Valve's 2016 skin gambling crackdown: the statement, letters and lawsuits
What Valve said about skin gambling sites in July 2016, the letters it sent, the lawsuits and the Washington regulator's demand, and what it all changed.
Fact-checked 18 October 2026 · 8 sourcesFor three years after skins arrived in CS:GO, Valve made no public statement about the gambling sites built on top of them; its only word on betting was a 2015 warning to professional players not to bet on matches. That changed in July 2016, when a lawsuit, a YouTube scandal and a state regulator pushed it into a statement, a round of legal letters and a public argument with Washington State. This is what each side said, with dates, and how much the crackdown actually stopped.
How the pressure built
Gambling with skins worked because Steam let anyone trade items between accounts. Sites ran automated Steam accounts, usually called bots, that took skins in as deposits and sent winnings back out, while third-party marketplaces let players turn skins into cash.
The first legal challenge came on 23 June 2016. Michael John McLeod, a Connecticut player, filed a proposed class action in federal court there, accusing Valve of having "knowingly allowed, supported, and/or sponsored illegal gambling" by letting Americans link their Steam accounts to third-party sites, among them CSGO Diamonds, where skins were swapped for credits and bet on dice rolls. The suit compared skins to casino chips, noted that some sites didn't check ages, and alleged that Valve profited from the trades.
Days later, two popular YouTubers were revealed as the secret owners of CSGO Lotto, a site they had promoted as if they were ordinary players; the CSGO Lotto scandal tells that story. On 7 July a second class action, brought in Florida on behalf of a minor, was amended to add CSGO Lotto and its two owners as defendants alongside Valve. And Washington State's gambling regulator had been asking Valve questions since February.
The statement of 13 July 2016
Valve's answer was a short post on Steam titled "In-Game Item Trading Update", signed by Erik Johnson. Its main points:
- Valve had no business relationship with any of the gambling sites and had never received revenue from them.
- Steam had no system for turning in-game items into real-world money.
- The sites relied on two things: OpenID, the sign-in standard that lets a user prove which Steam account and items are theirs, and automated Steam accounts that made "the same web calls as individual Steam users".
- Running a gambling business that way "is not allowed by our API nor our user agreements", and Valve would start sending notices asking the sites to stop operating through Steam.
The post ended with a line aimed at players: "Users should probably consider this information as they manage their in-game item inventory and trade activity." It framed the problem as a breach of Valve's own terms; it said nothing about whether skin gambling broke any law.
The cease-and-desist letters
About a week later, Valve's general counsel wrote to 23 sites, CSGO Lotto and CSGO Diamonds among them, and Valve confirmed to Ars Technica that the letter was genuine. It told each site that it was using Steam accounts for business, that the Steam Subscriber Agreement licenses Steam "for personal, non-commercial use only", and that if the commercial use didn't stop within ten days, Valve would pursue "all available remedies including without limitation terminating your accounts".
The letters relied on contract, not gambling law: Valve's lever was its power to close the accounts that the sites' bots ran on. By the autumn Valve said it had sent letters to more than 40 sites and shut down the Steam accounts they used.
The lawsuits
| Date | Event |
|---|---|
| 23 June 2016 | McLeod files in Connecticut against Valve |
| 7 July 2016 | Florida class action adds CSGO Lotto and its owners |
| 4 August 2016 | McLeod and dozens of other plaintiffs file a new case in federal court in Seattle, also naming CSGO Lotto and its owners |
| 4 October 2016 | The Seattle judge dismisses the federal racketeering (RICO) claim |
| December 2016 | A follow-on class action, G.G. v. Valve, lands in federal court in Seattle |
| January 2023 | An appeals court upholds the dismissal of the last claim in G.G. v. Valve |
The McLeod case ended quickly. On 4 October 2016 the judge granted a motion to dismiss brought by CSGO Lotto and its president, holding that "gambling losses are not sufficient injury to business or property for RICO standing", the requirement for suing under that law. With the only federal claim gone, the state-law claims were dismissed too; a November amendment left the plaintiffs free to refile them in state court.
G.G. v. Valve ran for six years. The court sent the claims to arbitration under the Steam Subscriber Agreement in April 2017, and the case was dismissed in March 2019 after the arbitrators ruled for Valve. An appeals court let the parents' own claims go back to court, but in December 2020 the judge dismissed everything based on skin gambling, and in January 2022 the last remaining claim, by then about loot boxes, ended in Valve's favour. The appeals court upheld that in January 2023.
Washington State's demand
The most serious pressure came from Valve's home state. In September 2016 the Washington State Gambling Commission's director, David Trujillo, wrote to Valve co-founder Gabe Newell, and on 5 October the commission announced that it had ordered Valve to stop skin gambling through Steam. Its press release said every third-party gambling site had Steam accounts and used Steam to carry out its gambling transactions, gave Valve until 14 October to respond, and Trujillo's letter warned of possible criminal charges.
Valve answered a few days after the deadline. Its counsel wrote that Steam and CS:GO were lawful under Washington law, and that Valve was "surprised and disappointed" that the commission had publicly accused it and threatened its employees with criminal charges, adding that there was "no factual or legal support" for the accusations. Valve said again that it had no relationship with the sites and earned nothing from them, and pointed to its letters and account shutdowns. It said it would not shut down its Steam marketplace, and that policing the sites was hard: they appear and vanish without Valve's knowledge, and their bots are hard to tell apart from ordinary traders. It offered to keep working with the commission.
What the crackdown did and didn't stop
Some sites closed or stopped taking skin bets within weeks, CSGO Lotto among the first. But the effect was partial. In January 2017 ESPN reported that about half of the sites Valve had targeted were still open, and that new ones kept appearing outside the United States.
Valve's later tools changed how trading itself works. In March 2026 it said it had locked more than a million Steam accounts misused by third parties for gambling, fraud and theft, had added trade cooldowns and trade reversal partly to discourage gambling sites, and bans gambling-related businesses from taking part in or sponsoring tournaments for its games. The history of CS:GO gambling puts those changes in order, and how the law treats skin gambling covers where regulators stand today, including New York's 2026 lawsuit against Valve.
For players, the July 2016 warning still holds. Valve treats using its game items on gambling sites as a breach of the Steam Subscriber Agreement, and says it shuts down accounts it finds doing so.
Sources
- In-Game Item Trading Update — Steam News
- Valve lawyers send cease-and-desist letters to Counter-Strike gambling sites — Ars Technica
- Counter-Strike player files suit against Valve over illegal gambling surrounding CSGO — Polygon
- McLeod v. Valve Corporation, order granting motion to dismiss — Justia
- G.G. et al v. Valve Corporation, docket — Justia
- Valve fires back at Washington regulators over facilitation of Counter Strike online gambling — GeekWire
- How Counter-Strike turned a teenager into a compulsive gambler — ESPN
- About the New York Attorney General lawsuit against Valve — Steam Support
