## A Skin Controversy – iGB
CS:GO developer Valve has issued cease and desist notices to sites that blur the boundary between virtual money and actual cash, providing skin gambling. However, with an estimated $7 billion wagered this year, this unmonitored market won’t disappear easily, writes Christina Takor-Rankin, advisor at 1710 Gaming.
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Skin Controversy
CS:GO developer Valve has issued cease and desist notices to sites that blur the boundary between virtual money and actual cash, providing skin gambling. However, with an estimated $7 billion wagered this year, this unmonitored market won’t disappear easily, writes Christina Takor-Rankin, advisor at 1710 Gaming.
Over the past year, the betting and gaming sector has become increasingly interested in a new “craze” called esports, a term used to describe organized competitive computer gaming. And for good reason. One of the most popular games in this sector, Counter-Strike: Global Offensive (CS:GO), boasts about 380,000 unique active players at any given time, recent tournaments have drawn over 70 million viewers, and the industry is expected to earn nearly $20 billion this year.
Competitive gaming isn’t a new phenomenon, despite the recent surge in interest. Broadcasters like the BBC, Sky Sports, and ESPN are now covering esports events, attracting a projected audience of nearly 300 million viewers by year’s end. Top brands like Coca-Cola are sponsoring events, and US universities are even offering scholarships for esports athletes. The idea of competitive gaming has existed since the dawn of computer games. In 1980, Atari hosted the first major event, dubbed the “Space Invaders Championship,” drawing over 10,000 participants. This trend continued with games like Pac-Man, Donkey Kong, and even made its way into films like “Tron.” As consoles gained popularity in the 1990s, gaming shifted from public arcades to private homes. To keep players engaged and maintain market share, console manufacturers began hosting their own tournaments, like the Nintendo World Championships.
From private homes to massive arenas
The internet accelerated the growth of this worldwide phenomenon, transforming the old model of playing computer games in physical locations with a limited number of opponents into a massive virtual global arcade. This paved the way for massively multiplayer online games (MMOG or MMO), making competitive gaming accessible to everyone. What was once about fame, getting into the Guinness Book of World Records, winning trophies, and free trips to the finals, has now become a major industry and a source of significant revenue.
Lets contrast the £6.5 million reward fund of the traditional Open Championship in golf with the £14 million reward fund of the Dota 2 competition. Fundamentally, this is just a computer game, but the magnitude of the reward fund could make any professional golfer contemplate swapping their clubs for a joystick. Just as poker did in the early 2000s, the size of the reward fund has inspired many amateurs to leave their regular jobs, leading to a new type of esports “professionals” or “athletes” who adhere to training programs, have representatives, and take part in team transfers. The top five players globally have each earned over $1.8 million so far, with top teams earning $9.4 million, and the recent Call of Duty championship had a $2 million reward fund shared by 127 players, with the top prize being $200,000.
Considering these substantial sums at stake, and the many similarities to other popular sports and entertainment activities, it’s not surprising that betting companies are eager to participate and profit. There are clear concerns about permitting betting on an activity that is equally appealing to those under 18 and those over 18 – the youngest professional, Benedict “McCool” Ward, is only 13. However, ultimately, at least within the framework of regulations, this is simply another activity that can be wagered on, and is subject to the same controls and safeguards as football, the Olympics, or talent shows – all of which can have contestants under the age of 18.
Beyond Regulation
Considering this, you might wonder, why all the commotion? The crux of the matter is regulation – or rather, the lack of regulation that allows those who can’t access esports through conventional channels to now enter through virtual currency “skin” gambling.
This originates from the idea of in-game purchases, where gamers can pay for extra features and attributes to aid their advancement, instead of earning or acquiring them through gameplay. This isn’t a novel concept – even basic games like Candy Crush Saga offer in-game purchases, such as additional lives. In the realm of esports, “skins” are akin to decorative coverings or stickers on a player’s in-game weapons, which can be obtained through gameplay or bought directly.
They are purely aesthetic and have no gameplay function, although different patterns, hues, and textures can be employed strategically, such as for concealment. Initially, in-game purchases and acceleration features had little worth outside of the game. This all shifted with Valve, the creator of Counter-Strike: Global Offensive (CS:GO), where players form terrorist and counter-terrorist teams in the game and then engage in combat, introducing the notion of “skin trading,” permitting players to “experience all the excitement of illicit weapons trading without having to frequent dark warehouses and risk getting stabbed.”
Putting aside the moral and ethical concerns surrounding games that feature terrorists as central characters and the excitement of promoting illegal weapons deals to young people, Valve’s decision to let players buy and sell virtual items outside the game blurs the distinction between virtual and real-world money. They change virtual features into goods with actual monetary worth in the real world.
In regulated gambling markets, players can wager cash on esports events in a traditional way, which is hardly valuable unless these services are unavailable for some reason, such as age restrictions. However, in an unregulated market, it provides a way to exploit the law’s silence or inadequacy on cash gambling while remaining silent or inadequate on virtual currency, something social games have never done.
Here’s how it works. Go to a skin gambling website, trade virtual items for “tokens.” Use “tokens” to place bets. Trade tokens back into virtual items. Sell virtual items for cash. This is very similar to Bitcoin gambling websites, which bypass the legality of cash gambling by playing virtual cards. However, the main difference between Bitcoin and virtual items is that there are over 350,000 players daily, higher liquidity, lower volatility, and for players with limited resources, they can be obtained for free by playing the game, regardless of age. It’s like gambling operators offering free bets, with no wagering requirements, KYC, or age checks, to bet or process withdrawals.
For devoted esports enthusiasts, utilizing skill and judgment to forecast match outcomes is an inherent aspect of the experience, irrespective of the viewer or player’s age. For those who adore esports, predicting match results is an integral part of the game, regardless of their age. It appears only natural to employ this ability and judgment to augment your allowance, wagering on skins earned through free-to-play games.
It is unknown how many players under the age of 18 utilize skin betting websites, but considering the substantial number of teenagers who engage in gaming, with 38 million visitors to CSGO Lounge (a skin betting website) in a single month, coupled with player comments, the answer is likely disconcertingly high.
Sven, a 16-year-old from the Netherlands, commenced skin betting after a companion informed him that individuals could effortlessly generate income. “You become genuinely excited, hoping your team triumphs. Every kill, every round they win, you become more enthusiastic,” he stated to Bloomberg.
Xavi, hailing from Spain, began playing at the age of 17. “It doesn’t feel like you’re losing actual money… I believe a significant portion of the players are youngsters, due to their manner of communication and reactions. None of the sites I’ve played on requested my age. If they lose, players can become genuinely irate. It’s akin to a drug. They require gambling,” he revealed to Polygon.
Mats, from Germany, added: “I began playing CS:GO when I was 14, and initiated betting and gambling a year later. Most of my companions were within the same age range.”
He stopped after losing funds, never wanting to touch betting again. However, “A few of my companions are still spending a lot of money. The majority of them are young. This stuff is hazardous and very easy to get.”
Tino from California began with virtual goods, then “moved to prize websites – that’s when I started spending a lot, winning large sums and losing large sums,” and then “soon after, I became addicted to roulette websites. You get a thrill when you go all in and win big.” He informed Polygon that his 13-year-old nephew, seeing a CS:GO streamer win money on an online gambling site, started gambling with virtual items he earned playing the game. When he ran out of funds, he used his grandparents’ credit card to buy more virtual items and lost thousands of dollars.
These insights have alarmed officials. Under public pressure, Valve recently issued cease and desist orders to several sites offering virtual item gambling, but this seems to be just the beginning, and given the current stakes (estimated at $7 billion this year, according to Naurus Advisors/Eilers & Krejcik Gaming research), virtual item gambling isn’t going away soon.
If the above experiences are any indication of reality, the real danger of virtual item gambling isn’t just young people gambling, but that it can be a gateway drug, continuing to cause harm even after players have stopped playing video games.
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