Although I missed it the first time I read the letter, the site that I worked for and moderated, CSGOBattle.com, was named. The sites was essentially given ten days to shut down or disassociate itself from Steam’s network.
I jumped on the computer and opened up the site to see the chatroom busier than ever. Everyone had the same question for me: What was going to happen?
The backstory on skin gambling
Let’s wind back a little. CSGOBattle was a newcomer in a growing trend of skin betting. Users traded in their skins for virtual ‘coins’ which could then be gambled on the site and then withdrawn back into CS:GO skins.
It had been operating for a few months, but had only left its beta stage a few weeks prior and the site was plagued with bugs that were slowly being addressed. Additionally, players who held a balance in the beta were sitting on a waiting list to be refunded on the new site.
The site had just picked up a deal with a popular streamer and CS:GO merchandise company for the launch, so the management seemed much more interested in the endless waves of bets flowing in rather than addressing the issues. The attention was warranted; the site had been nearly completely reworked and it finally seemed as though the site was ready to compete with the biggest sites.
Despite knowing this, I never would have thought that the site, and for the most part the entire skin gambling scene, would be left in such a position of confusion and uncertainty.
The chain reaction for skin betting operators
The day after Valve verified it sent the letter, both the sites and their users began to consider what it could mean for everyone. The first word form CSGOBattle was that we’d “work something out.” Many of the other sites did the same and avoided making any kind of proper statement in the first few days.
But the lack of responses in the early stages didn’t stop users from taking the opportunity to withdraw everything they could from the sites. The stock of skins available for withdrawal began to run dry everywhere, and as the days progressed some of the sites began to officially begin encouraging user withdrawals.
What happened at CSGOBattle
At CSGOBattle, for better or worse, this wasn’t the case.
As luck would have it, the majority of the items in the withdrawal system had already been stuck for days because of a glitch in connecting to the trading bots. This left the account balances of everyone on the site currently worthless and in limbo. The users were understandably unhappy. However, this at least gave the owners some time to make a decision about what to do next.
The slight sense of optimism was continued roughly 48 hours after the letter. Then management finally made an informal announcement to the staff that they had been talking with CSGOWild and were working towards a way to continue the site. The moderators passed this down to the users and there seemed to be some calm.
But as the days progressed and the ten-day deadline loomed, some of the other sites began to indicate their closure and management fell completely silent.
In the final few days, the moderators began to independently accept that there wasn’t going to be a future for the site. Unlike some of the others, CSGOBattle had just used up all of its resources for its official release.
It became apparent, with some thought and discussion between us, that there was no way of continuing without yet another costly major rework. Furthermore, it didn’t seem as though we would have enough to mount any kind of legal defense if it came to it.
Given our size, it was likely not an option for the owners to ignore the US market entirely. I believe that it contributed for at least half of our bets, as we only had an English version of the site.
The end of skin betting as we knew it
This ultimately led to a dramatic shift in power towards the big players in the gambling scene. Larger sites were able to change their system, whilst forcing smaller ones out of the market completely because of their inability to pivot.
We began to tell users, against the request of the owners, that it was probably the end. The moderators each wrote a short explanation of the situation that asked the users to withdraw whatever they could, as some of the cheaper items in the market seemed to have become available again. We then repeated that message as much as we could to spread the word, but that came with the cost of dealing with the fury of the members as they heard the news.
As this was unofficial, we couldn’t do anything for the hundreds of people who couldn’t withdraw because of the errors. Nor could we help those still owed from the beta, which in one case was up to a thousand dollars. Some accepted the fact and moved on, but there was a sadness in seeing some of the users log on every hour and ask us if there was any news or anything we could do.
There never was.[show-table name=betway]
The doors close
It neared the end of the week and I awoke one morning to see CSGOBattle with our maintenance error message:
“Something broke, so we’re fixing it… we’ll be right back.”
But below it the owner had left a farewell and it was clear that we would be one of the first to close its doors.
The Skype group we used for communication ended with a string of goodbyes from each moderator to the friends we’d made and then the notification that they had left the chat. I stayed until the end of the ten-day period but the owners never said a word to us after the closure, so I eventually left the group in good faith.
In retrospect, and in talking to some of the moderators, all seemed to be disappointed in how it ended. Even if the owners had wanted to let users withdraw, the nature of the letter presumably meant there was no flexibility in fixing the withdrawal issue so we could attempt a proper closure.
In the end it was seven days of confusion and frustration from members before we shut down, a trend that was reflected in many of the other sites as they followed suit.
The picture for The International 2017 is rapidly coming into focus.
In late March, Valve confirmed that the world’s largest annual Dota 2 tournament would be taking place August 7-12 at KeyArena in Seattle. That’s where it has resided for the past four years. Tickets went on sale via Ticketmaster on April 4.
With the stage set, all eyes now turn to the prize fund. Traditionally, Valve seeds $1.6 million toward the prize pool, and then raises the rest via digital compendium or Battle Pass purchases, with a portion of the proceeds added to the prize pool.
Last year, the campaign generated a record-breaking $19.17 million, vaulting the total prize pool to over $20.7 million.
Can lightning strike twice, or was The International 2016 as good as it gets?
Growth of The International slowing
From the looks of it, the prize fund potential of the The International is nearing its apex.
The International began growing in 2013, which was the first year that Valve allocated 25 percent of compendium purchases toward the prize pool. But it wasn’t until 2014 that the mechanic really caught on, with the prize pool climbing a staggering 280 percent to $10.9 million.
2015 saw another large jump, up 69 percent to $18.4 million.
Last year, Valve adjusted its campaign model, replacing the Compendium, which had been a staple of the campaign from 2013 to 2015, with the Battle Pass. However, the differences between the two were somewhat nominal.
Popular features, like the Immortal Treasures and the Collector’s Cache, were carried over.
In 2016, the prize fund for The International grew by a scant 12.7 percent, representing the smallest margin of growth since Valve began adding player contributions to the prize pool.
Many variables at play
Based on historical trends, it looks as though the prize fund for The International 2017 will remain relatively flat year-on-year. If the stars fail to align, it could even be headed for a slight decline.
Still, there are a number of variables that lead us to believe The International could see modest-to-moderate growth:
- In the lead-up to Valve’s campaign, Dota 2 will have momentum on its side, thanks to the currently running $3 million Kiev Major. The event will rank in the top 10 esports prize pools of all time.
- The International 2016 set new benchmarks for viewership. According to TrackDota, over 5.7 million spectators watched the event across DotaTV and various streams.
- The International is still the biggest event on the esports calendar, and not by a small margin. It’s responsible for the three biggest prize pools in esports history. The fourth biggest? The LoL 2016 World Championship, which clocked in at $5.1 million — or just over a quarter of the prize fund for last year’s International.
That being said, Dota 2 is a somewhat antiquated game, having been officially released on Steam nearly four years ago, and in the public eye for six. The product is clearly showing its age. The number of average concurrent players is significantly down over the past 12 months.
According to Steam Charts, Dota 2 averaged 548,413 players for March 2017, representing a year-on-year decline of 20 percent. The peak number of players was down nearly 300,000, from 1.248 million to 956k.
The last time Dota 2 peaked at less than one million players during a calendar month was in December 2015.
These statistics bore poorly for The International 2017’s prize pool. Campaign purchases are designed exclusively for players of the game. Put simply, there is likely a strong correlation between the number of players and the amount of Battle Pass purchases.
All this said, Dota 2 is hardly a “dead” game, with 12.7 million unique actives in the past month alone.
It may all come down to Valve
With variables working for and against The International 2017 campaign, the fate of The International 2017’s prize fund may boil down to how Valve runs its fundraising campaign.
The Valve braintrust will probably need to keep its foot on the accelerator just to keep pace with the 2016 campaign. Should it scale back on its giveaways and special events, then a year-on-year decline becomes a much stronger possibility.
Reason being, this year’s campaign doesn’t look like it’ll be a particularly long one. In 2015, the campaign stretched nearly 100 days, compared to just 87 days in 2016 — which may explain away a portion of the less impressive growth.
At the time of this writing, there is only 108 days before The International 2017 concludes. Given that there has yet to be an announcement on when the campaign will begin, the assumption is we’re looking at a mid-May start — similar to last year.
With a tight campaign schedule, Valve better get its creative juices flowing, and fast.
In a short statement Valve said:
“In July of last year we outlined our position on gambling web sites, specifically noting that Valve has no business relationship with these sites. At that time we also began blocking many CSGO gambling accounts. You can view the original post here.
More recently, some gambling web sites started leveraging TF2 items. Today we began the process of blocking TF2 gambling accounts as well. We recommend you don’t trade with these sites.”
Valve is under legal and political pressure to shut down skin gambling
The Washington State Gambling Commission (WSGC) rapidly followed up with its own version of a cease and desist letter:
“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.”
Valve’s legal counsel Liam Lavery wrote a detailed three-page rebuttal to the WSGC letter. In it, he legally distanced Valve from any possible legal action:
“Valve is not engaged in gambling or the promotion of gambling, and we do not “facilitate” gambling. The operation of Steam and CS:GO is lawful under Washington law. We were surprised and disappointed that the Commission chose to publicly accuse Valve of illegal activity and threaten our employees with criminal charges. There Is no factual or legal support for these accusations. Notwithstanding, as you know Valve has taken its own steps to discourage skins gambling on third party websites. We are open to further cooperation with the Commission.”
The steps that Valve has taken so far should be enough to mollify the WSGC. It shows Valve is continuing to take the issue seriously with its current action against TF2 gambling.
Skin gambling suffers from a lack of legal framework
The rise of the popularity of esports has been accompanied by a concomitant increase in skin gambling. In-game virtual items (skins) are used to make wagers on third-party websites.
The nature of the wagers varies enormously. Bottors can wager on major tournaments or use skins to play online roulette or enter raffles.
The size of the potential market can be judged from research conducted by ESBR and Narus Advisors. That research found that the largest CS:GO skin betting site, CSGOLounge, had taken in “103 million skins, or the USD equivalent of $1 billion in handle, in the first seven months of 2016.”
As an esports allied industry, skin gambling looked set for a bright future. But the Valve shutdown last July sharply reduced forecasts of its potential revenues.
Narus and Eilers and Krejcik Gaming have reduced their most bullish forecasts of the industry’s 2020 revenues from $22.6 billion to less than $1 billion.
The demand for skin gambling is there. What is missing is a legal and regulatory framework. Such a regime will enable the large game developers to permit skin gambling to exist.
A legal framework already exists in the UK
One of the most advanced regulatory jurisdictions in the world is that in the UK, where the UK Gambling Commission (UKGC) has already given deep consideration to skin gambling.
At the end of last July, the UKGC updated its regulations to cover the use of virtual currencies:
“Licensees, as part of their internal controls and financial accounting systems, must implement appropriate policies and procedures concerning the usage of cash and cash equivalents….”
The Commission was fully aware of the use of esports skins as cash equivalents, and within a month had released a discussion paper “Virtual currencies, eSports and social gaming,” to raise the issues involved.
They made it clear that:
“Where ‘skins’ are traded or are tradeable and can therefore act as a de facto virtual currency and facilities for gambling with those items are being offered, we consider that a licence is required.”
This was positive news for the skin gambling industry. A regulator in one of the world’s largest gambling markets is content to offer licenses for skin betting operators.
A major operator, a UK license and Valve could revive the industry
The skin betting industry has a chance to regain some of the ground it has lost. That opportunity: If a major operator, licensed in the UK, were to start discussions with Valve about putting a properly regulated CS:GO skin betting site into the market.
The possibility doesn’t look if it’s on the immediate horizon, but the top esports betting operators do like to surprise.
If Valve believes that the legal risks were covered, the more bullish forecasts of industry growth could still come to fruition.
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.
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.
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.
The Overwatch League is being structured for the long term, Blizzard describes it as “a world-class sports ecosystem for professional Overwatch competition.”
Mike Morhaime, CEO and co-founder of Blizzard Entertainment said:
“The Overwatch League represents not only the pinnacle of Overwatch competition, but also a genuine career opportunity for the most skilled Overwatch players.
We’re building a league that’s accessible to players and fans, sustainable, and exciting for everyone involved.”
Overwatch League includes infrastructure features for sustainability
The key features represented in the Overwatch League show that Blizzard is creating more than an additional esports league, it is building a template for the future development of the esports industry.
Making global gaming a local event
The internet’s most important characteristic is that it is a truly global system. At the moment, esports teams compete both on the internet and in tournaments held around the world—they are not geographically tied to a specific location.
Blizzard’s plan for the Overwatch League will see investors bid to own teams which will represent individual cities throughout the world.
In this they are replicating the traditional sports model where local sports teams such as the Chicago Bulls, Manchester United or the Washington Redskins take their identity from their home town.
In effect, Blizzard will be in control of granting a team franchise for each city:
“Once these city-based teams have been admitted to the league, their spots will be secured, giving them the best opportunity to grow and thrive for years to come.”
Players get minimum salaries and a career path
At the beginning of each season, Blizzard will host a draft called a combine where players will be invited to try out for teams. A series of standardized evaluations will rank players allowing teams to choose the best to fill their rosters.
Blizzard says that:
“Anyone picked up by a team during the signing period will be guaranteed a contract that includes a baseline minimum salary and benefits package.”
While there is nothing specific in the Blizzard press release, it looks like Blizzard will be managing issues such as game fairness, discipline and pretty much all other supporting areas itself.
What Blizzard is creating is an esports ecosystem that can be just as readily used for other games. It is an ecosystem outside the authority of any governing body other than Blizzard itself.
In-sourcing or outsourcing esports leagues
Getting above the excitement of a new esports league, the template that Blizzard has outlined allows industry analysts to see two possible models for the future of esports.
In one, the game developer owns and manages the league. In the second, exemplified by companies such as ESL, a third party runs the league in cooperation with the game developers.
The big question investors will want to answer is will one model win out, or can both models co-exist?
The developer has intellectual property rights and the power to control who, what, where, when, and how any esports adaptation of its game is implemented.
The Overwatch League is a model controlled and executed by the game developer. In establishing its own league for its own game, Blizzard is retaining complete control.
The most successful esports tournaments are currently run by ESL, a subsidiary of Turtle Entertainment, itself a subsidiary of the Modern Times Group (MTG).
MTG is a broadcaster in the entertainment business, not a game developer per se. In putting on the wide range of tournament festivals in which ESL has become an expert, the company works with game developers, but has no ultimate control over its business.
ESL’s success depends on renewing contracts as the result of providing a service better than the companies can themselves. In effect, the game developers are outsourcing to ESL because it has developed the competence to run successful tournaments and leagues.
Are both models sustainable or will one be left behind?
If all game developers followed Blizzard’s lead, ESL and other league organizers would face an existential threat to their businesses.
In practice, the two business models are more likely to co-exist satisfying different areas of the market.
The corporate competence is not easy for game producers to develop or to match. Blizzard may be big enough to run an Overwatch league as a business vertical in-house, but many other game developers will be happy to outsource this expertise to third parties.
The bigger companies such as Blizzard will continually face such competition while they try to maintain the popularity of their own offerings.
Zynga was once dominant, but over the last few years its business has had to face massive competition, the effect exacerbated by the company’s slow adoption of mobile gaming technology.
The gaming industry may consolidate further over time, but technological innovation will always leave space for entrepreneurial challengers. They will value the services that companies like ESL can provide in helping to bring their games to a wider audience.
Even the big gaming companies may decide not to follow Blizzard, preferring to keep their business focused where they have the expertise to protect their competitive advantage.
The second season of Turner / WME | IMG’s ELEAGUE kicks off Friday and could underscore different forms and volumes of esports betting than this summer’s Season 1, which coincided with several skin wagering scandals.
Season 1 champion Virtus.Pro will look to defend its title and capture the $400,000 first-place prize.
The Counter-Strike: Global Offensive tournament’s prize pool will expand to $1,100,000 in Season 2.
TBS will continue to nationally broadcast the action on Friday nights at 10 p.m. ET, but will air a portion of each group’s play, as opposed to each group’s final match. Twitch will stream all group play action live online.
Season 1 betting handle dominated by skins betting
While exact cash betting figures from licensed casinos aren’t available for ELEAGUE’s first season, the majority of betting traffic on the matches this past May, June and July was believed to have come from the skin betting sector.
Skin betting involves the wagering of virtual items, most often from CS:GO itself, as currency on the outcome professional esports matches. Skins were introduced by Valve Corp. in 2013 as an element of the in-play, CS:GO experience, and have since morphed into a form of virtual currency.
Skins have a real-world value to due to their ability to be bought and sold on third-party sites for $USD.
Season 1’s 103 matches took in the equivalent of $63 million in betting handle from the wagering of approximately 6.5 million skins on one website alone, according to research from EsportsBettingReport and Narus Advisors.
Several matches boasted individual handles of over 100,000 skins/match on CSGOLounge, which was the world’s largest skin betting sports book before it shut down skin betting earlier this year in the wake of a cease and desist letter from Valve.
Organizations such as Virtus, as well as FaZe Clan, Fnatic, SK Gaming and mousesports drew in some of the largest handles last season, and could do so again.
Smaller total action expected due to skin betting crackdown
Lower levels of skin betting are expected during season 2.
The industry ground to a sort of stasis earlier this year in the wake of four separate skin gambling scandals that eroded consumer trust and raised concerns of skin wagering’s legality.
Owners of several gambling sites, including CSGOLotto and CSGOShuffle, were found to have bet on their site and won with the likely advantage of inside information. m0E, a sponsored gambler on another site, also used to do color commentary for TBS during Season 1’s national Friday night broadcast (he was not asked back this season).
CSGOLounge no longer offers skin betting as a product. That site now operates a popular coin betting function, as well as a skin trading platform. Another popular skin betting site, Fanobet, converted to a Bitcoin and real-money esportsbook after it claimed Valve disrupted its ability to transfer skins via the game maker’s API.
Furthermore, regulators are attempting to eradicate the unregulated, unlicensed form of betting altogether. The Washington State Gambling Commission became the first US regulatory agency to investigate the legality of skin gambling, which includes not only sportsbook-style betting but also the betting of skins on casino-style games of pure chance, like roulette.
It told Valve earlier this month to stop facilitating skin wagering on third-party websites in all forms by policing such sites, which leverage its API in illicit and violative ways. Valve responded to the commission by expressing confusion over the allegations and by saying that it does not facilitate skin gambling.
Interestingly, despite several forces pushing sites to stop offering skins betting, some sites have recently pivoted to skin betting as a product.
CSGOFast, CSGOPolygon, CSGOSpeed, Bets.gg and Eazy.gg are among several sites now offering sportsbook-style skin betting in addition to their casino-style games. With the exception of Fast, these sites aren’t believed to attract large skin betting volumes yet.
New format provides fewer matches to bet on
Season 1 featured 24 teams across six groups.
Each group featured 15 matches each Tuesday through Friday. The top team from each group qualified for the single-elimination stage, while second place teams competed amongst themselves for a few final wild card spots.
Season 2 will work a little differently. Sixteen teams will compete across four groups.
Each group this season will only feature five matches, which will run Friday and Saturday. The top two teams from each group will advance to the eight-team, single-elimination playoff stage.
The eight-team final bracket will be single elimination, and conclude in a Dec. 4 “Grand Final” which of course airs on TBS.
Fewer groups means a more compact timeline of group play (from Oct. 21-Nov. 19, as opposed to last season’s May 24-Jul. 1), and could increase engagement.
Between fewer matches, increased regulatory scrutiny over skins, and fewer skin options for bettors, we should see much lower total skin handles for Season 2.
New esports could fuel new kinds of esports betting
The potential betting volume shift from skins to cash also comes at an interesting time in the US regulatory calendar. The Nevada Gaming Policy Committee is in the process of promulgating regulations affirmatively governing esports betting.
Those regulations could very well include sportsbook-style betting on esports, and could force the committee to treat the matches as either a sport or as an “event.”
Another factor potentially fueling the shift from skins to cash betting on esports matches is ELEAGUE’s shift to other events, and potentially other esports.
Sportsbook-style betting with CS:GO skins was boosted by the growing prevalence of CS:GO matches through ventures like ELEAGUE, as well other massive tournaments like MLG Columbus and ESL One Cologne.
Similarly, ELEAGUE’s experimentation not only with different formats and tournament types, but different esports, could help popularize other, non-skins forms of esports betting.
ELEAGUE will host the next CS:GO major tournament in 2017, meaning it’s officially recognized by Valve and is one of the top two or three tournaments of the calendar year in the world.
But it also hosted an Overwatch tournament between its CS:GO seasons one and two earlier this year.
Turner, WME | IMG and other stakeholders have vowed to bring the best in-class esports experience for teams, players and fans. It just happened to pick CS:GO as the title it chose to launch with last May.
As the venture grows (in both revenue and popularity) it very likely could shift to embrace new seasons with new titles, which in turn could popularize new forms of betting—skins, cash or otherwise.
Valve Corporation has formally responded to the regulatory agency investigating its proximity to and alleged enabling of skin betting, and has insisted it does not facilitate gambling—legal or illegal.
Valve counsel Liam Lavery wrote in a three-page letter to the Washington State Gambling Commission that the operation of its Steam API, which unlicensed third-party gambling sites use to facilitate casino and sportsbook-style betting, is lawful under Washington state law.
Techraptor posted the letter Monday night. It is available here.
The WSGC had originally ordered Valve to respond by Oct. 14, and told the company to stop allowing the transfer of skins, which are virtual in-game items, via Steam.
Valve questions legal basis for WSGC’s demand
Lavery asked the commission to provide it with a specific law that it was violating, and said Valve did not understand the “legal and factual reasoning” supporting the commission’s position.
He also said he was unsure of how the WSGC expected it to shutter illegal gambling.
In the following sentence, however, the letter alluded to one way of doing this: shutting down Steam entirely.
“The commissions (sic) main argument seemed to be, ‘Valve could stop this, so it should.’ We do not want to turn off the Steam services,” Lavery wrote.
Valve reiterates lack of financial, promotional connection with skin sites
Lavery wrote that Valve is aware that websites offer gambling propositions “outside of Steam and, we believe, outside of the United States,” and that those websites may accept skins “as wagers from other users.”
He told the WSGC that Valve neither receives revenue from these sites nor promotes them.
The comments echoed the only public comment the company has made regarding skin gambling this year, which came in mid-July when it posted a note on Steam itself threatening action against gambling sites that continued to use Steam.
On Tuesday, Lavery wrote that skin gambling sites utilize the API in two ways.
The first is in using it to facilitate the transfer of skins. This can occur between two players trading skins, or it can happen between two players buying or selling skins for Steam Wallet funds, which constitute Steam’s virtual currency to use in its marketplace.
(Another method of transferring skins, between a player and a trade bot, allows an automated bot to trade skins to a player as payout for winning a gambling bet. Steam’s API prohibits this.)
The second way, Lavery said, is by facilitating Steam authentication. This allows users to identify themselves by their Steam credentials without having to give that website their personal information. Many other tech companies also employ this “OpenID” system.
“None of these activities are illegal in Washington or any other jurisdiction, and we do not believe the commission contends to the contrary” Lavery wrote.
But the WSGC did not ask if Valve made money off of, or partnered with, these sites. Nor did it ask if third-party sites’ use of Steam was legal. It asked that Valve stop facilitating the use of skins for gambling through Steam.
Valve says it’s not necessarily able to identify all bot accounts
Lavery noted that Valve has taken several steps to address the use of skins. He cited a July note that threatened action against Steam accounts that violated its user agreement, and the two cease and desist letters it sent later that month to 42 skin gambling sites.
But Lavery characterized the extent and scope of the problem as too vast for Valve to control.
“We do not know all the skins gambling sites that may exist or may be newly created, and we are not always able to identify the ‘bot’ accounts that particular skins gambling sites may use to effectuate trades,” his letter read.
“Cleverly designed bots can be indistinguishable from real users performing legitimate trades.”
Despite Lavery and Valve’s confusion over how to comply with the WSGC, the letter concludes by describing yet another way the game maker can do just that.
Lavery appeared to address the potential identification of bots based on the gambling site in connection with which they were used to facilitate trades.
“Valve can enforce its user agreement against the Steam accounts of skins gambling sites, where we can identify the site and identify the corresponding account. In fact, we would be happy to cooperate with the commission, if it is able to identify more skins gambling sites that are illegal in Washington,” Lavery said.
This policing of skin gambling sites could require significant time and legwork, and it’s unclear if the WSGC would identify the sites for Valve as the game maker appeared to ask.
Either way, it could foreshadow a potential way forward in combatting skin gambling not just in Washington, but all over the US.
Effect of the C&D letters was muted at best
A few of the sites in Valve’s July cease and desist letters reported trade bots being banned, but the majority either voluntarily shut down or brazenly kept running.
Those letters noted that the sites in receipt were gambling sites, and told the sites to stop utilizing its API for any commercial purposes. The C&Ds did not specify gambling (legal or illegal) as the specific use it was referring to.
After the letters were sent, Valve’s apparent enforcement of its own user agreement came to a halt. Now, the problem of skin gambling is growing for Valve, regulators, and others, not shrinking.
Three months after Valve sent its C&Ds, roughly half of the sites it ordered to shut down were still operating commercial gaming or gambling products using Steam and CS:GO skins.
Just in the time since the WSGC sent its Oct. 5 C&D letter, at least four new skin gambling websites have launched:
As many as 100 skin gambling sites are believed to be in existence.
Do not expect swift action to Valve’s response
Sources close to the investigation have indicated that regardless of the content of Valve’s response or non-response, it will likely proceed with especial caution. The timetable could be reflective of a slower, step-by-step approach that’s already underscored the WSGC’s investigation so far.
Despite the WSGC saying that Valve’s communication and cooperation broke down soon after the February meetings with Lavery, and despite the skin gambling industry growing over the first half of 2016, it wasn’t until Sept. 27 that the WSGC sent a blunt letter to Valve CEO Gabe Newell.
That letter threatened search and seizure of gambling-related property. While that specific action still appears unlikely, it would require time-consuming preparation, the cooperation of other law enforcement agencies, and possibly the securing of a warrant.
Following the February meetings, further attempts to contact Lavery and the corporation were not successful, according to the commission.
That account contrasts with Lavery’s letter, which alludes to conversations ongoing between both parties for 18 months, since April 2015. Lavery wrote that Valve and the WSGC last spoke on Oct. 3, two days before the WSGC send its cease and desist notice.
The WSGC could also be looking to other game developers’ reaction to the third-party use of in-game items as guidance.
Last week, game maker CCP changed the in-game license agreement for its game Eve to prevent items from being bought and sold, with the aim of discouraging skin gambling.
Another reason the process could take inordinate time is the makeup of Washington state’s gambling laws, which are among the most expansive and rigorous in the nation.
A two-part response
WSGC Executive Director David Trujillo expressed disappointment at the company missing the initial deadline. The game maker first responded to the WSGC on Friday in a brief email, in which it said it needed until Monday, Oct. 17, to prepare everything it needed for its full response.
“I am disappointed that Valve Corporation missed Friday’s deadline, but encouraged that they have committed to responding today. I look forward to reviewing their response in detail,” Trujillo said Monday, before Valve’s full response came through.
“The type of approach Valve decides to take will be very important,” said WSGC Commissioner Chris Stearns on Monday in regards to the investigation.
Stearns’ remark could foreshadow the wide-open nature of the investigation, and the special and detailed scrutiny the commission is giving to Valve’s response.
The same sources that spoke to the potential timetable of the investigation characterized Valve’s response prior to Monday’s letter as “extremely cavalier.”
The WSGC did not respond to comment Tuesday morning following Valve’s full letter, but said in a statement it was considering Valve’s response to see if it satisfactorily addressed its concerns.
The commission said it will “continue to evaluate its options” regarding the violation of Washington’s gambling laws.
On Oct. 12, CCP announced that it was making changes to its End User License Agreement (EULA) to prevent its in-game assets from being bought and sold.
CCP owns the Eve series of games which offer play in a science fiction universe.
According to the EULA:
“You may not transfer, sell or auction, or buy or accept any offer to transfer, sell or auction (or offer to do any of the foregoing), any content appearing within the Game environment, including without limitation characters, character attributes, items, currency, and objects, other than via a permitted Character Transfer as described in section 3 above.
You may not encourage or induce any other person to participate in such a prohibited transaction. You may not use, transfer or assign any game assets for games of chance operated by third parties.”
The aim of the new rules is to prevent Eve users from engaging in any form of gambling – skin betting – via third party websites.
The blog post from CCP explains:
“In short, this addition to the EVE Online EULA means that as of the launch of EVE Online: Ascension, players will be prohibited from using in game assets and currency, as well as the EVE IP, to take part in or promote gambling services or other games of chance that are operated by third parties.”
The new EULA will come into force on Nov. 8, coinciding with the launch of new game EVE Online: Ascension.
CCP has already taken action against IWANTISK and EVE Casino
In a demonstration of the will to enforce its opposition to skin gambling using its game assets, CCP said that it had already shut down third party site IWANTISK’s in-game access.
It has also confiscated all ISK and assets “after extensive and exhaustive investigation has brought forward compelling evidence of large-scale Real Money Trading.”
CCP said that “those involved” had had their accounts permanently suspended.
IWANTISK has made an angry reply threatening legal action.
CCP has also shut down Eve Casino “in game” and implemented the same confiscation “after multiple and sustained breaches of our Developer License Agreement.”
Eve players who have used the two third party services will not be reimbursed their “outstanding ISK or asset balances.”
Other operators have been given a warning
There is a stark warning for any other third parties:
“In the run-up to November 8th, all services that offer any form of third party gambling of this nature are required to wind down their operations.
During the time from this announcement until the release of EVE Online: Ascension, our security team will be closely monitoring all these in game entities to ensure that no illicit behavior occurs, and that any movement of in game assets and currency remains in line with our current EULA and Terms of Service.”
CCP allowed an exemption for the Alliance Tournament
The Eve Alliance Tournament XIV, which began on Oct. 1 and finished on Oc. 16, was granted a small exemption to the new policy.
“Given that the Alliance Tournament is currently ongoing, we are aware that some players may have outstanding wagers on alliances who are competing with other third party services who have not been subject to account action and/or ISK and asset confiscation.
These third party services are free to finalize these wagers over the course of the weekend given that they have not broken our rules, but must wind down operations in an orderly fashion before 11:00 UTC on Tuesday November 8th, 2016.”
The wider threat to skin gambling
ESBR’s Will Green has written an exhaustive analysis listing the gambling sites which have closed, varied their business model, or ignored the directive from Valve. He has also produced what is currently the definitive short guide to skin gambling for Narus Advisors.
The report, “Skins In The Game: The size of esports skin betting in 2016, its convoluted closure, and how it could shape the future of esports wagering,” is available to download for free here.
Following the Valve shutdown, Narus Advisors and Eilers & Krejcik Gaming reduced their projections of skin gambling’s global handle in 2020 from almost $20 billion to less than $1 billion.
CCP is following Valve’s example, in what looks like the beginning of a trend which may spread to all major game makers. If so, we could be seeing the start of the end of the skin gambling industry.
Regulatory risk sharply reduces skin gambling upside for game makers
Skin gambling can only happen if game makers enable skins, whether in-game artifacts or frequent player “coins,” to be traded outside of their game.
As the UK Gambling Commission (UKGC) has pointed out, should such transactions have a financial value where the stakes and winnings from skin gambling can be monetized, then as far as they are concerned the activity becomes classified as gambling.
The UKGC makes the clear distinction that in-game currencies and artifacts that can be monetized change the essentials of the activity from social gaming to real money gambling and therefore necessitate a license and all that that entails.
The Dutch regulator, Kansspelautoriteit has issued a similar warning, and US legislators are becoming involved now. The Washington State Gambling Commission has directed Valve to stop the transfer of skins via its Steam API, or face possible criminal charges.
Game makers have no desire to clash with regulators over an activity which has only a limited upside potential for them, so the easy option is to ban third party gambling and make whatever technical changes are needed to keep any gambling on a social basis.
The new game from Amazon which allows in-game betting, Breakaway, uses Twitch’s new virtual currency Stream+.
Although details have not yet been promulgated, it is now inevitable that Twitch will make sure that the use of its currency does not bring it into the realms of real money gambling regulation.
Reputation risk may be even more important
One of the bigger issues faced by game makers is that the use of their skins for gambling brings with it a serious reputation risk.
The whole Valve/skin gambling furor appeared to begin with a series of skin betting scandals. In a market without any oversight or regulation, these self-inflicted wounds were foreseeable.
In addition, third party sites have been accused of inducing underage gambling. Such accusations produce an unacceptable reputation risk for game developers.
Gaming executives have no need to take such risks and unless they can see a real financial upside in real money gambling, are going to steer well clear of any imputations that they are encouraging gambling, especially in children.
It is difficult to see how skin gambling can survive in this environment, other than as a social activity practiced within a single game or platform.
As game maker Valve has come under fire in recent weeks for facilitating unlicensed gambling via its Steam API, the skin wagering landscape has shifted dramatically, with commercial gambling operators filtering into separate camps of compliance and contravention.
ESBR’s October Skin Wagering Scorecard catalogues reactions by websites instructed by Valve in July to cease-and-desist using Steam.
It also embellishes how the skins market could react as regulators begin to take notice, and as courts begin to address skins as a virtual currency.
More, not fewer, sites appear to be violating Valve’s C&D orders
As of mid-August, roughly half of the named sites the game maker told to stop using its API had shut down. Eight were still operating in apparent violation of Steam’s terms of service by virtue of using Steam to conduct commercial activity.
Several more were either in the process of pivoting to a new business model, or had future plans that were unclear.
- At least 19 sites are utilizing Steam in connection with commercial gaming or gambling.
- Five of those sites appear to US users as if they’re shut down, but are offered to users in other countries around the world.
- Five of those sites initially shut down and appeared to obey Valve’s C&D demand, but have since relaunched with equally violative products.
- Three of those sites not only failed to shut down, but have expanded their Steam-related gambling offerings to include sportsbook-style betting on matches.
- Three of those sites do not accept skin deposits themselves, but only accept as gambling currency coins from third-party, skin-to-coin deposit sites, which still involve Steam.
This illustrates not only the selective policing by Valve of the skin gambling ecosystem, but also the recurring, potentially unenforceable problem of operators popping up faster than Valve, or even regulators, can shut them down.
In fact, dozens of skin wagering sites not named in July’s two C&D letters are also operating, largely unfettered.
Some sites continue to comply, or have since complied, with Valve’s C&D
An additional 19 sites that formerly utilized Steam in connection with commercial gaming or gambling are now shut down.
Two other sites, CSGOLounge and Fanobet, are still operating the type of sportsbook-style match betting that made them popular, but are no longer using Steam or skins to do so.
Two other sites appear to have been targeted incorrectly, and never used Steam or facilitated gambling in the first place. Therefore, those sites have not altered their operational model.
19 sites still utilizing Steam in connection with commercial gambling
The Washington State Gambling Commission last week instructed Valve to explain how it has not violated Washington State gambling laws by virtue of owning and operating Steam (the company is based in Bellevue, Wash.).
If Valve cannot give the WSGC a satisfactory answer, it risks criminal charges and seizure of property, among other inconveniences.
One of the ways in which Valve might try to make its case is by arguing the C&Ds it sent to 42 skin wagering websites constituted an act in good faith to prohibit those websites from operating.
But it could prove challenging for Valve to argue even this point when regulators consider that nearly half of the sites named in the C&Ds are now using Steam in connection with commercial gaming or gambling transactions.
In fact, more of the named sites are using the Steam platform in connection with skin gambling now than were using it in the direct aftermath of the C&Ds.
Even though some sites don’t directly accept skin deposits via Steam, they nonetheless rely on users’ Steam accounts in various forms to transfer some form of virtual currency, or turn skins into some form of virtual currency.
CSGOFast appears to American users to be offline. A message on its website reads:
“In light of the recent announcement from Valve CSGOFAST has decided to close operations. All bots are stopped now, games are not functioning.”
But to users elsewhere in the world this message not only doesn’t appear—it’s flat out wrong. Instead, the site is not only functioning, but is bigger than it was before.
Fast runs both real-money and skin gambling operations using the G2A Pay suite of payment options, which include real-money processors like MasterCard and Discover.
Users can also deposit skins on the site via Steam.
Users convert either real money or skins to Fast Coins, which are then used to bet on the site. The site uses Steam, in part, to facilitate not only the conversion of skins to coins, but of coins back to skins.
Because coins hold no real-world value outside of the Fast ecosystem, users cashing out must purchase skins with coins in the Fast marketplace in order to derive anything of real-world value from their winnings.
Once a skin is purchased, it’s transferred to one’s Steam wallet, which again establishes the API as a tool by which to transfer items won in connection with commercial gambling.
Separately, in conjunction with HLTV.org, Fast also facilitates sportsbook-style skin betting on the outcomes of professional esports matches, against leveraging the Steam marketplace in a violative manner to transfer skins for the direct purpose of betting.
After disabling its casino-style skin gambling games just days after the first Valve C&D, CSGOBig relaunched on Aug. 31 and is once again using Steam to offer unregulated skin gambling across jackpot, raffle, coinflip, roulette and other games.
Users on the site appear to only be able to deposit skins, and not other forms of virtual currency. Those in need of skins to deposit are encouraged to visit Bitskins, where they can purchase skins with real money and then deposit those skins into their Big account, which in turn turn to virtual coins players use to wager on the games.
Similar to Fast, users from the US are met with a site that appears dead. But gamblers from other countries can access Big in its fully-functioning entirety.
This could be problematic for Big, Fast, and other such sites because Valve mandated in July that they stop using Steam to facilitate commercial gambling the world over, not in the US only.
Big’s terms of service, which visitors are prompted to agree to after signing in through their Steam account, mandate users be over 18 and not a resident of the US, but the site employs no verification process to ensure this.
The ToS say that users are also “responsible for compliance with any applicable local laws,” and that the terms themselves are construed in accordance with the laws of the European Union.
“Any disputes relating to these terms and conditions will be subject to the exclusive jurisdiction of the courts of European Union,” the terms read.
Big is one of many sites that offer cash back promotions to users who include the phrase “csgobig.com” in their Steam profile name, which effectively advertises for the site directly on the API whose terms it’s in violation of in the first place.
CSGOStrong, a skin gambling roulette site, continues to block US users but operates elsewhere using a workaround it first employed in early August. Users may only deposit and gamble with coins from skins-to-coins site Skntrades, also known as SKN points, and not skins themselves.
Users receive SKN points by depositing their skins on Skntrades and receiving SKN points in return. They then transfer those coins to their Strong account. Cashout functions in the reverse form.
Despite this workaround, gamblers must still log in with their Steam account in order to use the site and receive or transfer their SKN points. In other words, Strong is still using Steam to facilitate commercial gambling even if Steam is not directly facilitating the transfer of skins to Strong itself.
Strong maintains its game is legal because SKN points have no monetary value. However, SKN points are earned in exchange for skins.
Skins, in turn, do have a real-world value thanks to third-party marketplaces like OPSkins, Bitskins and others that facilitate the purchase of skins for $USD.
Strong’s terms of service say the site is “governed by and construed in accordance with the laws of Costa Rica, and any disputes relating to the Terms and Conditions will be subject to the exclusive jurisdiction of the courts of Costa Rica.”
The ToS also forces users to agree that:
- They are 18 years old or of different legal age as might be required at the jurisdiction from which they access Strong in order to engage in its activities.
- They are not accessing the website from jurisdiction from which it is illegal to do so (the website is freely accessible from the US).
- The owner of the website is not a financial institution and that, “no legal requirement to obtain any type of licence in order to provide services offered at the Website are in force at the jurisdiction from which the Website is being accessed.”
According to this site, Valve personally targeted the site in mid-August after it failed to comply with the company’s first C&D.
CSGOCrash said someone, likely the game maker, was blocking its trade bots—the automated mechanisms websites create to facilitate gambling pay-outs and pay-ins over Steam.
This disruption rendered the site effectively unable to conduct skin gambling. It also illustrated a key tool Valve has in its arsenal to end skin gambling, but has not yet chosen to use: The ability to manually block every trade bot associated with every skin wagering website or transaction.
The Crash site appeared to either shut down or to block users in the US in late August. Its accessibility vacillated throughout the month of September.
Now, like Big, Fast and Strong, Crash has blocked itself to US users while those from other countries are allowed on, and prompted to sign in with their Steam account.
Oddly, the site’s FAQ page, which US users are also blocked from viewing, discusses problem gambling and links to the National Council on Problem Gaming, an American organization that advocates for programs and services to assist problem gamblers.
The FAQs also freely admit that coins used to bet on Crash:
- Are “backed” by Steam skins.
- Are acquired by the depositing of skins, via Steam, onto its platform.
- Have a $USD monetary value of 1/10th of one cent.
The site even allows users with large YouTube or Twitch followings (minimum 10,000 subs and 100,000 views) to receive “special perks” if they connect their Crash account with their streaming account.
Popular esports figures streaming their gambling on a site to their following serves as a critical driver of traffic to skin sites. It’s unclear to what extent YouTube or Twitch endorse, or police, casters using their platforms to promote esports wagering.
CSGO500 is one of the few skin gambling websites operating that has blocked itself in more countries than just the US.
Attempts to access the Wheel of Fortune site from the UK and Canada also did not work.
Log-on attempts from Eastern European countries like Poland and Romania, or from Scandinavian countries like Sweden, on the other hand, did work.
Despite not being available in most countries where English is spoken, 500 prompts users to read its terms of service in English before entering.
Similar to CSGOStrong, for example, users cannot log in to the website via Steam. Instead, 500 accepts “Bux,” which are obtainable by users simply by depositing their skins somewhere else (at skin exchange platform SkinX).
SkinX, however, requires users to log in with their Steam accounts.
CSGOBubble also went dark in the wake of Valve’s C&D order, but teased a new product and vowed to return.
The coinflip site did not tweet anything between Aug. 17 and Oct. 1, but an announcement at the bottom of its home page says that its new site is now live. The site prompts users to log into Steam and utilize its trade URLs.
The site’s terms of service make it clear that Bubble does not consider itself a gambling site for real money. It reads in part:
“By using CSGOBubble.com you agree that you will deposit virtual items to play. Understand that this is not a gambling website for real money.”
In the next line, Bubble acknowledges that, based on data collected from Steam, the items players win on its site have values.
“Skins (sic) value are for comparison purposes only. The values of each virtual item are based on analytics collected from steam market transactions.”
But the terms do not acknowledge the real-world value those items have on marketplaces outside of Steam, such as OPSkins.
The site is one of many that lists the G2A marketplace as a partner. The capacity of that partnership, which could range from skins marketplace and pricing provider, to a full payment solutions system, is unclear.
To be clear, CSGO2X is not currently utilizing Steam in connection with any commercial endeavors. Yet.
CSGO2X had shut down following its receipt of the first Valve C&D on Jul. 19, and has not been active since.
But on Monday it announced it would relaunch on Oct. 15 and that it would be giving away a $400 skin.
Its exact product offerings are unclear, but based on the nature of the announcement it appears that skins, in some form, will be a component of the new CSGO2X.
No skin gambling website, either one that accepts skin deposits via Steam or one that does not, has yet proven able to operate without utilizing the API at some point of the wagering ecosystem.
CSGO2X’s website currently prompts users to log in with an email and password, but attempts to sign up for an account now bring visitors to a blank page.
CSGOCasino was among the sites named by Valve that was believed to have quickly complied with the C&D. Attempts to visit the site from an American IP address in August were unsuccessful, and the site was believed to have shut down completely.
On Oct. 2, however, its Twitter account said the website had returned. Users from anywhere can access the site and must log in to their Steam accounts in order to play.
Casino offers both traditional roulette and the popular crash game, in which players attempt multiply an amount of wagered coins. They do this by selecting a multiplier that is less than a randomly generated amount, which grows and grows until it “crashes.”
Society.gg also shut down in the wake of Valve’s C&D, but quietly relaunched in beta on Sept. 30.
The site prompts users to log in to their Steam accounts, and offers the standard skins-for-coins conversion, except here coins are referred to as bananas. Users can use coins to play “bust” (aka crash) “Wheel of Fortune” (aka roulette), as well as coinflip and jackpot games.
Among the more intriguing aspects of Society.gg is its terms of service.
The “most exclusive CS:GO betting platform,” as it touts itself, forces users to agree to terms that state the user of the site is at least 18 years of age, or the legal age in their jurisdiction. Like most skin sites, Society employs no age or geolocation enforcement tools.
Aside from the fact that there is no “legal age” for skin gambling in any jurisdiction, since skin gambling is not legalized or regulated, two sentences later the ToS appear to contradict themselves when they say, “you must be at least 21 years of age to use Society.gg.”
.Gg is the domain for the United Kingdom crown dependency of Guernsey, a tiny island located near France. The country has built a reputation as an “eGambling” regulatory hub and passed a set of eGambling regulations in 2009.
CSBetGo is yet another site believed to have shut down following the C&D, but is now back up and running. It is accessible to users in every country and requires users to log in to Steam to place bets.
The site appears to deliberately have a low profile. It does not have a Twitter handle, and hasn’t posted on Facebook in nine months. Few users were visible on the site when it was visited this week.
Oddly, the site’s terms of service say that the website is only available to Ukrainians, but the site does not provide any geolocation capability to block users from other countries. Like most sites, it defers the responsibility to the user.
“If you want play in countries where gambling is illegal, you do so at your own risk,” the terms read.
CSBetGo is one of the few sites that list a conversion rate for coins, (or in its case, “tickets”) to USD. One $USD equals 100 tickets.
However, $USD are not directly convertible to tokens on the site. Instead, when users deposit a skin, they receive only the “ticket” amount of whatever the listed USD price is on CSGOAnalyst, a marketplace, for that skin.
CSGOSpeed briefly went down for maintenance in mid-August and came back online around the end of that month. In a notice, the site said it intended to “return with an alternative that complies with Steam’s Terms of Service and Subscriber Agreement.”
When it relaunched, Speed offered a redesigned product with flashy skin giveaways, a jukebox playing Bruno Mars and a whopping 13 different betting games. The site now offers traditional games like roulette and jackpot, newer games with names like “scratchy” and “drag race,” and sportsbook-style betting on professional esports matches.
But it’s unclear how the new product complies with either Valve’s C&D or Steam’s terms.
Despite maintaining an email-and-password log-in at its home page doorstep, users are immediately prompted to input their Steam account’s trade URL before proceeding further on the site. Users then utilize their Steam account to deposit skins, which are converted into virtual currency.
Like several other skin sites, its terms of service say that it is governed by the laws of the European Union.
The same terms aren’t specific on age requirements, either, saying that users of the site must be “at least 18/21 (EIGHTEEN/TWENTY-ONE) years of age.”
CSGOPolygon has quietly operated its roulette and coinflip games throughout the summer and into the fall, and has even expanded its Steam-login-reliant product offering in the interim.
The site prompts users to log in through their Steam accounts after they agree to a set of terms and conditions that state they are at least 18 years of age.
The terms also make clear that users “are responsible for compliance with any applicable laws” that may pertain to their use of the site.
On Sept. 21, Polygon launched an esportsbook feature, where bettors could wager skins on the outcome of professional esports matches.
On Aug. 5, the site said it was temporarily shutting down to comply with Valve’s (and not Steam’s) terms of service.
It has since rebranded as CSGOPot.win, and offers skin gambling via users’ Steam accounts. Similar to CSBetGo, Pot equates one $USD to 100 of its virtual currency, which it also calls “tickets.”
Users can either deposit skins via their Steam accounts into their Pot account and receive tickets, or they can buy tickets outright, ostensibly with real money. PayPal is mentioned as a payment processor the site uses.
But attempts by the author to purchase tickets resulted in a warning that appeared to require proof of ownership of Counter-Strike, the game:
“In a desperate attempt to stop piracy, we require that you own CSGO before being able to buy tickets. Contact us at [email protected] if you feel you are seeing this message in error.”
The site’s terms of service force users to agree that they are over 18 years of age. The site says that if they suspect users are not of age, it will ask for “proof of identity.”
Nothing in the terms mentions players accessing the site from the US, or any other specific country. The ToS say that the site is governed by the laws of the European Union.
After shutting down over the Summer, Bets.gg relaunched sometime around early September. But similar to CSGOStrong and CSGO500, the site places a third-party layer between itself and direct skins-to-gambling-currency conversion.
Users on Bets.gg are now prompted to sign in not through Steam, but through website Skrilla.io. Users deposit skins on Skrilla, earn coins, then deposit their Skrilla balances on Bets.gg.
Users can cash out their Bets.gg winnings and use the coins to purchase skins on Skrilla, which they then transfer back to their Steam account using, of course, Steam.
The site just added the popular crash game to go along with dice, roulette and coinflip gambling.
Bets.gg has also joined the growing number of sites offering sportsbook-style esports match betting, thus far only on CS:GO matches. It offers this form of betting “tax free“, ostensibly meaning it takes no vig, or fee, on wagers.
Its terms of service state that users must “acknowledge Virtual currency (‘BETS.gg Coins’ or ‘Coins’) cannot be redeemed for ‘real world’ money or any other item of monetary value.”
That point is debatable. In fact, Bets.gg coins can exclusively be redeemed on Skrilla, which defines itself as a skin exchange, exclusively for skins.
Skins are frequently bought and sold on third-party marketplaces such as OPSkins and Bitskins for $USD, aka, real-world value.
Kickback, a website that allows gamers to wager on their own in-game performance as opposed to playing casino gambling games, is currently running as it was before Valve sent its second C&D.
The site matches players up to compete against one another and allows players to win either cash or skins by actually playing Counter-Strike: Global Offensive, either in 1v1 or 5v5 match-ups.
It boasts of “instant skins-to-cash withdrawals.” It also uses its own virtual currency, Rubies.
According to Kickback’s legal notice, its game is legal in 45 states because that number of states, as well as the US government, “consider video games to be games of skill.”
Valve did not order sites to stop using its API for illegal gambling transactions. It ordered sites to cease and desist using Steam for any commercial purpose.
The site uses Steam to facilitate the use of skins as an entry fee in a contest. From Kickback’s terms of service:
“In order (sic) use Counter-Strike: Global Offensive (“CS:GO“) in-game items (each, a “Skin“) as Entry Fees, you must link your Steam account and deposit your Skins to Kickback. (A “Skin Contest“) occurs when a user enters Twitch Betting contest.”
Furthermore, the site facilitates the depositing of skins in exchange for virtual currency that can be used to wager. That currency can then be used in the “Ruby store” to redeem skins.
“Global Offensive Skins may be deposited to Kickback in exchange for Rubies (“Skin Deposit“). Depositing Skins on Kickback implies that you fully accept Kickback’s Skin valuation prices, and understand that you will not receive a refund in the case of a Skin price being above or below Steam market value.
You may be required to wager a minimum of 30% of all Rubies credited to your Kickback account as a result of Skin Deposits in Kickback contests to be eligible to withdraw Skins from the Ruby Store.
You can redeem Rubies for Skins in the Ruby Store by creating a trade offer from your Steam account to a Steam account owned by Kickback.”
CSGOMoment is still offering its roulette game, and is not even pretending to avoid facilitating betting through Steam. The opening lines of its terms of service announce:
Our CSGO casino is the best online service where you can always win more by depositing your CS items and skins!
1) Sign in on CSGOMOMENT.COM casino CS:GO via your Steam account.
2) Make an item deposit to your account after signing in. (It’s pretty simple, just send steam exchange offer to our trade bot by clicking homepage the “Deposit” button of our CSGO skin casino.
The terms also maintain the site awards 1000 of its virtual coins for every $1 in value of deposited skins. G2A is a site partner.
Other active, named skin wagering sites
SkinArena, CSGOHowl.us, and CSGOFade also appear to be operating normally as well, and utilizing Steam.
Again, dozens of other skin wagering sites are also operating with the use of Steam to facilitate commercial transactions.
Those sites, however, have not knowingly been told by Valve to shut down. Consequently, the scope of skin wagering extends far beyond the 42 sites Valve named.
19 sites formerly using Steam for commercial gambling have shut down
CSGOLotto came under fire in July when its owner was found to have broadcast video of himself gambling and winning on his own site without disclosing his ownership position.
Shortly after, Lotto said it would temporarily stop offering its casino-style skin gambling games. But its wagering features never came back online. As of early August, its url directed visitors to an error message.
Both the website and the owner, noted player and streamer Trevor ‘TmarTn’ Martin, were named as co-defendants in a class-action suit against Valve.
The suit alleged that the defendants violated RICO statutes, facilitated illegal gambling, and that Martin specifically promoted gambling to minors.
A federal judge granted a motion by Martin and Lotto to dismiss the lawsuit. The plaintiffs’ attorney said the case is not dead, but will simply move to a state court.
For more on the four major skin gambling scandals of the summer of 2016, see page 4 of this new report from ESBR and Narus Advisors.
Another site implicated in the four skin gambling scandals of the Summer of 2016, Shuffle shut down on Jul. 29 and hasn’t returned to the market.
The casino-style gambling website was pressured into shutting down after its owner, James ‘PhantomL0rd’ Varga, was found to have gambled on his site without disclosing his ownership position.
Skype logs published by esports journalist Richard Lewis revealed Varga gambled on his own site with unlimited amounts of house money, and often asked his web developer to feed him the “percentages” of the website’s jackpots.
Such information likely increased Varga’s odds of winning dramatically.
Despite shutting down all gambling features on its site in July, CSGOWild never lost its domain. Its website has promised something is “coming soon” for the past six weeks, but offers no other functionality.
Little is known about any forthcoming projects from Wild. The site’s Twitter account, however, tweeted out a promotion for a new skin gambling site, CSGONinja, which hosts automated footraces between bot characters who users can bet skins on. It is not clear if Wild and Ninja are related.
Wild shut down in the US twice over a period of two months this past summer.
The process was plagued by scammers posing as site administrators, customers reporting an inability to withdraw skins, and complaints of arbitrarily-raised skin prices on the site’s skin marketplace.
These allegations hastened its second departure from the domestic market. A site admin, ‘Gagey,’ refuted the charges in a statement.
CSGODiamonds, a player-vs.-house casino-style gambling site that offered betting on the outcome of dice rolls, shut down gambling operations on Jul. 29, the deadline mandated in Valve’s first C&D.
In June, a sponsored player on the site who broadcast his playing to his followers on Twitch admitted that the site’s owners told him the outcomes of “rolls” in advance.
This dramatically increased his odds of winning on the site, which in turn, made the promotional broadcasts of his playing that much more exciting (and deceptive).
As of mid-August, CSGOCosmos was operating almost identically to, and possibly in connection with, CSGOStrong.
It bypassed directly processing skin deposits by forcing users to deposit skins on Skntrades, receive Skntrades’ virtual currency, and then deposit that virtual currency back on Cosmos to gamble with.
At some point in either late August or early September, though, the site went offline.
Attempts to visit its website from both inside and outside the US elicit an error message.
With the fortunes of Strong, Skntrades and Cosmos thought to be linked, it’s unclear why the latter site is down while the former two continue to operate unfettered.
CSGOBestPot was one of the 10 initial non-compliant holdouts from the second C&D letter that operated well into the month of August.
At some point since then, however, the site has stopped offering gambling.
The website remains up, but all games are static and none of the site’s features are accessible.
The site has not tweeted since January, and it’s unclear if the shutdown is temporary or permanent.
CSGOHouse shut down shortly after the first C&D was sent. It is one of the few skin gambling websites to acknowledge what appears to be a simple, powerful truth.
“We have been forced to close, because we have created trade bots and are using valves (sic) API for gambling,” a note on its website and Facebook page reads.
“Thank you for all your support, you are truly awesome! Stay tuned for future updates.”
The website has not hinted at any future updates or product re-launches since the announcement, which came on Jul. 26.
It’s unclear to what extent CSGOPoor is operative. Users are prompted to log in to Steam once they reach the site, but trades were blocked as of Tuesday, and a site counter said that zero users were online.
No games were visible from the home page.
The site’s Twitter account is active, and the site appears to be in the middle of various skin giveaways. The site’s chat feature, also, was quite active.
This site might be functioning, but it’s unclear to what extent Steam or skins are involved.
On one hand, users are prompted to log in to their Steam accounts to play on CSGOBetBig.
But in the site’s “about” section, it instructs users to deposit and win Bitcoin. Then, when users follow that link, they’re prompted to sign into their Steam accounts and input their Steam trade URL, as opposed to their Bitcoin URL.
The site appears to have a low current user base and does not have an active Twitter account.
It says it published its updated terms of service on June 28, which would have been one month before Valve sent it a C&D notice It last updated the terms, it says, on Sept. 20.
Other named skin wagering sites that have shut down
CSGOJackpot, Csg0.com, CSGODouble, CSGOatse, CSGOBattle, CSGOSweep and Skins2, also appear to have shut down.
CSGODices, CSGO.One and CSGOMassive still have functioning URLs and appear to be actively offering games. But repeated log-in attempts from multiple countries to Dices and One timed out, while Massive no longer offers any type of deposits and only allows users to bet with existing balances.
Two sites offer esports betting that doesn’t involve skins or Steam
After a chaotic summer of refusing to abide by Valve’s terms, followed by a half-hearted shut down, followed by a complete skin betting shutdown, CSGOLounge is back to offering betting—just not with skins.
The world’s largest skin betting sportsbook, which took in the USD equivalent of $1 billion in handle in the first seven months of 2016 alone, is now a coin betting sportsbook.
Users can still utilize Lounge’s popular skin trading platform. But all bets on the outcome of professional CS:GO matches are now facilitated via Lounge’s own digital currency.
As of mid-October, these coins hold no value. It is unclear how users who win coins betting on matches will be able to cash them out, if at all.
Users who sign up for free with an email-and-password account receive 100 coins automatically with which to wager. Users cannot wager Steam items on matches, and cannot currently convert Steam items to coins.
The new format involves players making a series of bets on pro CS:GO matches with coins over time, and a rankings system to show who has made the most successful bets and who has the highest balance of coins.
The former skin betting sportsbook converted to a real-money sportsbook after Valve purportedly disrupted its trade bots in early August.
Originally, Fanobet said it was converting its skin betting platform to a Bitcoin platform. While it appears to have done this, and while Bitcoin is the site’s most prominently preferred payment option, it also says it accepts Visa and MasterCard as payment options.
A spokesperson for the site confirmed on Reddit that the site also accepts G2A Pay, Skrill and Neteller.
Recent attempts to log in to the site via Steam were blocked. A message reads that the site is no longer accepting Steam log-ins from new users as of Sept. 15. It’s unclear if users prior to that date can log in via Steam or not.
But now, users must log in via a traditional email-and-password format.
The site recently became the official sponsor of professional esports organization mousesports. Since Fanobet offers sportsbook-style betting on esports events that mousesports participates in, it’s unclear if Fanobet prohibits betting on matches involving the team it sponsors.
Unlike other websites, Fanobet also offers betting on NBA, Major League Baseball and NFL games.
But since it no longer accepts skin deposits from new users, and takes action on traditional sports in addition to esports, it appears to simply function as an unregulated, real-money sports betting site.
The site has a responsible gaming section where it warns users of the dangers of problem gambling.
Much like CSGOLounge did before it shut down in mid-August, it has implemented a self-exclusion policy for gamers who want Fanobet to shut down their account. It even provides an email address for concerned parents to contact Fanobet.
The site is licensed in Curacao, and continues to block customers from the US.
Only the beginning for Valve, regulators
There is a key challenge standing between not only Valve, but also regulators, lawmakers and the courts, and the enforcement of illegal gambling laws: Defining the size, structure and scope of the skin gambling industry it’s trying to regulate in the first place.
Valve only chose to name (as far as we know) 42 of the existing skin wagering sites in its C&D notices.
But there are likely more than 100 skin gambling sites operating at any given time (See: CSGONinja, CSGORage, CSGORoll, CSGOHunt, CSGOTrinity, CSGOCoinFlip, CSGOBlackJack, CSGOWorld, SkinRaffle, etc.).
Understanding the size and scope of the market becomes even more challenging when one considers the relative transiency of these sites.
Many, including several named in the C&Ds, can go away for a short while and then pop up again under another domain, or with amended products, or appear to users in some countries as if they’re shut down while operating in others.
Because it is the creator, moderator and final gatekeeper of Steam, only Valve can observe and quantify to the fullest extent the amount of wagering-related activity being conducted via the integration of its API.
This could point to one eventual, involuntary outcome the game maker could be forced to comply with: Devoting significant time and resources to policing Steam and blocking the trade bots that are akin to the oxygen coursing through the body of the skin wagering ecosystem.
In the class action case against the Valve Corporation, CSGO Lotto and Trevor Martin, US District Judge John Coughenour has granted the defendants’ motion to dismiss.
The court order can be found here.
The judge dismissed “with prejudice in its entirety” the first amended complaint against CSGO Lotto and its owner Trevor Martin. As a result of that dismissal, the Motion to Compel submitted by Valve was “denied as moot.”
Class action alleged RICO violation as well as illegal gambling infractions
The plaintiffs alleged that the Valve Corporation “allowed an illegal gambling market,” based on CS:GO skins, through “its Steam Platform.”
Furthermore they alleged that Martin promoted illegal gambling to minors through his CSGOLotto site by filming himself winning substantial sums of money and distributing the video on YouTube.
The judge’s order mainly revolved around the legal basis for the one Racketeer Influenced and Corrupt Organizations Act (RICO) charge that was levied.
The judge referred to a prior case ruling that stated:
“RICO is not expanded to provide a ‘federal cause of action and treble damages to every tort plaintiff.”
The judge ruled that case law in the 9th Circuit was clear on the issue that “gambling losses are not sufficient injury to business or property for RICO standing.”
In simple terms, the very fact that the plaintiffs are claiming damages suffered as the result of illegal gambling means that the RICO Act does not apply. As the only federal count alleged, this meant that the case should not be heard in federal court.
Plaintiff arguments of fraud also lacked factual substance
Judge Coughenour ruled that the arguments used by the plaintiffs to try to establish the case as having RICO standing amounted to a “misstatement of the law.”
Among other arguments, the plaintiffs stated that the gambling on CSGOLotto was “rigged” because Martin failed to disclose that he was the owner of the site in his YouTube videos. They used this to argue that the defendants’ actions were fraudulent, and could thus qualify for federal consideration under the RICO Act.
The judge ruled that the plaintiffs failed to provide factual evidence connecting Martin’s apparent deception with the losses they had suffered.
The judge also caught one instance where the defendants appeared to shoot themselves in the foot.
In claiming that the activity qualified as gambling, the plaintiffs argued that skins are “put into a large pool, and one winner is chosen at random to take all of the Skins.”
The judge pointed out that if the winner was chosen at random, then this amounted to “an explicit statement that the results were random, not rigged,” and therefore couldn’t qualify as “fraudulent activity.”
Federal case over but the case now moves to state court
The attorney for the plaintiffs, Jasper Ward of Jones Ward, was not disturbed by the court ruling.
Ward told ESBR:
“Yes, all the Judge said was that Federal Court is not the right place for this case if there is no RICO standing. So we are moving forward in state court, likely King County (WA), where Valve is located.”
The dismissal was forecast by Jeff Ifrah of Ifrah Law, who told ESBR when the case was first filed, “I’d call this lawsuit frivolous and say it is likely to be dismissed,” adding:
“Valve created a platform for play 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.”
Jasper Ward told ESBR that he saw the issue in a wider context:
“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.”
Possible benefit will be further legal clarity for skin betting
This week the Washington State Gambling Commission (WSGC) ordered the Valve Corporation to stop the transfer of skins via its Steam API.
The WSGC press release expressed its concern about the growth of skin gambling, which it said had “proliferated so much that a recent market report by Esports Betting Report indicates that one specific gambling website, CSGO Lounge, brought in approximately $1 billion in ‘skin’ gambling between January 1st and, August 1st this year alone.”
The latest skin gambling report by ESBR’s Will Green is available free to download here.
The WSGC has determined for itself that skin gambling is both gambling, and against the law.
WSGC Gambling Commissioner Chris Stearns said:
“In Washington, and everywhere else in the United States, skins betting on esports remains a large, unregulated black market for gambling. And that carries great risk for the players who remain wholly unprotected in an unregulated environment.
We are also required to pay attention to and investigate the risk of underage gambling which is especially heightened in the esports world.”
The current class action case raises the profile of skin gambling, and in doing so has contributed to attracting the attention of the WSGC. There is no doubt that lawmakers and regulators in other states, and indeed other countries, will now be moving the subject higher up their priority lists.
Even if the plaintiff’s case is “frivolous,” as Jeff Ifrah suggests, the final court rulings will bring some much needed clarity to how the law applies to online skin betting.
Politicians and regulators may then be in a better position to make their own determinations as to what action is required to either regulate or prohibit this new form of gambling.