How Valve Cracked Down on CS: GO Skin Gambling

With the introduction of weapon skins, essentially cosmetic items that alter the appearance of guns in the game, Valve made a change that can be argued that they weren’t even aware would grow into a gaming cultural behemoth.

For those of you who weren’t invested, or weren't around back in the day, here, we’ll be delving into the story of CS: GO skins. How, over time, they became one of the primary sources of Valve’s income and the gambling scene that formed around them, as well as how they had to intervene to resolve a significant issue that reached even beyond gaming itself into the real world and lawmaking.

The Rise of Skin Gambling

Back in 2013, Valve added skin drops to CS: GO in the hopes that players would trade them, form communities, and populate the Steam Marketplace.This innovation was a success for them; however, it spiraled out of control quickly. Third-party sites cropped up, exploiting Valve's marketplace limitations and allowing players to trade their skins for cash, which was not a possibility there, and the market price was capped at $400. These sites became full-fledged gambling sites, allowing users to bet skins on professional CS: GO games or play games of chance.

By 2016, the skin gambling industry was worth an estimated $5 billion. The virtual items were being utilized for gambling on websites such as CSGO Lounge, CSGO Lotto, and CSGO Wild, which did not have regulations or age limits.In stark contrast to the situation that was back then, legitimate casino businesses are much more regulated and overall safe, taking into consideration all the systems preventing underage or foul play. Even the ways they are promoted are well regulated, and most of them nowadays provide codes for new users, just like Fanatics casino promo code with their deposit bonuses.

The Sketchy Side of Skin Gambling

With all that happening, the entire episode was further tainted by accusations of unsportsmanlike conduct, such as match-fixing, underage betting, and hidden promotions through influencers.For instance, the now-well-known scandal surrounding CS: GO Lotto run by YouTubers "Tmartn" and "Syndicate" promoted their own platform without disclosing that they were the owners, while others admitted to being paid by Steam Lotto for simulating winning bets for the purpose of promotion.

Valve Stepping In

As the scandals piled up, Valve decided to clamp down on the whole industry that developed out of their well-ment feature. In July of 2016, they sent cease and desist letters to several of the skin gambling sites, invoking violations of Steam's user agreement. They pointed to their inability to derive profit from the gambling sites and absent business relationships with them. A direct quote given was:

“We'd like to clarify that we have no business relationships with any of these sites. We have never received any revenue from them. And Steam does not have a system for turning in-game items into real-world currency.”

Yet, this wasn’t enough. The Washington State Gambling Commission (WSGC) got involved, accusing Valve of enabling illegal gambling by permitting these websites to utilize Steam's API. The commission directed Valve to stop using skin transfers for gambling and clarify how it would comply with gambling laws.

The Consequences

With Valve under pressure from a higher authority, the crackdown really gained steam and compelled most of the skin gambling websites to either modify their systems or shut down completely. The introduction of a seven-day "cool-off period" for freshly traded skins in March 2018, made it even more difficult for gambling websites to function, and it also slowed down the trade on the market.

This also impacted legitimate traders and community websites. OPSkins, in trying to circumvent the ban using "ExpressTrade," was closed by Valve, with approximately $2 million worth of skins lost in the process.

Valve banned about 40 CS: GO traders linked to gambling sites in June 2023, taking out over £1.5m (or $2m) worth of in-game skins.The bans were allegedly linked to allegations of money laundering of cryptocurrency through a rival gambling site, which was a controversy on its own.

The Move Away from Loot Box Systems

Though we are tackling the topic of skin gambling, it fits into the larger context of loot boxes, since these skins were randomly awarded from them through chance.The skin gambling scandals led to the increased regulation of loot box systems in video games. Loot boxes, which provide randomized in-game items, have been condemned for their closeness to gambling, especially when real money is involved.

The public and regulatory pressure has led some game developers to rethink their monetization models, moving away from loot box mechanics to more predictable and transparent systems to mitigate worries, particularly for young players.This also had an effect on the current trend of battle passes being offered in online games, where, by paying a fixed price, the players know what item they would get after playing the game for a certain time, removing the luck factor from the equation.

The Legacy

Valve's fight with skin gambling was substantial, revealing how in-game items could be exploited for actual cash and how risky and uncontrollable gambling within video games could be. Although skin gambling continues in less blatant ways, Valve's efforts made it harder for those kinds of sites to operate so openly, as a caution for the industry about the need for regulation as well as sensible behavior, just like with real-life betting.