Financial interest not revealed in promotional videos
At the heart of the controversy is a simple allegation that doesn’t seem to be in serious dispute at this stage: Martin recorded and published videos where promoted CSGOLotto without fully disclosing his financial connection to the site.
Following the video from HonorTheCall, Martin generally confirmed his ownership interest in CSGOLotto via a video and a Twitlonger post that has since been deleted. In both, Martin stressed that he had never hidden the fact that he had an ownership interest.
Regulations in several jurisdictions, including the U.S. and the U.K., require some level of disclosure when paid promotion is involved in online content, although the rules in question are often broad and involve case-by-case interpretation.
Unique game integrity issues
This story comes only weeks after a separate controversy involving a prominent figure in the esports community and promotion of a skin gambling site.
In mid-June, popular CS:GO streamer mOE, who had a disclosed promotional relationship with skin gambling site CSGODiamonds, revealed that Diamonds had provided him with game outcomes ahead of time in order to make mOE’s videos “more entertaining.”
CSGODiamonds is a house-banked virtual dice game where players compete against the house (not unlike craps). While providing mOE with advance knowledge of outcomes was troubling on several levels, that knowledge couldn’t have been used by mOE to gain any sort of advantage over other players.
CSGOLotto, on the other hand, is a game where players are competing against other players in a lottery-style game. Advance knowledge of outcomes in that scenario would provide an individual with a significant advantage at the expense of other players.
There is no evidence that Martin engaged in that specific behavior, but a site owner competing against other players in a lottery-style game naturally raises the question of what mechanisms were in place to prevent such abuse.
Connection to Team EnVyUs may raise stakes
Martin reportedly owns a small equity stake in Team EnVyUs. That’s the same team that made headlines earlier this year after securing financial backing from SierraMaya 360 and announcing related plans for a training center and esports venue in Charlotte, North Carolina.
EnVyUs isn’t the only esports organization to receive backing from a VC firm. But the organization’s high-profile nature and direct connections to both the investment community and local government could focus additional attention on this situation.
Team EnVyUs released a statement regarding Martin earlier today. Excerpt:
Trevor has never been involved in the operational or decision making process of our team or company. He is not a managing partner, does not sit on our board and has a very small, minority stake in the business that operates Team EnVyUs.
As a company and as managing partners, we have absolutely no involvement with or ties to CSGOLotto.com. Recently, a few of our CSGO players have been offered sponsorship with CSGOLotto.com among many other lottery driven or skin marketplace type web destinations on an individual basis. Our organization does not manage those relationships and have advised our players to avoid further relationships with any company that may be deemed as negligent by the vocal community.
We have always rejected lucrative offers from groups who operate unregulated marketplaces, lottery or wagering type properties and will continue to do so. At this time, we will fully cooperate with any publisher, partner or party we are engaged in business with in order to maintain this position we have dedicated ourselves to all along.
Read the whole statement here.
In a separate tweet, EnVyUs owner and Managing Director Mike Rufail called on Valve to cut off sites like CSGOLotto from the API for trading skins that underpins skin gambling sites. But Rufail drew a line between casino gambling sites like Lotto and sportsbook-style sites such as CSGOLounge:
I would be one of the happiest to see Valve cut off the skin lotto sites from their trade and API. The match wagering needs regulation too.
— Mike Rufail (@hastr0) July 4, 2016
Speaking of Valve, the company appeared to briefly institute a generic warning (“the URL you are attempting to log in to has been blocked by our moderators and staff. This site may be engaged in phishing, scamming, spamming, or delivering malware”) to users attempting to utilize Steam to log in to CSGOLotto.
I was able to log into the site using Steam without receiving the warning as of 1:30 p.m. PST on July 4.
How large is the skin gambling market?
I recently published an overview of the global market for esports gambling. Skin gambling is the dominant vertical, accounting for over $7bn in total item value wagered in 2016.
As the chart below shows, “jackpot” sites like CSGOLotto are one of the more popular game variants:
Scandal threatens to undermine viability of the market
Partially as a result of that popularity, skin gambling is increasingly registering on the mainstream radar. Gambling regulators in the U.K. are reportedly monitoring the issue, and a recent lawsuit seeking class-action status in the U.S. could be a precursor to additional attention on the legal front.
Situations such as the one involving CSGOLotto and Martin will no doubt fuel additional mainstream attention. But the more immediate impact will likely come on the consumer front. Mounting backlash from players could begin to erode demand for skin gambling, especially if similar revelations emerge around other sites.
That backlash could also impede the ability of skin gambling sites to acquire new customers if popular streamers (arguably the most effective marketing tool for skin gambling sites) start to become less willing to promote an activity as a result of popular opinion.
Is skin gambling illegal gambling?
It may be a more complicated question than most on either side would like to admit.
The first layer of complication arises from the fact that every country deals with gambling in a unique way. What may be considered gambling in one jurisdiction may not in another, and what’s required once something is defined as gambling also varies from jurisdiction to jurisdiction.
The second layer arises from the nature of skins. Do virtual items have value simply because they can be exchanged for money in certain circumstances on secondary markets? And, if skins do have value as a prize, does the wagering of skins constitute gambling given that skins can be readily acquired for free?
The answers to these questions will prove critical in jurisdictions such as the U.S., where much of the process for defining an activity as gambling hinges on the question of whether what’s being bet (and what’s being offered as a prize) is actually of a “thing of value.”
Those who argue that skin gambling may not constitute illegal gambling for the purpose of most U.S. state laws often point to a recent decision involving gambling within Games Of War. Background on the Mason V. Machine Zone decision here, text of the decision here. The decision is being appealed.