Valve Faces Lawsuit Over Video Game Gambling

The company's failure to crack down on sites that use its virtual goods as currency for bets makes it complicit in a billion-dollar gambling industry, the suit charges.

Valve, the video game company behind the popular Counterstrike: Global Offensive, is being sued for its role in the multibillion-dollar gambling economy that has fueled the game's popularity.  

Michael John McLeod, a Fairfield, Conn., man who has been gambling on CS:GO since 2014, filed a lawsuit Thursday in the U.S. District Court in Connecticut alleging that Valve violated gambling laws and engaged in racketeering with a handful of off-shore gambling companies. McLeod is asking for class-action status for the suit, which if granted could extend widely. The complaint, was first reported by Polygon, doesn’t give a specific request for damages and doesn’t spell out exactly how much money he lost by betting on the site. 

The lawsuit comes two months after Bloomberg published an investigation into the rise of what's known as skins gambling, an increasingly prominent part of professional video gaming. Though it's poorly understood by people outside the gaming world, bettors will wager some $7.4 billion this year, according to a recent estimate from Eiler & Krejcik Gaming and Narus Advisors. They do so—and skirt existing gambling laws—by betting with virtual goods (decorative weapons called skins) that they can earn by playing CS:GO or can buy directly from Valve. The company allows those goods to serve as chips on independent websites that take bets on the outcome of professional video game matches or that run various casino-style games. 

Players can redeem their winnings for cash through other independent websites. While Bellevue, Wash.-based Valve doesn’t facilitate that exchange itself, it has been criticized for turning a blind eye to those that do. According to the complaint, Valve provided money, technical support, and advice to such websites as CSGO Lounge and Diamonds, which take bets, and OPSkins, which runs a market where virtual goods are traded and can be redeemed for cash. These actions amount to criminal conspiracy:

“Valve owns the league, sells the casino chips, and receives a piece of the casino’s income stream through foreign websites in order to maintain the charade that Valve is not promoting and profiting from illegal gambling, like a modern-day Captain Renault from Casablanca. That most of the people in the CS:GO gambling economy are teenagers and under 21 makes Valve’s and the other Defendants’ actions even more unconscionable.” 

Other video game companies have taken steps to avoid this trade, and Chris Grove, the author of the Eilers & Krejcik report, says Valve could do the same. The company hasn't responded to a request for comment. “I think what everyone will be watching for is Valve’s response. They haven’t had much to say publicly on the topic, and this suit could change that,” said Grove. “I don’t think this suit alone will be that damaging—although if it advances further towards class-action status, then things get trickier to handicap.”