New York AG Accuses Video Game Maker Of Illegal Gambling

New York Attorney General Letitia James has opened a novel front in the battle over video game loot boxes, suing Valve and accusing the maker of Counter-Strike of illegally running an online gambling operation for kids and adults.

This is a different tack than other suits against video game manufacturers have taken, as James argues Valve is violating the state’s constitutional ban on gambling and laws against promoting it. 

Unlike New York’s case, filed Wednesday, most earlier lawsuits went after loot boxes as a kind of sneaky business practice rather than straight-up illegal gambling. For example, players have sued companies like Electronic Arts over FIFA “Ultimate Team” packs, claiming they’re addictive, hide the true odds of getting top prizes, and target kids, but usually under consumer-protection laws, not criminal gambling statutes. 

“Illegal gambling can be harmful and lead to serious addiction problems, especially for our young people,” James said in a press release. “Valve has made billions of dollars by letting children and adults alike illegally gamble for the chance to win valuable virtual prizes. These features are addictive, harmful, and illegal, and my office is suing to stop Valve’s illegal conduct and protect New Yorkers.”

At issue are the loot boxes in Valve’s most popular titles, such as Counter-Strike 2, Team Fortress 2, and Dota 2, all available through the company’s Steam platform. Players pay to open virtual containers for a random shot at cosmetic items like weapon skins or character hats. The process works a lot like a slot machine: In Counter-Strike, an animated wheel spins before landing on whatever item the algorithm has selected.

The items have no effect on gameplay, but that hasn’t stopped them from becoming serious commodities. The market for Counter-Strike skins alone has topped $4.3 billion, according to the attorney general’s office, with one AK-47 skin reportedly selling for more than $1 million last year. Valve sets the odds, making certain some items are far rarer, thus far more valuable, than others.

Players can sell their winnings through Valve’s own Steam Community Market or connect their accounts to third-party marketplaces that deal in cash. The attorney general’s investigation found that Valve actively facilitates those outside platforms, effectively building a pipeline from loot box to real money.

That pipeline has also attracted thieves. According to the lawsuit, Valve has fielded hundreds of thousands of support requests from users reporting hacked accounts or stolen items.

Danger for youngsters

James’ office argues the model is particularly dangerous for young players, who may be drawn to gambling through loot boxes in hopes of scoring items that boost their social standing in-game. 

The suit seeks to permanently bar Valve from offering gambling features in its games, along with paying back their profits and paying fines under New York law.

Whether a court agrees that loot boxes constitute gambling under the New York Constitution, as opposed to just being a questionable business practice, could set a significant precedent for the gaming industry nationwide. Valve has not responded to the lawsuit.