Lawsuits and criticism sparked by concerns over teen betting have spun the skyrocketing skins trading industry into an uncertain future.

Valve Makes A Stand Against Skins Trading

Video game developer Valve has essentially pulled the plug on an unregulated online gambling economy that was projected to include $7.4 billion in eSports bets in 2016. After being named as a defendant in two lawsuits, the Washington-based company has asked third-party sites that use Valve’s Steam software to stop letting users access Counter-Strike: Global Offensive contests to bet skins, or guns and knives, that are used in the game.

Valve has stated it has no business relationships with the third-party sites, but a federal lawsuit alleges the company knew about the betting, often done by teens, profited from it and tacitly allowed its growth.

Linking Steam

One suit, filed June 23 in the U.S. District Court for Connecticut on behalf of Michael John McLeod and seeking class action status, alleges that Valve and third-party sites (such as CSGO Lounge, CSGO Diamonds and OPSkins) “knowingly allowed, supported and/or sponsored illegal gambling by allowing millions of Americans to link their Steam accounts” to the sites.

The CS:GO matches are streamed online and shown live on TBS television weekly. Because the skins that online spectators wager on the matches can be redeemed for real-world cash, they are essentially casino chips that are won and lost through illegal gambling, McLeod alleges.

McLeod is now a legal adult but was a minor when he bet on matches.

In light of Valve’s central and pioneering role in eSports betting, observers are trying to determine if the company’s actions since being served with the lawsuits will kill the skins trading industry or transform it somehow. At this point it seems there are far more questions than answers about the industry’s future.

The Future of eSports Betting

So far, at least three of the gambling sites, out of dozens in operation, have said they will close down.

The uncertainty raises seven questions about the future of skins trading:

1. What will happen to skins-for-cash sites? Valve has asked gambling sites to stop letting their users link to and bet on CS:GO contests, but the company has not reached out to sites that simply allow players to redeem skins for real-world cash, such as OPSkins. Regardless of what happens with skin gambling, there will continue to be CS:GO players who accumulate skins in the course of playing the game. They will still be incentivized to turn those virtual weapons into actual cash. OPSkins also serves the function of linking skins sellers and buyers, another thing that distinguishes it from gambling sites.
2. Could this brighten the future for exchange wagering operator sites? Another major point raised by Valve in its recent announcement was the need to eliminate bot betting. Some gambling sites create bots to place bets that offset those made against the house. One option to eliminate this problem is facilitating betting between users, or exchange wagering, rather than betting against the house.
3. Could eSports cash gambling continue with heightened geolocation and age verification requirements? Sensitive to the accusation that it was turning a blind eye to underage gambling, Valve threw the baby out with the bathwater when it ordered the gambling sites to shut down completely. Instead, why can’t it tighten its standards and require affiliated gambling sites to follow all local applicable laws, such as those requiring them to verify users are 18 or older? This would allow adults to continue betting skins.
4. Will esportsbook cash gambling sites enjoy a boost in business? That isn’t likely to happen immediately because gambling cash on professional match outcomes is illegal in every state except Nevada. New Jersey, where gaming interests are lobbying for the legalization of sports betting, recently enacted temporary regulations allow esports competitors to pay a fee to enter matches that pay cash awards to winners. No casinos in New Jersey have started offering such games.
5. What happens if the CS:GO gambling sites ignore Valve’s order to stop allowing their users access to matches via the Steam API? On July 13 Valve issued an “In-Game Item Trading Update” that stated, “We are going to start sending notices to these sites requesting they cease operations through Steam, and further pursue the matter as necessary.” Six days later, Valve sent cease-and-desist letters to the 23 gambling sites, but only three of the dozens of such sites announced they had shut down or would be doing so (societylogin.com, csgodouble.com and csgocasino.net). After the 10-day compliance window ended, 11 sites had closed down; four sites had closed temporarily but hinted they would resume operations once they could certify they would meet Steam’s contract conditions and terms; and six sites were ignoring the order.
6. How will the popularity of CS:GO be affected? Valve’s crackdown on the gambling sites could trigger one of two very different outcomes. One on hand, viewership could decline as access to betting options greatly decreases, depending on how vigorously Valve enforces its cease-and-desist orders. On the other hand, interest from sportsbooks could increase, especially if states other than Nevada ultimately legalize eSports betting.
7. Is there a future for the skins betting sites that comply with Valve’s ceast-and-desist? Skins gambling site CSGO Lounge, the world’s biggest, accounting for about 80 percent of the stream for a typical CS:GO match, has said it will obtain licenses in countries that allow eSports gambling, an apparent nod toward legitimacy. It is looking for ways to maintain a connection with the CS:GO community. But Steam’s terms and conditions contain no reference to gambling. Valve says these third-party sites are violating language in the Steam Subscriber Agreement that prohibits commercial use of Steam. How far Valve would go to enforce language in such cases