New York Attorney General Sues Valve, Alleging Loot Boxes Are Illegal Gambling
New York’s top legal official, Attorney General Letitia James, has taken legal action against Valve Corporation. She claims that popular video games like Counter-Strike 2, Team Fortress 2, and Dota 2 encourage underage players to gamble.
James says these games lead players to spend money hoping to win valuable in-game items. According to New York’s laws, this practice is considered illegal gambling.
In New York, online casinos are not permitted. James argues that the “loot boxes” found in these games are basically like slot machines or lotteries.
The lawsuit points out that most players end up spending more money on the special keys needed to open these loot boxes than the items they actually get. However, the chance of winning a rare and valuable prize keeps people playing and spending.
The legal document states, “Most people, therefore, purchase a key and open a loot box for the same reason people play the lottery or a slot machine—the potential of winning a large prize.”
Valve’s Business Model Tied to Alleged Illegal Gambling
James stated, “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.”
The lawsuit claims that Valve has intentionally offered its games for free, while creating a way to make money from players gambling.
The legal filing explains, “Seeking a new way to monetize its most popular games, Valve introduced cosmetic virtual items into its flagship games.”
Valve first added these kinds of items to Team Fortress back in 2011, making them available for purchase directly on their Steam platform.
About two years later, the company found a more profitable method to make money from these items by introducing loot boxes, the lawsuit alleges. This system was soon put into Counter-Strike 2 and Dota 2 as well.
Valve Also Blamed for Skin Gambling Among Young People
A previous report about gambling with in-game “skins” also suggested that Valve should do more to prevent young people from using items from its games to gamble on other websites.
One person who responded to a survey mentioned, “A lot of the games with tradeable skins are from Valve, so I think they have a huge part in this being possible at all.”
Valve has officially forbidden event organizers and esports teams from promoting third-party websites that deal with skin gambling and opening virtual “cases.”
However, the lawsuit claims that even though Valve has publicly spoken out against skin gambling sites, it hasn’t stopped online marketplaces where players can buy and sell items they get from loot boxes.
The suit suggests this encourages more players to gamble in hopes of winning valuable items, which ultimately makes more money for Valve.
The company takes a 15% cut from these sales, which the lawsuit claims has brought in millions of dollars from people in New York.
Will New York Stop Valve?
James stated that she “seeks to permanently stop Valve from promoting gambling features in its games, disgorge all ill-gotten gains, and pay fines for violating New York’s laws.”
However, other courts have been hesitant to label loot boxes as gambling. Just last month, the Supreme Court in Austria ruled against a player who sued EA, claiming its loot boxes were illegal gambling.
In its decision, the court noted that “the acquisition process of loot boxes cannot be considered in isolation from the rest of the video game for the purposes of gambling law assessment.”
Because the game involves player skill, the court decided it wasn’t a game of chance and therefore not illegal gambling. The player did not get back the €20,000 (about $24,000) he had spent on loot boxes.
The lawsuit filed in New York is asking the court to order Valve to repay players in the state who have spent money on loot boxes. It also wants Valve to pay a penalty for its alleged illegal actions and remove loot boxes from its games.
Now, it will be up to the Supreme Court in New York to decide if it agrees with Attorney General James or if it will follow a similar path as the Austrian courts.
