Game-Maker Valve Moves to Choke Off $7.4 Billion Gambling Market

Valve Walks Away From Gambling Ecosystem for Its Games
  • Recent lawsuits highlight firm’s connection to teen betting
  • ‘This appears to be the beginning of the end,’ analyst says

Facing a wave of criticism and legal action, video game maker Valve is walking away from the rapidly expanding gambling ecosystem that has evolved around its games, potentially destroying an industry that was expected to take $7.4 billion in bets this year.

The Bellevue, Wash.-based company says it will crack down on websites that use Steam, Valve’s gaming software, to facilitate gambling, a reversal from its previous support of those sites.

“We’d like to clarify that we have no business relationships with any of these sites,” said Erik Johnson, a company spokesman, in a statement. “We are going to start sending notices to these sites requesting they cease operations through Steam.”

In April, a Bloomberg investigation raised questions about Valve’s relationship with the sites, which are particularly popular among underage gamers. “This is long overdue,” said video game attorney Ryan Morrison of Morrison & Lee LLP. “I’m very tired of getting e-mails saying, ‘I’m 15 and lost a thousand dollars on a Counter-Strike gambling website.’”

For about five years, Valve has encouraged players of games like Dota 2 and Counter-Strike: Global Offensive to collect virtual items like decorative weapons. These weapons can be acquired through game-play or purchased through Steam. Users can also trade the items (known as skins), or sell them for cash or use them to place bets on other websites, all of which rely on Valve’s software to operate.

Valve now says using its software in this way violates its terms and services. “From what I can see this appears to be the beginning of the end of widespread skins gambling,” said Chris Grove, an author of a recent report on skins gambling.

Writing for Eilers & Krejcik Gaming and Narus Advisors, Grove and his colleagues estimated that the $7.4 billion in skins gambling this year would measure 12 times the amount gambled in cash through established books like Ladbrokes or Bet365. Left unchecked, skins gambling could grow as high as $22.6 billion in 2020, the report says.

Valve’s move to shut this market down could have strong repercussions for the company and the legions of mostly young men who play its games. An open secret in the gaming world, skins gambling was widely credited for turning Counter-Strike into one of the world’s most popular titles for competitive video gaming. When Turner Broadcasting and WME/IMG created an e-sports league for prime-time television this spring, the game it chose was CS:GO.

As for the players who have amassed caches of skins worth real money, Valve’s Johnson said, ”Users should probably consider this information as they manage their in-game item inventory and trade activity.”

Last month, a Connecticut man sued Valve in a potential class-action suit that drew heavily from Bloomberg’s investigation. A second suit quickly followed in Florida. The company must respond to the first complaint in the next several days.

In addition to legal action, the world of skins gambling drew new fire in the past few weeks with two separate, high-profile revelations. CS:GO Diamonds, a site where gamers use skins to bet on virtual dice rolls, admitted to tipping a sponsored player to make the site look more exciting to his half-million followers. Mohamad ‘m0E’ Assad, a player, broadcaster and online personality, admitted that he used the advance knowledge to win on the site.

At the beginning of this month, a pair of popular esports YouTube personalities, Trevor ‘TmarTn’ Martin and Tom ‘ProSyndicate’ Cassell, were revealed to be part-owners of a skins gambling site that they promoted in their videos. Both had posted videos of them winning large amounts in skins on the site CSGO Lotto, without disclosing that they were involved in creating the site.

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