New York Attorney General Letitia James has filed a lawsuit against Valve Corporation, claiming that Counter-Strike 2, Team Fortress 2, and Dota 2 promote illegal gambling to minors. 

James alleges the games entice users to gamble money to win rare, valuable items. Under New York state law, this amounts to illegal gambling. 

New York does not allow online casinos, and James claims loot boxes in the games are essentially slot machines or lotteries. 

The lawsuit notes that most users spend more on virtual keys to open loot boxes than the value of the items they receive. However, the hope of hitting the jackpot and receiving a rare, high-value item keeps players gambling. 

“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,” says the complaint. 

Valve Business Model Revolves Around Illegal Gambling

James said, “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 the company has deliberately offered its games for free while devising a business model to profit from users’ gambling. 

“Seeking a new way to monetize its most popular games, Valve introduced cosmetic virtual items into its flagship games,” writes the lawsuit.

Valve first introduced these items in Team Fortress in 2011, making them available for direct purchase on Steam. 

Two years later, the company devised a more lucrative way to monetize the items by introducing loot boxes, alleges the complaint. This model was soon introduced to CS2 and Dota 2. 

Valve Also Blamed For Skins Gambling Among Youth

A report on skins gambling also claimed Valve should do more to stop the phenomenon of minors using items from its games to gamble on third-party sites. 

One survey respondent stated, “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 prohibited event organizers and esports teams from promoting third-party skins gambling and case opening sites.

The lawsuit claims that although the company has taken a public stance against skins gambling sites, it is not restricting third-party marketplaces that allow users to buy and sell items gained from loot boxes. 

It alleges this encourages more users to gamble on winning valuable items, generating more profit for Valve. 

The company takes a 15% commission on sales, which the filing claims has generated millions of dollars from New Yorkers. 

Will New York Shut Off Valve?

James said 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.”

Other courts, however, have been reluctant to categorize loot boxes as gambling. Last month, the Austrian Supreme Court ruled against a player who sued EA, alleging its loot boxes were illegal gambling. 

In its judgment, the court said “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 includes elements that depend on the player’s skill, the court found it is not a game of chance and is therefore not illegal gambling. The player, therefore, was not refunded any of the €20,000 ($24,000) he spent on loot boxes. 

The lawsuit in New York demands that the court order Valve to pay back users in the state who have spent money on loot boxes. In addition, it wants Valve to pay a fine for its illegal activities and remove loot boxes from its games. 

It will now be left to the Supreme Court in New York to decide whether it agrees with James or takes a similar stance to the Austrian courts.