Valve has moved to dismiss the New York Attorney General’s lawsuit against the company, which claims loot boxes in its games such as Counter-Strike 2 promote illegal gambling and threaten to addict children.
Valve allows users to cash in on the virtual items they have won in two ways. Users can sell the items they won through Valve’s own virtual marketplace, the Steam Community Market, where they can use the proceeds to buy other video games, video game hardware, and other virtual items. Users can also connect their Valve accounts to third-party marketplaces where the virtual items can be sold directly for cash. The OAG’s investigation found that Valve facilitates and even assists these third-party marketplaces in their operations.
All three games feature an optional mechanic where players can pay real money in exchange for “loot boxes”: a virtual item that drops a randomly-generated piece of cosmetic gear that can be used in-game. Most of these items have no mechanical impact and are there strictly for looks, such as silly hats in TF2 or neon-painted “weapon skins” in CS2.
Despite their lack of actual effect, loot boxes and item trading are both an extraordinarily lucrative market for Valve. Virtual items for these three games have been sold for staggering amounts of real money. One estimate cited by the AG’s office indicates that the market for Counter-Strike skins alone was worth over $4.3 billion as of last year.
While Valve absolutely benefits from the strangely frenetic market for virtual items in CS2, TF2, and Dota 2 — it sells these loot boxes in the first place, and hosts the secondary market for them via the in-app Steam Marketplace — the occasionally shocking prices for these items is part of a player-created economy. The lawsuit may be partially aimed in the wrong direction.
There is no evidence I have seen that Valve supports 3rd party market places, and like I said the steam user agreement explicitly forbids them. There is nothing illegal about their own market place because you are paid in steam wallet funds and steam wallet funds cannot be exchanged for real world money. This case is going to flop, valve will win this one.
Valve then allows the contents of loot boxes to be traded for platform currency.
Unfortunately that platform currency has a real monetary value because it can be traded for real monetary goods because you can use it to buy a steam deck of other valve hardware.
It is this direct chain of events that make this illegal gambling because this is not something you can do with baseball cards or Pokemon cards.
three core elements common to all gambling laws: (1) consideration, (2) chance, and (3) prize. So long as one of these three elements is not met, a loot box system is not “gambling”. The “chance” element is inevitably met in any form of loot boxes, but the “consideration” element can arguably be avoided by making loot boxes acquirable only by exchanging virtual currency that itself arguably has no “value”, and the “prize” element can arguably be avoided by making the loot box drops account-locked. Where the loot box drop cannot be transferred, sold, or “cashed out”, there is arguably no “prize” no matter how rare the drop is or how useful it is for in-game purposes.[1]
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There is no evidence I have seen that Valve supports 3rd party market places, and like I said the steam user agreement explicitly forbids them. There is nothing illegal about their own market place because you are paid in steam wallet funds and steam wallet funds cannot be exchanged for real world money. This case is going to flop, valve will win this one.
Valve makes you buy a key to open the loot boxes.
Valve then allows the contents of loot boxes to be traded for platform currency.
Unfortunately that platform currency has a real monetary value because it can be traded for real monetary goods because you can use it to buy a steam deck of other valve hardware.
It is this direct chain of events that make this illegal gambling because this is not something you can do with baseball cards or Pokemon cards.