[toc]Skin betting site CSGOWild has decided to stop accepting customers from the United States.
Customers from the U.S. appear able to access their accounts, but are blocked from participating in play.
Skin betting lawsuit may have factored into decision
A recent lawsuit aimed at Valve, which owns the Steam platform, has given the legal issues around skin betting a higher profile.
The suit alleges that Valve “knowingly allowed, supported, and/or sponsored illegal gambling by allowing millions of Americans to link their individual Steam accounts to third-party websites.”
CSGOWild utilizes Valve’s Steam platform to accept transfers of skins from players, and to make transfers back to players. Players deposit Counter-Strike: Global Offensive (CS:GO) skins at CSGOWild, skins that are then converted to an equivalent value in “emeralds,” an internal site currency.
Players can use their emeralds to play coin flips or roulette. CSGOWild takes a percentage of each game as a rake.
On cashing out, players can convert their emeralds back to skins.
It should be noted that CSGOWild was not mentioned in the plaintiff’s original complaint. An amended version of the complaint, filed on June 29, also does not mention CSGOWild, but did add numerous skin betting operators to the original complaint’s list of so-called “co-conspirators.”
Multiple sources have confirmed to ESBR that the decision by CSGOWild appears to have been a unilateral one, and does not appear to be the result of action by Valve or other external pressure.
Neither Valve or CSGOWild immediately responded to requests for comment.
Analyzing the civil suit
As ESBR reported when the story first broke, the lawsuit may struggle to gain traction in the legal system.
“I’d call this lawsuit frivolous and say it is likely to be dismissed,” Jeff Ifrah of Ifrah Law, a firm with a specialist practice in online gambling, told ESBR.
Ifrah went on to question the fundamental assertions of the suit.
“Valve created a platform for play,” Ifrah continued, “and on this platform, virtual items were played in a virtual world for virtual rewards. First, this doesn’t meet the standard for a RICO violation. Second, based on the recent Mason V. Machine Zone ruling in the Maryland courts, virtual gambling under those conditions is not illegal.”
The plaintiff’s lawyer contends that Valve is profiting from illegal gambling.
“Valve certainly profits from skin betting: they take a fee from selling the casino chips in the first place, and have directly benefited from the increased popularity, revenue and exposure of CS:GO because people bet on it,” said Jasper Ward of Jones Ward.
Perhaps the most relevant comment in the light of CSGOWild’s decision to leave the U.S. market came from Sports Illustrated legal analyst Michael McCann: “Lawsuits like these also tend to attract the attention of lawmakers and regulators, which could become a source of concern for esports companies.”
Read the original complaint here, and the amended complaint here.
Skin betting could become a huge market if regulators allow
In the latest “Esports and Gambling” report issued by Eilers & Krejcik Gaming, skin gambling is estimated to turn over $7.4 billion annually. Their base case scenario for market growth sees that figure rise to almost $20 billion in 2020.
However, the potential for scandal and regulator/legislator involvement in the market could severely hamper skin betting’s growth potential.
In the U.K. the Gambling Commission is already looking at the industry and could plausibly conclude that skin betting is an activity that requires a U.K gambling license.
James Cook, corporate affairs officer at the Commission, said:
“If GB-based players are being invited to gamble with money or money’s worth then this requires an operating license…. If we suspect unlicensed gambling is taking place, we will write to the operator to inform them that they need a license and will take further action if they do not stop.”
ESBR believes that at least one skin betting site has received a cease and desist letter from the UK Gambling Commission, but the Commission has not confirmed whether this is true or the identity of the site.
If the U.S. determines that skin betting is gambling, then prohibition is more likely than a licensing process.
CSGOWild’s decision to exit the U.S market may be premature, or it may be a decision that positions it to seize some of the enormous growth potential of the skin betting business in a regulated environment.