Final claim in CS:GO skin gambling lawsuit dismissed because plaintiffs never actually used Steam

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On January 7, a US federal court dismissed one last claim against Valve in a years-old lawsuit over CS:GO skin gambling. The case was part of a series of 2016 lawsuits that accused Valve of facilitating unregulated gambling on third-party websites where people could wager CS:GO skins, some of which sell for more than $1,000 on the Steam Marketplace. All of those suits have now been dismissed.

Back in 2016, stories about teens blowing through their parents’ credit card limits to buy keys for CS:GO weapon cases so they could gamble skins on black market websites hit mainstream news: “Virtual weapons are turning teen gamers into serious gamblers,” Forbes reported. Valve received some harsh words from the Washington State Gambling Commission at the time, but in the end, Gabe Newell and company seem to have avoided any lasting legal damage from the controversy.

The suit that was just dismissed was brought by parents who said they discovered that their kids were spending the money they gave them on CS:GO weapon cases and then wagering skins on gambling sites. It claimed that Valve “facilitated” illegal online gambling through third-party websites like CSGO Lounge and that it misled the public about the sort of business it was running. Over the course of several years, the claims were whittled down by the court until there were none left.

The first blow to the case was something we’ve scrolled past in every terms of service document we’ve ever signed: arbitration. The Steam Subscriber Agreement says that if you’ve got a legal problem with Valve, you have to work it out with an arbitrator instead of with a judge, which simplifies and speeds up the process. The court initially agreed with Valve that the arbitration clause in the Subscriber Agreement applied here.

The arbitrators ruled in favor of Valve. The plaintiffs were not able to convince them that Valve was the “proprietor” of skin gambling sites that used its API, or that it had used deceptive practices to encourage gambling on those sites. One noted that the minor in question heard about skin gambling from friends, not from Valve, and chose to participate on his own accord and in violation of the Steam agreement.

Valve couldn’t get out of it that easily, though. The parents appealed, and the appellate court decided that while the kids had agreed to the Steam Subscriber Agreement, the parents hadn’t, so they were still allowed to sue. The case went forward, but the parents were running out of viable complaints to make.

Courts don’t typically overrule decisions made in arbitration, so any dispute between the minors and Valve was over, and the claim that Valve was responsible for third-party skin gambling sites wasn’t going to work. When the parents brought it back up, the court dismissed it right away on the basis that the arbitrators had already made a judgement on the issue.

The Lootbox Theory

With skin gambling out of the equation, the plaintiffs instead targeted CS:GO’s weapon cases and keys themselves with what came to be called the “Lootbox Theory.” The claim was that Valve violated Washington’s Consumer Protection Act by deceiving the parents into providing funds for their kids to spend on loot boxes, which they characterized as unlicensed gambling disguised as a videogame. Valve concealed the risks and failed to disclose the odds, they said.

As part of its defense, Valve argued that loot boxes are not legally defined as gambling in the US, but the claim was dismissed for a much simpler reason. The parents could not have been deceived by Valve, said US District Judge James L Robart, because they “never visited a Valve or Steam website, never used Steam, never played CS:GO, and never saw or read any representations from Valve about CS:GO, keys, or weapon cases.” The parents said during depositions that they only found out about the weapon cases and skin betting from their kids after the fact, so even if Valve had posted a bunch of disclaimers about loot boxes, they wouldn’t have seen any of them.

Well, that’s that, then. The claim was dismissed with prejudice, which means they can’t retry it, and a number of other claims have been dismissed over the years. This case’s first incarnations, filed in Connecticut and Florida, claimed that Valve violated the Racketeer Influenced and Corrupt Organizations Act (yeah, the same RICO Act used to prosecute the mafia), but the federal courts dismissed that claim. After more failed tries, the current version of the case began its journey through the legal system, only to arrive here. The only open skin gambling case I could find was filed by the Quinault Nation in 2019, but there doesn’t appear to have been any recent movement on it.

Valve has maintained that it does not condone or support skin gambling sites, even if they have used its Steam API. Back in 2016, when this was all blowing up, Valve sent cease and desist letters to CS:GO skin gambling sites. Some did shut down, including CSGO Lotto, which drew even more attention to skin gambling due to accusations that its owners weren’t clearly disclosing their relationship to the site in YouTube ads, leading to a response from the Federal Trade Commission.

Skin gambling still goes on, though it has sunk under the radar since 2016. Following a 2018 Supreme Court decision, sports betting is now legal in many US states, creating an opening for an esports betting industry that doesn’t obscure itself with CS:GO skins or other non-currency tokens.

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