A prominent skin gambling site, CSGODiamonds.com, posted a blog entry outlining an altercation last month with one of its Twitch streaming partners, m0E, which raised concerns for everyone currently gambling with CS:GO skins.
During this incident, m0E made threats to reveal the service’s ability to forecast game results ahead of time for anyone using the service.
“We made a mistake with Moe and decided to tell him some of his future rolls in an effort to make his stream more entertaining on our site.”
Yes, that’s right — they know the outcome well enough ahead of time to leverage the information and give the impression that winning happens more often than it should.
M0E eventually spilled the beans on Twitter, providing screen grabs of Skype conversations showing CSGODiamond’s owner allegedly going out of his way to convince the well-known streamer to use the insider information to rig the game and showcase big wins on the site.
How do ‘provably fair’ gambling sites work?
If you have no idea what “provably fair” means or stare off into space every time you hear someone yammering on about it, here’s a slightly oversimplified explanation:
- The random number generated to dictate the result of the gambling event (roll of dice, spin of roulette wheel, etc.) is determined by a combination of factors – some from the server side and some from the client side. These factors are referred to as “seeds.”
- Players have access to the client side seed, but can only see a “hash” of the server-side seed. Basically, it’s a series of numbers and letters which has been sent through a complex algorithm and which would be incredibly difficult to derive the original number from.
- After the gambling event takes place, the online casino shows you the client side seed for the previous event. This is “provably” fair because players, if they so choose, can input that seed into the algorithm to make sure that the same hash as was given to them originally comes out.
- If the hashes match, it proves that the site did not change the result and that your win or loss by wagering on the event itself was fair.
Sites using the system are indeed provably fair as it relates to the outcomes of games — of that there’s no question — but only in the sense that the outcome can be repeated given the variables provided. This has nothing to do with the operator’s ability to predict that outcome when it is able to read its game’s unprotected server seed before the players can.
Basically, the whole of the provably fair model is based upon the idea that the past is predictable. As a consequence of this, the future can be just as easily predicted, given complete information. The reliability of that relationship isn’t what we should be calling into question, but rather what the powers that be decide to do with it.
To be clear, if you have been wagering on CSGODiamonds, you have probably not been taken advantage of. The outcomes were truly random, and the site is not “rigged.” That said, employees with a certain level of access do know ahead of time what results are – they just can’t change those results.
Understandably, many people would consider “provably fair” to apply not just to aspects of how the game determines the outcome, but also to the transparency of the operator when it comes to matters like these.
CSGODiamonds has shown us just how slippery of a slope that can be if you’re not careful.
What can go wrong with CSGODiamonds’ system?
Although gambling events weren’t impacted, the ability to access results ahead of time does make you wonder just what someone running one of these sites would be capable of doing if they were so inclined — especially given the fact that virtual property laws are few and far between.
Circumventing gambling laws and finding creative ways to skirt them has been a national pastime in many places in the world. With crypto-currencies becoming more widely used and cryptographic law being such a quagmire because of the extreme lack of education on the topic, it certainly raises the question regarding what sort of industry we’re dealing with here.
With the laws nowhere near where they need to be, what obligation does a site like this have to keep records to offer up in case its honesty is ever called into question? What chance does an outsider have to really know that something isn’t quite right?
There isn’t much incentive to keep your nose clean when there’s little to no oversight. It’s unfortunate but it’s going to happen — that’s just the way the world operates on a long enough timeline.
Bitcoin and other cryptography-based currencies like it offer a similar level of security and privacy as you find on CS:GO skin wagering sites for the same technology-driven reasons.
The only real difference here is that the keys to the locks are changed every few seconds, with copies given to the person opening the door afterwards. With crypto-currency, that private key is never handed out to anyone, ever. Heaven help you if someone steals that wallet from you.
There are easier ways of going about laundering funds or evading taxes than doing so through CS:GO skins. But surely that doesn’t mean sites should operate using systems which would enable anyone to achieve those goals so easily.
Many of you may be well aware of the scandal involving unlocking an iPhone in California by court order. It is simply mind boggling how so few currently comprehend what the implications of compromising encryption standards could be.
Apple released a very telling statement regarding the matter. You should give it a serious read if you’re starting to grasp just how important of a topic this actually is.
What can be done to ensure the integrity of online gambling?
In most gambling industries in the world, a regulatory agency (both private as well as public) is used in the process of submitting gambling content to markets. These markets can trust that the regulating agency cares more about its reputation than the fickle kickbacks it could potentially receive for skirting fairness guidelines.
These agencies also provide industry guidelines pertaining to how software operates, and what’s considered fair not only to the player but also the casino. A good example of a private agency would be GLI (Gaming Labs International), which handles gambling product submissions as well as writes and enforces standards for how those products operate.
This agency even has guidelines for how random number generators should operate (check out page 19).
This is an industry that I myself have been a part of. Because of this experience, I can certainly speak to the benefits that these integrity checks provide when it comes to the quality of a gambling experience delivered to the public.
Providing algorithm transparency is a good step in bringing people into that world of trust, but there really are so many other angles that need to be covered to ensure that this industry doesn’t turn sour and further tumble into controversy.
And there’s no reason for a site to generate future results in bulk the way that CSGODiamonds does. The site is correct that it doesn’t change player odds or outcomes, but it DOES make it possible for site employees to use the information unethically in other ways.
Perhaps it’s time to bring these gambling outlets into the regulatory fold and begin expecting higher standards be met for fairness.
Read a brief primer on the market for skin gambling here.
Suit ‘likely to be dismissed’
“Whether or not skin betting is legal, this suit claims the consumer — who entered into a wager with his eyes open — was injured by Valve.”
“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 question of profit
Another issue that may play a pivotal role in the trajectory of the case is the question of whether or not Valve directly profits from activity at third-party sites where skins are gambled or sold.
The suit appears to allege at various points that Valve receives a direct cut of skin gambling transactions, at one point stating that Valve earns “a percentage of gambling proceeds on CS:GO through various websites and third parties.”
This is an inaccurate characterization.
When players gamble skins, the skins are transferred between the player and the skin gambling site using a “trade” function that allows players to send items to one another. There is no charge associated with the trade function on Valve’s marketplace.
Jasper Ward of Jones Ward, attorney for the plaintiff, contended that, direct cut or not, Valve is still profiting from skin 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 Ward.
Where responsibility for a virtual item ends
Another issue likely in play: How much responsibility does a product creator bear for the secondary usage of said product?
“It’s pretty easy to illustrate why Valve is unlikely to be held complicit in the sale and trading of skins,” said Jessica Feil of Ifrah Law.
“It’s the same as the government releasing currency – just because you release something legally doesn’t mean that you have to anticipate and expect to be held liable for all illegal uses that might flow from it.”
Ward sees the issue differently.
“I think a key difference between what Valve has created and normal in-game purchases is that, because of Valve-supported third-parties, consumers have the ability to cash out the skins for real money,” said Ward.
Handicapping the peripheral impacts
The question of the viability of the suit is only partially connected to the external impacts the existence of the suit might generate.
“Lawsuits like these also tend to attract the attention of lawmakers and regulators, which could become a source of concern for esports companies,” said Sports Illustrated legal analyst Michael McCann, who noted skins betting constitutes a largely unexplored frontier of the law.
The media attention the suit will generate could train a stronger spotlight on the market for skin gambling as those conversations progress.
You can read the full complaint here.
Will Green contributed to this article.
CSGO Diamonds is a gambling platform where players deposit skins, convert their value to “Diamonds” and then wager Diamonds on variable-odds outcomes based on dice rolling. Diamonds can then be used to purchase skins on the site’s marketplace. One Diamond is worth roughly $1 in skins value.
The site made the announcement in direct response to the sponsored player, prominent Counter-Strike: Global Offensive caster m0E, accusing the CSGO Diamonds on Sunday of preventing moE from withdrawing tens of thousands of dollars in virtual currency.
According to the statement from CSGO Diamonds, moE and the site entered into a relationship in early 2016 whereby moE would promote the site on his Twitch stream in exchange for a percentage of site profit.
CSGO Diamonds said it made “a mistake” in providing moE with advance knowledge of game outcomes, and did so in order to make the sponsor’s stream “more entertaining.”
m0E gives CSGO Diamonds ultimatum
On Sunday, m0E, a gregarious former professional CS:GO player who commentated alongside Richard Lewis during the first three weeks of Turner’s ELEAGUE broadcasts on TBS, threatened in a tweet to “expose” CSGO Diamonds.
moE wrote that CSGO Diamonds was preventing him from withdrawing $26,000 in Diamonds on the site. He appeared to give the site an ultimatum to either allow him to withdraw the Diamonds within 24 hours, or else shine a light on something the company wouldn’t want exposed.
On Monday afternoon he uploaded a Skype conversation to Twitter:
CSGO Diamonds admits divulgence of roll results
On Monday, the website issued a response revealing on its own what it says m0E was threatening to “expose.”
From a CSGO Diamonds TwitLonger post:
“…we made a mistake with Moe and decided to tell him some of his future rolls in an effort to make his stream more entertaining on our site. (It’s important to note we did not do this with any other sponsor and, rightly so, have learned from the mistake.)”
The intent to acquire the outcomes of rolls in advance was a two-way street, according to CSGO Diamonds, with m0E asking for them at some times and the site providing them at others.
“This happened in both directions, at times we provided him a future roll and other times he would ask us for a roll result while on stream. This is what he is threatening to ‘expose’ us with, although he had a willing part in this too.”
Profit-sharing agreement terminated
CSGO Diamonds said it engaged in a sponsorship deal with m0E earlier this year in which he would cast his playing on the site for between 110 and 130 hours a month in exchange for 10 percent of monthly profits. The site also said it provided m0E with Diamonds he could wager but not withdraw.
When his casting hours dipped below that mark, the site said it wanted to either renegotiate with him, or offer him a severance payment to end the sponsorship. It was at this juncture, the site said, that m0E threatened to “expose” the site revealing its roll outcomes to him in an effort to keep his 10 percent deal intact.
The site then terminated its sponsorship deal with m0E and went on to accuse him of making defamatory statements about the site to other sponsors. From the post:
“…we decided to offer him the severance payment and part ways. He agreed to the payment and to part ways. Following this, we found out that he had been providing false, negative information regarding our site to our sponsors. He has now taken to Twitter, regarding the withdrawal of Diamonds that, as mentioned previously, were never to be withdrawn as part of the original agreement.”
Need for skins gambling regulation
Skins gambling represents not only a extremely lucrative form of esports gambling — Narus Advisors and Eilers & Krejcik Gaming estimate the global skins gambling market in 2016 will reach $7.42 billion in handle — but a highly unregulated form as well. As the overall volume of wagering expands and puts more money up for grabs, the temptation for and prevalence of unchecked malfeasance will almost assuredly grow.
Several industry leaders have called for regulation in recent months, smarting at the idea of players in some instances as young as 13 years old wagering hundreds of dollars worth of skins on the outcomes of esports competitions. There is still the absence of a recognized regulatory body that could bring stakeholders across titles together to formulate common standards and practices. This is in part because the esports industry is online-native, and therefore diffuse and fragmented across different cultures, regulatory jurisdictions and game titles.
It’s also because esports wagering represents a double-edged sword for gaming companies: Skins wagering is good for business and helps drive engagement and growth, but can open game makers to both regulatory scrutiny and, in instances like CSGO Diamonds, bad publicity.
While sportsbook-style, outcome-based wagering with market odds is the most dominant form of skins wagering, roulette, jackpot, coin-flip and other types of wagering, such as what’s offered on CSGO Diamonds, compose a multi-billion dollar sub-industry themselves, according to Eilers.
Skins are not directly redeemable for real money on sites like CSGO Diamonds, or with game maker Valve, but can be sold for cash on third-party sites. CS:GO is by far the dominant title in the skins wagering market, and is responsible for roughly 85 percent of all skins gambled, according to Naurs / Eilers. Skins from another Valve game, Dota 2, are also commonly wagered.
Protecting consumers… against companies
The focus of many of the high-level regulatory discussions involving esports has thus far been the consumer side. Common questions include:
- How does one protect players from throwing esports matches that others wager on?
- How does one establish age verification and geolocation for players?
- How does one determine the legality of players wagering skins sportsbook-style under both state and federal law?
- What type of regulatory body could be created and positioned to ensure player safety regulations?
This incident raises larger questions about regulating the operators of skins betting sites themselves, rather than just the activities of the wagerers.
The case of CSGO Diamonds is one where an operator admittedly engaged in deceptive practices. The supplying of roll outcomes to m0E to assure winning outcomes — even if m0E could not withdraw the Diamonds — nonetheless ensured a particular, and not necessarily accurate, portrayal of the game-playing experience in what is effectively online advertising.
Deceptive advertising isn’t uncommon in the gaming industry. In the case of daily fantasy sports, New York Attorney General Eric Schneiderman said he will prosecute DraftKings and FanDuel on false advertising charges despite reaching a settlement that could absolve the two largest DFS operators of other charges.
The operators portrayed their products as contests that anyone had a relatively decent chance at winning. Further research cited by the operators in court cases noted that since the games were highly skill-based, a vast majority of the winnings were concentrated in a small minority of professional users.