Overzealous Washington State Gambling Regulators Target Popular Video Game Developer

Valve's Steam platform's been used by players to facilitate games of chance, and the company is in hot water with regulators who want their skim as a result.

Valve is best known as the developer of popular games like Counter-Strike: Global Offensive and its Steam gaming platform. But to Washington state regulators, the company is a rogue outfit, enabling illegal games of chance through the nefarious means of… well… making its software user-friendly.

As in many American states, gambling is legal in Washington if overseen by politicians' friends and if the house—the government—gets its cut. The state hosts tribal casinos, raffles, card rooms, bingo, fund-raising casino nights, amusement games, and a state lottery. But state residents can't legally wager online because "Internet gambling has never been authorized and is illegal in Washington State," according to the Washington State Gambling Commission.

Strictly speaking, regulators aren't accusing Valve of actually operating games of chance. They're not even accused of offering a venue for gaming. Instead, the company is allegedly "guilty," if that's the right word, of letting players exchange in-game items—known as "skins"—with one another. This is somehow a violation because players and third-party companies working independently of Valve found a way of using those skins as markers in betting on other platforms that have nothing to do with Valve.

Basically, players discovered they could use the neato stuff they acquired in the game as poker chips.

"The Gambling Commission expects Valve to take whatever actions are necessary to stop third party websites from using 'skins' for gambling through its Steam Platform system, including preventing these sites from using their accounts and 'bots' to facilitate gambling transactions," according to a press release issued October 5. The Commission was quite cross that skins continued to be used in gambling months after it first "contacted Valve Corporation in February 2016" about the issue.

Actually, the Gambling Commission was a bit late to the issue—Valve itself was there first.

"In 2011, we added a feature to Steam that enabled users to trade in-game items as a way to make it easier for people to get the items they wanted in games featuring in-game economies. Since then a number of gambling sites started leveraging the Steam trading system, and there's been some false assumptions about our involvement with these sites. We'd like to clarify that we have no business relationships with any of these sites," the company noted in July 2013. "Using the OpenID API and making the same web calls as Steam users to run a gambling business is not allowed by our API nor our user agreements. We are going to start sending notices to these sites requesting they cease operations through Steam, and further pursue the matter as necessary."

And Valve did just that. But as the Seattle Times reported, some of the gambling companies "found a workaround: They began taking bets in virtual coins, which could be traded for skins, which could then be traded for cash, adding a layer of abstraction while allowing the basic activity to carry on."

So the Washington State Gambling Commission is essentially complaining that Valve has been no more successful than playing card manufacturers in preventing the use of its products in ways that violate stupid and presumptuous local laws. The company acted, but it couldn't predict the innovative ways players and gambling sites would react to keep their fun going.

"The Washington State Gambling Commission has notified Valve Corporation that it must immediately stop allowing the transfer of virtual weapons known as 'skins' for gambling activities through the company's Steam Platform," the October press release adds, though it offers no ideas for how to do that promising greater success than the company's prior efforts.

Eliminating unapproved games of chance has proven an elusive goal for the Washington State Gambling Commission itself, which is why it can continue to announce raids on poker games decades after its creation. But in its diligent efforts, it has frequently picked unlikely targets for threats and enforcement actions.

At the end of 2013, it ordered a group of regulars to discontinue their penny-ante card games at the Snohomish Senior Center. There was an $11 pot in the games, which had been going on for 25 years.

And in 2008, the Commission hit PR Web with a cease and desist order forbidding the company to distribute press releases promoting online gambling sites.

The Commission even shut down a web site that reviewed Internet casinos—and threatened the Seattle Times for running a poker column.

But it's not that state regulators are inherently opposed to gambling. The Commission regularly issues press releases touting the contributions tribal gaming makes to communities and the similar wonders of licensed card rooms. "Commercial card rooms employ over 6,000 people," one release trumpeted, though you might wonder how many other jobs are at risk if the Commission seriously puts the screws to Valve, and how many it has already killed at unapproved gaming operations.

Invariably, these releases boast about money channeled to government coffers and approved causes (Up to 2% of table game net receipts are paid to governmental agencies impacted by Casinos! Gambling Taxes Paid to Local Jurisdictions: $29.4 million, Business & Occupation (B&O) Tax: $3.2 million, Problem Gambling Tax: $280,000!). Which is to say, the government is happy so long as it has a say and gets its skim. And established players in the gambling industry are willing to pay that protection money to regulators who watch their backs and drive competitors out of state—or at least underground.

Even if those competitors are a few old friends playing penny ante in a senior center.

And even if those competitors are video game companies whose products have incidentally become popular for use in games of chance.

Given that Valve never set out to be a gambling company and the use of its skins for wagers is an unintended third-party innovation, it's hard to see how the company can ever satisfy the regulators. Will it have to cripple its offerings, removing popular features to keep them satisfied?

Or maybe the company should admit it's playing a rigged game and give regulators the stuffed envelopes they so obviously covet if they'll just let the good times continue.