Money Refund Program Announced For CSGOLounge And DOTA2Lounge

Written By Joss Wood on January 1, 2017

[toc]Five months after receiving a cease and desist letter from the Valve Corporation, CSGOLounge and DOTA2Lounge have announced that they will put in place a self-funded money refund program for users affected by the shutdown.

Owners ESforce and Borewick explained:

“After Valve had banned our bots with in-game items which belonged to the CSGOLounge and DOTA2Lounge users, ESforce and Borewik made a decision to refund the items with their own means.

The decision required a lot of time and work, and it is final.”

The company plans to start refunding frozen bot items no later than March 2017. The long lead time is explained as being result of working on “the technical side of the refund mechanism and legal aspects of the issue.”

$20,000 prize fund for virtual coin bets

In September, CSGOLounge reacted to the skin betting shutdown by introducing a new betting system using “Lounge” coins. The Facebook announcement said that:

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

The same message also gave preliminary indication of the planned refund program.

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

Alongside the money refund announcement, CSGOLounge has said that it will summarize the results of the new virtual coin bets and provide rewards for the most active users.

“The prize fund amounts to $20,000. Afterwards, coin balances will be set to their default condition on February 1, 2017.”

CSGO Lounge says it never directly profited from betting

The ESforce and Borewick announcement provides a few statements that distance CSGOLounge from any involvement in illegal betting.

“The CSGOLounge and DOTA2Lounge services have never had any tools for money input and output and never made profit as a betting platform. The only way to receive income was advertising.”

The user fee introduced in summer 2016 was explained as a response to a hacking attack on their Steam bots and designed “to defend our bots and recover lost items.”

The Washington State Gambling Commission has made its own determination that skin betting has led to illegal gambling.

At the beginning of October it sent a letter demanding that Valve stop the transfer of skins via its Steam API:

“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.”

In August, CSGOLounge announced that it planned to seek regulatory approvals to continue its operations, and banned players from 18 countries, including the US, as it restructures its business.

The company is clearly trying to avoid being entangled in any future legal action regarding illegal betting so that it can create a viable business that is plainly operating within the law.

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New Valve class action legal suit

Despite a federal court ruling in Valve’s favour over the class action filed three months ago, the company is not yet out of the legal woods.

A new action was filed just after Christmas, involving primarily the same lawyers who launched the first action. The first action failed after the judge ruled that “gambling losses are not sufficient injury to business or property for RICO (the Racketeer Influenced and Corrupt Organizations Act) standing.”

The new suit takes a different legal angle, but the demand is virtually the same:

“Restitution of all money wrongfully obtained by Valve Corp. through the alleged online gambling and a court order barring Valve Corp. from continuing to engage in the unlawful, unfair or deceptive practices complained of.”

The Valve Corporation is wealthy, and therefore vulnerable to such lawsuits.

The smaller skin betting operators such as CSGOLounge may not have the financial resources to make a class action worthwhile, but even so ESforce and Borewick are wise to emphasize their legal position that they were in no way involved in any form of illegal gambling.

The future for CSGOLounge

The money refund program may provide a clear exit from the previous business, allowing CSGOLounge to redefine itself and find a profitable business niche.

ESforce and Borewick said that they are taking the business in a new direction:

“We plan to further develop the service as a media resource for video game and eSports fans and also to introduce an encouragement system for our game ‘Virtual coin bets’ participants.”

There is no doubt that the skin gambling industry has been ruined by the scandals and abuses of early 2016 which ultimately led to Valve taking determined action.

An ESBR white paper from Narus Advisors explains the full background to the demise of the industry.

Whether a viable skin betting industry can be salvaged remains doubtful, although the game developers are likely to retain the facility for players to buy and exchange skins because their customers want it.

Amazon’s new game and Twitch’s new virtual currency were launched after the skin betting issues came to prominence. They clearly want to satisfy the large demand for in-game betting, either for real money or as social gaming.

What remains uncertain is the level of skin trading restrictions that game owners, distributors and broadcasters will impose to ensure that they remain within the law.

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Joss Wood

Joss Wood holds an English degree from the University of Birmingham and also earned a master’s degree in organizational development from the University of Manchester. Joss has a special focus on the international online gambling market, though he also writes extensively on US regulated markets, sports betting, and esports betting.

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