Skins are virtual items that people buy and trade in video games.
In the note, the NGA determines that skins in games like CS:GO constitute a virtual currency:
“Skins can normally not be exchanged for cash, but it is possible to take the skins out of the game and of other markets for buying and selling. There are separate online casinos where you can bet and win skins, and in such cases, skins a virtual currency that can be used for gambling. We have seen several examples of Norwegian children and young people who have spent thousands of money from this.”
It concludes that using such a virtual currency for gambling brings the activity within its jurisdiction.
“A gaming site that allows betting and pays out prizes in skins is in our view an online casino, and in Norway, only Norsk Tipping is allowed to offer online casino.”
Norway is following other European precedents
Norway is not the first European regulator to analyze skin betting.
As part of its argument, the NGA refers to the UK’s experience, where the UK Gambling Commission (UKGC) made a similar decision.
However, in Norway, there is no open licensing system for operators; the market is a state monopoly. Other examples:
- In the UK, skin gambling operators will be able to offer skin gambling legally. However, they acquire a gambling license from the UKGC.
- Most recently, the Isle of Man amended its regulations to allow skin betting under license.
- The Malta Gaming Authority is considering its own approach.
- The Dutch regulator also ruled that skin betting is gambling, and put out its own warning notice. Online gambling regulation (paywall) is slowly making its way through the process of implementation in the Netherlands, so no licenses are yet available and all online gambling is currently prohibited.
During 2017 other European regulators are likely to make their position clear on the issue.
Valve’s shutdown triggered the regulators’ interest
The publicity surrounding Valve’s shutdown of CS:GO skin betting in mid-2016 looks to have been the trigger that got euro-regulators interested in the skin betting issue.
The first regulator to jump on board in the US was the Washington State Gambling Commission. The WSGC sent Valve a cease and desist letter in October 2016.
The letter came after Valve had already sent its own letters to skin betting sites. That was at a time when a few still continued to operate.
Under-age gambling is driving skin gambling up the priority list
The regulatory interest stems from the fact that children play video games. The possibility of them enabling illegal gambling sends alarm bells to regulators.
In the UKGC’s report that discussed skin gambling, the authors determined the activity was fundamentally no different to other forms of gambling. It expressed concern that it might be especially attractive to children.
The NGA justified its decision partly on this basis. It quoted a study which showed the interest young people have in CS:GO:
“Media’s survey “Children and Media 2016” shows that 25% of Norwegian boys 15-16 years old playing the computer game “Counter Strike: Global Offensive.”
To back up the point the NGA points to its own experience:
“We have seen several examples of Norwegian children and young people who have spent thousands of money from this.”
Threats and opportunities for skin betting operators
The MGA, UKGC and Isle of Man Gaming Commission are all forward thinkers among regulators. They are providing the opportunity for skin gambling to develop into a legitimate part of the online gambling industry.
However, skin gambling remains in its infancy. More scandals or attempts to market to under-age players will bring the industry into disrepute–skin gambling could be killed in its tracks.
There is even a risk that the reputational risk could extend to licensed and regulated operators that offer esports betting on the same games. The general public may simply not see the difference between CS:GO skin betting and CS:GO betting.
The NGA ends its note by offering its own threat to skin betting operators:
“Stopping illegal betting has always been a priority at the Gaming Board, especially where games offer is aimed at children and young people. We will therefore examine the issues surrounding gambling with skins, and consider sanctions against operators who offer this in Norway.”