E-sports gambling

I admit that I hadn't been paying attention to the whole E-sports gambling angle, so I was completely blindsided by the details of today's story: Game-Maker Valve Moves to Choke Off $7.4 Billion Gambling Market

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.”

Even if you don't believe the 7.4 Billion number, and I think there's lots of reason to believe that this was fabricated by someone with an axe to grind, it's still astonishing how large this little corner of the Internet grew, and how quickly it happened.

For a lot more detail about how this all works, don't miss the enormous Bloomberg report from last spring: Virtual Weapons Are Turning Teen Gamers Into Serious Gamblers

Obscured by several layers of abstraction, the wagering is tucked away in a subculture that most mainstream legal authorities don’t know exists. Gaming lawyers say Valve could be legally vulnerable; on the other hand, this is a rapidly changing area of the law with little established precedent.

In a handful of cases, judges have ruled that activities carried out entirely with virtual goods within video games shouldn’t be considered gambling, because they have no connection to the real world. “Even in the Internet age, there is a crucial distinction between that which is pretend and that which is real and true,” U.S. District Judge James Bredar wrote in October, dismissing a suit against mobile gaming company Machine Zone. “The laws of California and Maryland do not trifle with play money.”

Well, clearly billions of dollars a year is not "play money."

But it seems like it's not so much the AMOUNT of money, it's the details of how it's used:

Like the companies that have successfully defended themselves in court, other prominent game makers, including Zynga, Riot, and Activision Blizzard, have been aggressive about keeping virtual currencies separate from real ones. Valve has not: Its software enables an explicit connection between in-game goods and off-line cash.

The thing is, this explicit connection is complicated, and it's indirect:

Buying and selling in-game stuff for real-world money has become a common feature of video games, and encouraging players to buy virtual merchandise has become a predominant business model for game companies. But Valve is unique in letting players transfer their virtual possessions to third-party sites, many of which offer gambling. There, users with names such as bulletpoint and ravenouskilljoy stake skins on pro teams. There are also ways to wager that have nothing to do with CS:GO contests. One website runs multiple lottery-style contests per minute, where a player’s odds of winning rise with the value of the skins wagered. Another operates a game that looks like roulette.

These sites, while independently run, use Valve’s software and pay out in skins.

That is, these decorative virtual weapons, known as "skins", turn out to be equivalent to "real" money, because of the fact that Valve has linked the two:

For CS:GO, the introduction of skins led to a thriving gambling market. People buy skins for cash, then use the skins to place online bets on pro CS:GO matches. Because there’s a liquid market to convert each gun or knife back into cash, laying a bet in skins is essentially the same as betting with real money.

Skins are thus the equivalent of those pretty colored chips that you buy at the casino, and use to gamble, and then sell back to the casino.

And, since Valve is the organization that does the buying, and the selling, even if they don't provide the actual GAMBLING, they are still, effectively, the casino.

Which is wrong, and thus Valve is trying to fix this.

What Valve does, here, will decide how this plays out. If they fix it, properly, the rest of the industry will quickly adopt their approach. Valve leads, others follow: Twitch bans broadcasts showing gambling in CS:GO, Dota

I have a lot of respect for Valve. I've been a happy Valve customer for years now, and I put a decent amount of my yearly entertainment budget into their coffers.

So I hope they get this figured out, properly, and fast.