outlined its position on esports gambling in a white paper.

It paid particular attention to the wagering of virtual currencies. Each of the forms of wagering offered by FutGalaxy appeared to violate the UKGC’s official policy requiring such sites to seek and acquire a license.

“Any operator wishing to offer gambling facilities to consumers in Great Britain, including use of digital currencies for real money gambling, must hold an operating licence,” the Commission wrote in the August position paper. 

It does not appear FutGalaxy sought or acquired any sort of gaming license.

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Sport-based video game betting presents new challenge for regulators

Dozens of websites facilitate coin betting over not just FIFA, but EA’s other sports titles as well, such as its Madden NFL and NHL video games.

Just as third-party skin betting sites popped up rapidly as skin gambling took off in popularity, the same could happen with EA’s coin-based currency across its titles.

Both FIFA and Madden are massively popular games, and gamers already have no shortage of unregulated options where they can bet, spend, or liquidate their coins.

With CS:GO skin betting, game maker Valve, and not regulators, was seen as the final arbiter of what type of skin betting activities would be permitted. After all, Valve owns all skins, and betting couldn’t be facilitated without the violative use of Valve’s proprietary marketplace.

But so far, betting on sport-based video games with EA’s virtual currency has attracted the action of law enforcement and gambling regulators, something which largely did not happen with Valve.

This underscores some of the differences between skin betting and coin betting.

Coins are not skins, but function similarly

Both can be bought and sold on third-party marketplaces

The UKGC’s treatment of virtual currency betting as real-money betting might seem overzealous.

But the fact remains that FUT coins, much like skins, can function as a virtual currency and have a convertible real-world value.

The marketplace for buying, selling, and trading skins is more centralized and robust, and includes third-party marketplaces like OPSkins.

But similar options exist in a more fragmented form for gamers wanting to acquire large amounts of FUT coins without buying points with USD, or taking the time to acquire coins through in-game achievements.

Websites like BuyFifaCoins.com and fifautstore.com, for example, facilitate the buying and selling of coins for real money.

Coins were designed as currency, skins were designed as cosmetic

Coins are a digital currency engineered specifically for in-game use by EA Sports. They have always been designed to act as a currency with which gamers buy and sell items, such as players, within EA’s proprietary marketplace.

Skins on the other hand are purely aesthetic items developed for in-game use by Valve, and whose original intent was to decorate a gun or a knife.

As skins attained more and more value and grew into the role of a digital currency, they became the items that were traded and purchased on Valve’s proprietary marketplace.

The UKGC defines skins in its recent position paper as “in-game items that provide aesthetic upgrades to a player’s game play where those in-game items can also be traded as commodities on a marketplace within a platform operated by the game’s developer or distributer.”

Neither FIFA nor Madden coins appear to fully meet this definition.

Real-world coin values are very small, skin values range vastly

The real-world monetary value of coins is also much smaller than most skins, which are unique and have widely differing values.

There is no widely adopted coins-to-USD exchange rate, as there is with a currency like Bitcoin. But 10,000 coins from the 2016 version of FIFA appear to commonly sell for between $5 and $10.

In addition to the third-party buying and selling of coins, abuse of coin trading has plagued EA’s own marketplace before, too.

Both are transferred between accounts by bots, but often for different reasons

Gamers have abused the transfer system within EA’s online marketplace by creating bots to purchase items before regular gamers can, or by “selling” low-value players for massive amounts of coins in order to facilitate the transfer of coins to another account.

This is similar to how skin gambling websites created trade bots not to complete a trade between two humans, but to facilitate the payment on Steam of gambling winnings (in skins) from an account that appears to be run by a human to the person who won the skins.

Both are often wagered on the esport responsible for their existence

Interestingly, just as skins act as a virtual currency that can be bet on any sport, most skins are bet on the outcome of esports.

In particular, they’re most often bet on matches involving Counter-Strike: Global Offensive, the virtual world which spawned skins in the first place.

Similarly, FUT coins are most often bet on the real-life games involving the sport—soccer—corresponding to the ecosystem of the game that originated the coins. 

Is FUT gambling esports betting or sports betting?

The betting facilitated by sites like FutGalaxy unequivocally utilizes a virtual currency. But the answer to whether or not these sites facilitate esports betting or regular sports betting could be more complicated to determine.

The UKGC only defined skins in its recent position paper, and did not define skin betting specifically.

Skin betting constitutes: wagering with skins, a digital product developed in an esports ecosystem for intended use within that closed ecosystem, outside of that ecosystem on a real-life competition involving gamers playing a professional esport.

But the majority of the FIFA coin betting offered by sites like FutGalaxy is slightly different.

It constitutes: wagering with coins, a digital product developed in an esports ecosystem for a intended use within that closed ecosystem, outside of that ecosystem on the real-life competition involving athletes playing a professional sport.

Soccer is a sport foremost, and an esport second. It is made an esport solely within the context of the FIFA video game itself.

So does taking a virtual currency that originated from an esports ecosystem and using it to bet on sports constitute unregulated esports betting, or unregulated sports betting?

This could be one of many questions regulators have to untangle in the weeks and months ahead.

Matthew Kaufman contributed to this report.