Washington State Tribal Nation Sues Valve Over Alleged Illegal Online Gambling

Another battle over the alleged illegality of online “skins” offering a form of online gambling has emerged in the US state of Washington, where the Quinault Indian Nation has sued Valve Software, the owner and developer of Counter-Strike: Global Offensive, one of the most prominent games offering skins-based “gambling” activity as a way to generate corporate revenue.

Despite the actual skins-based trading technically taking place on third-party sites, the lawsuit brought by the Quinault Nation asserts that Valve intentionally fostered and continues to benefit from an illegal-gambling environment aimed at consumers of all ages. Though skins trading often receives public and legal heat for its frequent targeting of underage players — and that receives play within the lawsuit — the Quinault claim is that the entirety of Valve’s activity consists of “unfair competition” that violates Washington’s gambling codes and, by extension, deprives the Quinault nation of gambling revenue agreed to under its compact with the state.

The action was filed about a week ago in Grays County, Washington, in the Superior Court for the State of Washington and has just started to receive public exposure. The Quinault nation operates the Quinault Beach Resort & Casino in Grays County. The lawsuit is the latest of several legal actions originating in Washington that target various forms of online gaming and/or online gambling, continuing in some sense a tradition dating all the way back to 2006, when a tribal-driven legislative effort made the playing of online poker in the state a Class C felony.

This lawsuit makes a bit more sense than that farcical 2006 legislative decree, which remains on the books. In preparing the 25-page complaint, counsel for the Quinault nation obtained numerous transcripts and communications that appear to define Valve’s willingness to create and nurture a legally-grey niche that would enhance the company’s bottom line. According to the lawsuit Valve rolled out the skins concept in 2013, and the concept has been imitated by other gaming firms ever since.

Much of the legal focus is on Valve’s subsidiary Steam, where most of the buying, selling and trading of skins is facilitated, per the complaint. “The creation of the skins,” the suit claims, “was a deliberate attempt by Valve to increase its sales and profits by adding an element of games and market economies to its products.” The action claims the strategy worked for Valve in massive ways; for  CS:GO alone, the company grew its player base over 1500 percent and generated $567 million in sales.

“This was a deliberate strategy on Valve’s part,” the complaint continues. “One of its employees explained at a developer’s conference in 2014 that the company determined that the ‘best way to get players deeply engaged in games… was to give away virtual items of random value and encourage a robust market to trade them.’ That employee was quoted as saying: ‘This is not an accident. This is by design. … This is hugely successful for us. …'”

The lawsuit also asserts that Valve has been something less than sincere in rooting out and barring third-party sites that facilitate the trade and sale of skins obtained inside of Valve’s games. (Indeed, according to the suit’s claims, some of these third-party sites even pay cash for skins, depositing funds into players’ accounts via online wallets such as PayPal. While Valve cracked down on some third-party sites after previously coming under fire from State of Washington regulators in 2016, the suit alleges that Valve and Steam assisted other third-party sites in remaining open and active, thus allowing the game’s internal economy to continue to prosper.

“Valve is well aware of the skins gambling that goes on, is well aware that skins have real world cash value, which has increased their popularity and value, and actively encourages and facilitates skins gambling,” another excerpt states.

Among the most damning allegations raised within the Quinault complaint is that Valve and Steam control and continue to extract revenue from all elements of Valve’s games’ operations, including access to the player accounts by the third-party-transaction sites. “In the barkeeper analogy,” counsel for the Quinault nation wrote, “Users buy chips from the bartender, gamble in one backroom and cash out in another, all under Valve’s roof.”

Valve has not responded publicly to this latest complaint. No dates have yet been set for hearings on the case.

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