Valve fights back in skin-gambling battle with Washington state

Valve is not backing down in a squabble with the state of Washington.

Earlier this month, the Washington State Gambling Commission gave the Steam operator until October 14 to explain how it is going to end its alleged facilitation of online wagering in its games. In response to those accusations, Valve has sent a letter that attempts to refute the commission. This follows months of increased scrutiny surrounding a practice known as “skin gambling” in Valve games like military shooter Counter-Strike: Global Offensive.

Skin-gambling sites give CS:GO players a venue to bet in-game items, like the skins that change the way a gun looks, against other players’ items. The winning team then gets all of the loot. Many states are starting to take a closer look at this practice because these skins often have high real-world values. Certain cosmetic gun dressings can sell for more than $100. Valve, however, does not have a first-hand participation in any of this, and it only provides the technology that makes it possible. And it claims that technology is not inherently unlawful.

“The operation of Steam and Counter-Strike: Global Offensive is lawful under Washington Law,” reads a letter from Valve legal counsel Liam Lavery. “We were surprised and disappointed that the Commission chose to publicly accuse Valve of illegal activity and threaten our employees with criminal charges. There is no factual or legal support for these accusations.”

Lavery goes on to point out that Valve has already taken steps to ban gambling sites. That includes sending cease-and-desist notices to multiple well-known skin-gambling sites, and that led to a handful of those operations shutting down. But while it is taking those steps, Valve is also claiming that it is not liable for what third-party sites are doing.

“Outside of Steam and, we believe, outside of the United States, certain websites offer gambling propositions,” reads Lavery’s letter. “Valve has no business relationship with such gambling sites, and indeed they can come into existence, operate, and go out of existence without Valve’s knowledge.”

The Steam company acknowledges that those sites may enable skin-trading based on the results of a match or as part of a lottery system, but it notes that this is not a Valve business.

“Valve does not promote or encourage Steam customers to use such gambling sites,” Lavery explained. “Valve does not receive revenue from these sites.”

The company’s attorney points out that gambling sites are taking advantage of legitimate Steam features that add benefits for millions of people who are not engaging in unregulated skin wagering. And Valve doesn’t want to have to punish all of its customers for the actions of a few.

“There are two Steam services that skin-gambling sites appear to use,” reads Lavery’s letter. “First is the exchange of skins. Steam allows exchange of virtual items on Steam, by Steam users for the entertainment of Steam customers.”

Most often, customers trade these items with one another in a 1-for-1 transaction that doesn’t involve gambling or games of chance.

“[The second feature skin sites are using] is authentication of Steam users,” explained Lavery. “Steam offers authentication using an open internet standard known as OpenID.”

OpenID enables Steam customers to identify themselves on third party sites without having to share their private credentials directly with those outside parties. It’s a common standard that enables people to quickly prove they are who they say they are across multiple platforms.

“None of these activities are illegal in Washington or any other jurisdiction,” Lavery wrote to the Washington Commission. “And we do not believe the Commission contends to the contrary.”

While the Washington State Gambling Commission is claiming that Valve could stop online gambling that uses its technology and therefore it should, Lavery is attempting to discredit the commission’s understanding of how the fundamental, underlying technology works. The Steam company is also wants to prevent Washington from setting a precedent that a gaming company is responsible for how everyone uses its games and services.

Lavery’s argument is basically that Washington wouldn’t attempt to shut down a dice manufacturer simply because some people use dice to gamble in games of chance.

“The Commission’s letter publicly threaten Valve with criminal prosecution for gambling on third-party sites,” Lavery wrote. “We do not understand the legal or factual reasoning supporting this position from the Commission’s letteror from our conversations with the Commission. We are also unsure of how you propose we do this. If there is a specific criminal statute or regulation you believe Valve is violating, please provide a citation. We are not aware of any such law that Steam or our games are violating.”