Academic journal article The Journal of High Technology Law

More Than Just Skin(s) in the Game: How One Digital Video Game Item Is Being Used for Unregulated Gambling Purposes Online

Academic journal article The Journal of High Technology Law

More Than Just Skin(s) in the Game: How One Digital Video Game Item Is Being Used for Unregulated Gambling Purposes Online

Article excerpt

I. Introduction

"The guy who invented poker was bright, but the guy who invented the
chip was the genius."

-Julius Weintraub

On September 27, 2016, the Washington State Gambling Commission ("WSGC") issued a cease and desist letter to the popular video game developer, the Valve Corporation ("Valve"). (1) Asserting that they are in violation of Washington State gambling law, the cease and desist letter emanates from Valve's alleged involvement in a quickly evolving industry known throughout the world as "skin gambling" or "skin betting." (2) As denoted by the letter, the WSGC sets forth that by turning a blind eye to the enforcement of its regulation against the usage of "bot" accounts, Valve knowingly permits their customers to use skins for illicit gambling purposes. (3)

Skins, as they are commonly referred to in the video game industry, are virtual decorations used in many modern day, online, multiplayer video games to change the appearance of a video game avatar's weapons or appearance in-game. (4) Although originally intended as simply a cosmetic feature of the video games they are used in, entire marketplaces have developed around the skins in a number of popular, Valve developed, video games over approximately the past four years. (5) Similar to a casino chip, a skin can be used as a "de facto currency" that can be used to place bets on the outcome of electronic sports ("eSports") matches, roulette games, virtual coin flips, and other casino-style games, completely online. (6)

Unlike video games that simply have lottery or casino style features built into their user interfaces, skin gambling has almost entirely emanated out of third party websites. (7) Through Steam, the Valve Corporation's digital distribution platform, these third-party websites have developed online casinos to facilitate gambling or wagering schemes using skins that are tradable in Valve video games like Counterstrike: Global Offensive ("CS: GO"). (8) As a result, from January 2016 to July 2016, one website, was able to facilitate the betting of approximately 103 million skins in over a period of 2,800 quasi-professional CS: GO matches, amounting to approximately $1 billion in placed bets. (9) As skins presently remain an unregulated currency domestically, many questions arise as to the legality of using such a de facto currency for gambling purposes.

Part II of this note provides a brief overview of the evolution of the gambling industry in the United States. (10) Part II further goes on to address some of the most important federal statutes pertaining to gambling, particularly that of sports betting. (11) Part Ill of this note will outline how skin gambling came to be and how the gambling process generally is facilitated via Valve-produced video games that provide players methods by which to buy, sell and trade skins. (12) Part IV will provide an analysis of the applicability of the relevant federal statutes and case law to skin gambling, a presently unregulated market. (13) Additionally, Part IV shall explore how attractive skin gambling is to children of young ages, and will compare foreign attempts to regulate the presently evolving industry. (14) For purposes of this note, as skin gambling and betting almost exclusively exists in games developed by Valve, the discussion will primarily revolve around games such as CS: GO, Defense of the Ancients 2 ("DoTA 2"), and Team Fortress 2 ("TF2"). Additionally, and to avoid confusion, the umbrella term "skin gambling" shall be used to encompass both the process by which skins are used as a de facto currency to place bets and used in gambling activities in this note.

II. History:

Participation in lottery-style games has been a favored pastime in America since the early days of the colonial settlements. (15) State legislatures first enacted state-run lotteries to help raise supplementary revenue and as a method by which to assist in the construction and development of local infrastructure projects. …

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