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The CS:GO gambling lawsuit against Valve is fundamentally flawed

$2.3 billion. That's how much Bloomberg reports the market for Counter-Strike: Global Offensive betting is worth. That's serious money, and it's attracting a lot of scrutiny. One CS:GO player has even taken it upon himself to file a lawsuit against Valve, claiming that the operator of Steam has “knowingly allowed an illegal online gambling market and has been complicit in creating, sustaining and facilitating that market.” The complainant, Michael John McLeod, believes the blame lies not with the many CS:GO betting sites, but with Valve for enabling and supporting their existence. But while his accusation is worth consideration, his arguments are deeply flawed.

McLeod makes numerous comparisons to casinos, claiming Valve “owns the league, sells the casino chips, and receives a piece of the casino's income.” This analogy only works, though, if you completely ignore the nature of the skins being traded. For those unfamiliar with how CS:GO betting works, players earn cases as they play the game which they can open to receive random skins for their weapons. Opening cases requires buying keys with real money, and once acquired, skins can be traded with other players. This is where the gambling component comes in: many websites allow users to stake their skins on the outcomes of CS:GO matches or even simple coin flips.

CSGO Lounge, one of the most popular betting websites.

The crucial differentiator here that undermines McLeod's analogy is the fact that skins, unlike casino chips, do not exist primarily as a form of non-money currency. Whereas casinos use chips to exploit legal loopholes in staking cash and to distance gamblers from the money they’ve already essentially spent, Valve implemented skins as a means of customization and creative expression, both for the makers of the skins and those who use them. The use of skins evolved later, goes beyond their intended purpose, and was seemingly driven by third-parties, which weakens McLeod's argument that Valve built and supports the betting economy.

The complainant, Michael John McLeod, believes the blame lies not with the many CS:GO betting sites, but with Valve for enabling and supporting their existence.

McLeod posits that “Valve has created and currently supports a secondary marketplace where these in-game purchases can be gambled and cashed out.” Claiming that Valve “created” the betting economy is bold, implying that Valve wittingly contributed to the creation of the third-party gambling sites. McLeod highlights the fact that users are able to link their Steam accounts to these sites, insisting that it “requires permission and cooperation from Valve.” This is incorrect. For a site to implement Steam account linking, it simply needs a Steam Web API key, a token that anyone with a Steam account can acquire. There is no vetting or approval process involved, and Valve certainly does not “[know] exactly what these sites are, what users are doing.” 

Furthermore, McLeod misrepresents the process of converting skins into currency on these betting sites. He claims “Valve specifically allows players to transfer skins to third-party [sites]” when this is not the case. By linking a Steam account to one of these sites, that site is only able to view a user's Steam inventory, not interact with it directly. To transfer skins, a user must engage in bot trading, which is a flimsy workaround where dummy Steam accounts created by the sites act as middlemen for the bets. This is in clear violation of Steam's Terms of Service, first in Section 4 with reference to bots:

You may not use Cheats, automation software (bots), mods, hacks, or any other unauthorized third-party software, to modify or automate any Subscription Marketplace process.

As well as in reference to external trading in Section 3, Subsection D:

You also understand and acknowledge that Subscriptions traded, sold or purchased in any Subscription Marketplace are license rights, that you have no ownership interest in such Subscriptions, and that Valve does not recognize any transfers of Subscriptions (including transfers by operation of law) that are made outside of Steam.

McLeod points out the presence of the Steam logo on the betting sites, implying that it reflects tacit cooperation on Valve's part. Ignoring the fact that anyone can past the Steam logo on their site without permission from Valve, the page that users are taken to upon clicking the Steam link expressly states that the site in question is “not affiliated with Steam or Valve.” Nevertheless, McLeod claims this is more evidence of collusion between Valve and the betting sites.

The lawsuit has attracted the attention of lawyers with experience in the esports industry. A recent AMA on Reddit hosted by legal professionals Bryce Blum, Ryan Morrison, and Jeff Ifrah supports the notion that the arguments against Valve hold little weight. Ifrah believes that “Holding Valve responsible for every single thing that a player or gambler might do with a skin once it is out of Valve’s hands of course sounds harsh,” saying that the only valid argument might be that “Valve could have done more to slow the success of the secondary skin betting market.” Blum agrees, saying “I’ve yet to speak to an attorney that reviewed the complaint and thought the case was likely to get past a motion to dismiss.”
 

Many skins are valued at hundreds on the Steam Community Market, and thousands outside of it. But Steam users may lose their rights to such items by depositing items to third-party services. Per the Steam TOS, "Valve does not recognize any transfers of Subscriptions (including transfers by operation of law) that are made outside of Steam."

Following McLeod's lawsuit, an anonymous mother has filed a similar suit against not just Valve, but Trevor Martin and Thomas Cassell, the owners of CS:GO betting site CSGO Lotto. Martin and Cassell are accused of deceiving viewers of their YouTube betting videos, in which they do not disclose that they own the site they are betting on. Their addition to the lawsuit, however, is a pursuant claim that does not affect the arguments against Valve.

McLeod's arguments fall apart under proper consideration. That's not to say, though, that Valve is necessarily innocent in all this. Legal precedent for the betting of virtual goods is lacking, and it will take cases like McLeod's to establish clear and decisive rules. Valve might be responsible for not taking sufficient steps to regulate the betting economy, but such a verdict cannot be made on McLeod's weak evidence alone. Illegal and/or unethical gambling should not be taken lightly. If we're going to discuss it, let's at least make sure we have the facts straight.