Where Esports Betting Goes Following Valve’s Crackdown On Skin Gambling

Written By Chris Grove on July 14, 2016

[toc]With a simple announcement yesterday, Valve appears to have gutted skin betting, the dominant product in the global market for esports gambling.

What are the ramifications for the broader esports gambling market?

So much depends on enforcement

The primary question behind any analysis is: How effective will Valve be at cutting off gambling activity flowing through the Steam platform (the mechanism that allows skins to move back and forth between players and gambling sites)?

There are really two questions packaged within that question:

How able is Valve to stem the flow?

As long as items can be moved from one account to another, the potential for a gambling product enabled by that transferability remains intact.

At this point, Valve doesn’t seem interested in eliminating trading altogether, putting the company in the perpetual position of reacting to new methods deployed by skin gambling sites attempting to work around the ban.

That doesn’t mean Valve is without power or leverage in this situation – they have ample amounts of both – but it does mean that a door remains open, however narrowly, to skin gambling facilitated by Steam.

How willing is Valve to stem the flow?   

Valve’s statement leaves open the question of how aggressive and proactive Valve will be when it comes to enforcement of the new policy: “We are going to start sending notices to these sites requesting they cease operations through Steam, and further pursue the matter as necessary,” the statement read.

Valve may simply be hoping for a soft landing, as a blunter crackdown could create significant disruptions (and loss of skins) for hundreds of thousands of customers, disruptions which those customers might blame on Valve.

However you read it, the fact remains that Valve has a spectrum of possible postures to choose from. The more relaxed their posture, the greater the chance that skin gambling persists in a meaningful, widespread form. The more aggressive Valve’s posture, the more underground skin gambling is likely to go.

Shutdowns will range from neat to not

One major skin gambling site has already announced plans for what appears will be an orderly shutdown. Another is inspiring a mild panic among players after going “down for maintenance.”

That theme of uncertainty will likely carry through the remainder of July as sites of all sizes assess their options following Valve’s announcement.

Unfortunately, there is a material chance that some number of sites will close without refunding full value to players (either by not returning deposited skins or by shuttering without allowing players to cash in internal currencies meant to be exchanged for skins).

Players impacted by such shutdowns will be left with little recourse, and we could easily see scandals similar to the TmarTn situation emerge as frustrated players attempt to zero in on the parties that profited from failed sites.

Esports cash gambling sites likely to see demand surge

By my estimate, skin gambling volumes are over ten times the volumes for cash gambling on esports.

Some of that gap comes down to variety. Skin gambling sites offer sports betting and casino-style games, while cash betting on esports is basically limited to sports betting.

But a significant part of the gap comes down to player preference. The relative ease of use, familiarity, and value proposition offered by skin gambling makes the format a superior choice to cash gambling for many gamblers in the esports community.

True as that may be, I still expect that, assuming major sites like CSGOLounge are forced to stop operating, cash betting sites like Unikrn and betway esports will see a major influx of customers in the weeks ahead.

Some form of skin gambling will persist

In the vast majority of worlds that emerge post-Valve’s decision, some form of skin gambling is likely to persist.

The demand for the product is proven, and significant. The profit potential is likewise established. And Valve has left some room (how much remains to be seen) for such sites to continue to operate.

The questions more come down to how large, and how public, said sites will be.

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