The true cost of Counter-Strike skin gambling

In the wake of a video game betting craze, the reckoning arrives

When Counter-Strike: Global Offensive gamblers talk about the money they've lost, their stories follow a familiar pattern.

The CS: GO player says he (usually we're talking about a young man or a boy) developed an interest in collecting virtual in-game items, known as skins. He was also attracted to professional CS: GO tournaments.

He decided to use some unwanted skins to bet on a favored team. At some point, he heard about pure gambling sites on which skins were wagered on coin tosses, roulette wheels and random number generators. He decided to give it a try. He won some. He lost some. Almost always, the wagers increased over time.

"I started out with just an interest in skins and opening [in-game weapons skin] cases that were dropped," said Peter from South Carolina. "Every now and then I would buy some cases and open them with friends. Then I started betting skins on professional games. Friends convinced me to start gambling on websites that were more like slot machines."

Peter says he quit gambling before it got to be a problem, but others were not so fortunate.

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"I started out betting carefully on pro games, and making sure that I bet the right amount and on the right matches," said Adam from Maryland. "I was organized. It was like an investment strategy. But once I moved onto the jackpot sites, that's when I just started throwing money around, getting huge profits and huge losses. That's when I fell down, when everything became addicting."

Adam, a student, lost $1,200 in a single bet. He says he won't gamble again. His advice to anyone thinking of betting skins? "Don't start. Once you start, you just want to do more and more and more."

Tino from California says he's been successful betting on professional games. He estimates that he's made more than $4,000 over the last few years.

"I was pretty good at predicting games, once I learned about all the teams," he said. "A little while later, I got hooked on roulette sites. There's a rush when you go all-in and win big. Then you lose $50 and you feel the need to throw down $100 in order to recuperate those losses."

He says skin gambling has exacted a big price from his family. His 13-year-old nephew watched a CS: GO streamer win a lot of money on an online gambling site. The boy started to play, using skins he'd earned while playing CS: GO. When he lost his money, he used his grandparents' credit card to buy more skins, without their knowledge. He lost thousands of dollars.

"There was a big fight between the whole family," said Tino. "He ended up getting sent away to a rehab center."

An unfolding scandal

In the last few weeks, it has emerged that YouTubers like Trevor "Tmartn" Martin and Tom "Syndicate" Cassel created videos of themselves winning cash on the website CSGO Lotto, while failing to disclose that they owned the gambling site. Martin and Cassel are currently the subject of a class-action lawsuit.

Streamer Moe "m0E" Assad was given results of dice rolls in advance, while he was paid to promote a site called CS:GO Diamonds.

Valve, the company that publishes CS: GO and which ultimately controls the trade in skins, announced last week that it would "start sending notices" to gambling websites "requesting they cease operations."

The company and various third-party websites are being sued by a CS: GO player for allowing an "illegal online gambling market" to spring up and propagate around the popular online shooter.

Valve's statement did not acknowledge the fact that large numbers of people gambling on these sites are children and minors, or the vast amounts of money made by the sites' proprietors.

The company's decision to address skin gambling is likely to have wide implications for betting websites and for the wider CS: GO market.

Big losses

In the wake of Valve's cease-and-desist letters, many sites have shut down or have stopped running betting games. Chris Grove, publisher of Esports Betting Report, believes the financial effect on the CS: GO scene will be significant.

"You're likely talking about eight figures being sucked out of the pro economy in terms of sponsorships, referral income, and in some cases direct ownership." he said.

Real facts and figures on the size of the skin betting market are difficult to find. One estimate puts it as high as $7 billion a year. Most of the gambling sites are opaque about ownership and are unwilling to talk to the media. Those few owners Polygon are able to identify did not respond to requests for comment. Valve also did not respond to a request for comment.

"These operations tend to be small," said Grove. "Usually they are just a couple of people. Often they have evolved out of esports in some way."

"You're likely talking about eight figures being sucked out of the pro economy"

According to Ryan Morrison, an attorney specializing in the video game business and esports, the real challenge is yet to emerge as new betting sites pop up, seeking to flout Valve's directive and make quick profits.

"For a long time, Valve has being very complacent about these websites," he said. "They've been aware of them and they've looked the other way.

Morrison believes the company will need to be vigilant to stop new sites from emerging. "I'd love to see some active and ongoing involvement from Valve. Even if it means they have just one employee on top of this who can keep track of these websites."

Sales of skins and of keys that open random skin boxes, via Valve's Steam online retail service, help to fund massive prize pools that attract big esports franchises to major CS: GO tournaments, which in turn attract large online audiences that are monetized via advertising and sponsorship.

Valve's statement last week took care to point out that the company derives no direct revenue from gambling sites, but Morrison believes the entire CS: GO scene has benefited enormously from gambling, and specifically from minors who gamble.

"CSGO is one of the most popular esports in the world," he said. "It would be nowhere near that without the gambling element. It's popular because of the gambling. Yes, it has a hardcore gaming fan base and, yes, it's a very high skilled game. But with competitors like Overwatch out there, would it be getting new fans [every day], aged 15 and younger, without the skin gambling? Absolutely not."

David from Texas bets small amounts on esports. He believes the end of gambling will have a detrimental effect on the CS: GO economy. "A lot of people don't even really care about Counter-Strike, but they gamble, even on the lower level tournaments, with unknown teams.

"Those competitions get a lot of viewers because people like to gamble. I think their viewer numbers are going to go down.. A lot of people watch Counter-Strike just for the gambling."

Legal loopholes

Following Valve's announcement, streaming service Twitch said it will no longer carry streams of people gambling with skins. Clearly, big companies that previously tolerated skin gambling have come to the conclusion that it's a toxic issue.

With lawsuits against Valve, gambling sites and YouTubers yet to be resolved, there is still the issue of legality. In most countries, it is illegal for minors to gamble. And yet, millions of dollars worth of skins have been bet by people under the age of 18, all over the world.

"No one really knows how many children or teenagers are gambling," said Grove. "There's no hard data, but I think it would be disingenuous to think that there are no minors playing these games."

Xavi from Spain began playing when he was 17. He says he doesn't have a problem. But until the gambling websites closed, he played often.

"It doesn't feel like I'm losing real money," he said. "I realize the skins do have a value. It's my problem that it doesn't feel the same. I'm trying to stop."

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"I think a lot of the people playing are kids just because of the way they talk and their reactions. None of the websites that I play are asking my age.

"If they lose, players can get quite angry. It's like a drug. They need to gamble. I think it's damaging the [CS: GO] community."

In a Dickensian twist, Xavi works part time for a gambling site, moderating chat rooms and bets. He's paid in skins, which he uses to gamble.

"I started playing CS: GO when I was 14 and started to bet and gamble a year later," said Mats from Germany. "Most of my friends were around the same age."

After losing money, he decided to quit. "In retrospective, it was a good experience for me. I now know that I don't want to have contact with gambling ever again. But there are also a few friends of mine that haven't learned the same lesson. Some of them are still wasting tons of money. Most of them are teenagers. This stuff is dangerous and access is so easy."

Morrison said his law firm has received multiple calls from young people who have lost money, often taken from parents. "These kids don't know anything about the law but they are scared to tell their parents they just lost five grand betting online. I've been getting emails saying, 'I'm 12 and just lost $3,000 on a CS: GO gambling website, what do I do?'"

Legal protections are almost nonexistent, with state-level commissions unable to comprehend or process the problem.

"A lot of these commissioners don't even know how to open emails," said Morrison. "If you try to explain skin gambling to a legislator, it's near impossible. I've been trying for a long time. They don't know what this is."

Polygon contacted the Washington State Gambling Commission, where Valve is based. A spokesperson said, "I have not heard of anything lately that involved children gambling with skins from the game Counter-Strike."

A spokesperson for the British Gambling Commission commented, "We are paying close attention to the growing popularity of virtual or in-game items, which can be won, traded, sold or used as virtual currency to gamble. Where such items are money or money’s worth and facilities for gambling with them are being offered, we consider that the activity will need to be licensed."

Loss of skin

As gambling websites close their doors, concern is growing about the inventory they currently hold, which belongs to their customers (strictly speaking, the skins are licensed from Valve, which owns all CS: GO in-game items). Some websites, like CSGODouble, have posted notices that they will return inventory to gamblers, while others have yet to make a statement.

Rajesh Jayaraman runs Getplank, a skin trading website that does not offer gambling services. "The value of these items is pretty large," he said. "As the gambling sites shut down, we're going to see which were the reputable sites and which were not. Users are panicking, especially about those sites that have a sketchy reputation. People are asking themselves if they are going to lose their skins."

Jayaraman said the situation could have a wide effect on skin prices. "Clearly the amount of liquidity in the market is going to reduce because people who were there for gambling will leave, but there [is] still [a] large number of people who are trading and who are not going anywhere." He said that high-priced knives, often used for betting, have dropped in price over the last few days.

"Once you start you just want to do more and more and more."

Some skins were used almost exclusively as gambling tokens. Gamblers who own those skins are likely to see a reduction in price. "The gambling sites put a collar on the price of certain skins," said Jayaraman. "So I think the prices for those will change in a more free market manner going forward."

Like Morrison, Jayaraman believes new gambling sites will emerge that seek to transgress Valve's dictum. Gambling sites use Valve's APIs to access Steam, and operate in much the same fashion as trading sites. In effect, users are trading skins, even though the transaction is presented as gambling.

"A lot of the sites use bots to access Steam. But they can use VPN and other cloaking techniques to disguise where they're coming from. Right now it seems all Valve is doing is sending these cease-and-desist letters to the site operators and maybe hoping that this will go away. But if they truly want to ban gambling they are going to have to shut down these bots.

"If they shut down a bot and people have deposited items with that website, they will be left stranded. There is no recourse, no way of getting their skin back. So that is another risk that users of these sites now run."

"Practically, it's going to be difficult to maintain item trading while closing down gambling," said Grove. "To anyone tracking activity, one trade looks the same as another. Obviously there would be clues in terms of volumes or the names of the bots, but people evolve."

Fun and entertainment

For some, the end of easy-access skin gambling will be a loss. Although many people have lost money playing these websites, a lot of the gamblers we spoke to enjoyed the experience, even if they lost money.

"Up until the end, I had fun with it," said Sam from Hawaii. "I wasn't betting anything massive. It didn't matter if I won or lost." He spent a lot of time trading items, and enjoyed gambling on the side. "I'd make small bets using stuff that I got naturally through playing CS: GO. I won big on a couple, lost everything on others."

Michael from British Columbia used to bet on esports. "It was fun at first, but I noticed that sometimes it would stress me out or make me feel anxious if I wasn't able to watch the matches I had bet on. I'm honestly glad I stopped when I did.

"Most of the people who frequently talk about [skin gambling] seem compulsive or addicted to it and would always talk about ongoing matches regardless of their relevance. I had to stop playing with a lot of people who solely looked at the game as a betting tool, because it was annoying. There's certainly a chance I behaved the same way as well."

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Others see skin gambling as a fairly harmless diversion with a healthy social element. Kelsey from New York plays with her friends, all of whom are in their 20s. "We schedule playing a game of CS: GO and when we get tired of that we'll flip over to the gambling," she said.

"The experience was fun. My friends and I are sensible and aren't betting money we can't afford to lose. Being able to watch a roulette wheel in real time with friends all across the world and bet with each other or against each other's colors, it's a fun time."

Like many of the adult gamblers we spoke to, Kelsey sees roulette games as lightweight entertainment, but takes betting on real CS: GO matches a little more seriously. "I got into betting on matches because of my love for competitive Counter-Strike. I consider myself knowledgeable enough to know who would win against who."

With skin gambling sites closing, Kelsey says she likely won't move over to cash gambling sites to bet on esports. But she is concerned that skin gambling will be driven underground. "Gambling is not going to disappear. It's going to become even shadier. People will resort to selling and betting between middlemen. A lot of people, kids especially, are going to get scammed."

Reckoning with the bill

With the big skin gambling sites closing down, a clear and easy route for minors to gamble has been closed off. Although some form of underground skin gambling is likely to re-emerge, the loss of ease of access and the increase in risk makes it unlikely that CS: GO gambling popularity will ever be quite the same again. Shady YouTube videos extolling the virtues of betting are a thing of the past.

But there are still those who are paying a price.

"All these kids have been wronged," said Morrison. "They've been tricked or defrauded into playing on these websites. By definition, by law, they are minors. They don't know what they're doing. These kids' lives have been shattered."

"A ton of kids got into the scene as a way to get fast, expensive skins," said Tino, who added that his cousin is doing well in rehab. "I just gamble for fun occasionally, but as a whole, the gambling scene is very, very damaging."

"They don't know what they're doing. These kids' lives have been shattered."

"Valve could have cut these gambling sites a long time ago," said Adam. "I get angry when I think about those YouTubers who came out and said 'watch me win all this money in the space of a few minutes.' I feel like I wasn't given a fair chance at the game. It was rigged."

It's still possible that the gambling website owners, especially those who used YouTube to promote their services without making full disclosures, will have to face some sort of reckoning.

"A lot of people are panicking right now," said Morrison. "Some of these guys have never talked to a lawyer before. They felt they were above the law because they were making so much money and they were in a field that didn't have any legislative attention.

"But this has freaked a lot of them out. You can be sure they are calling attorneys now. I know they are going to be replaced by something equally shady and terrible but not by YouTubers with millions of younger subscribers and minor-age fans."Babykayak

Note: Some of the people interviewed for this article requested that we not use their real names. They expressed concern about relatives and potential employers identifying them as under-age gamblers. We have complied with those requests. If you feel gambling is becoming a problem in your life, you can find help here.