Monday, July 15, 2024

‘It’s rotting young people’s brains’: the murky world of gambling in video games

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No one likes to imagine they might have given a loved one a ticket to a gambling problem as a gift. But Jeff, a professional video gamer, thinks well-meaning parents, partners and friends may have done just that if they have celebrated a special occasion by presenting someone with a voucher for an online gaming platform.

Jeff is prodigiously talented at Counter-Strike: Global Offensive (CS:GO), a wildly popular military-style shooter played by millions around the world. He has 750,000 subscribers on YouTube alone, a highly engaged fanbase willing to spend money on their hobby.

One day in spring last year, Jeff opened an email from his agent and his eyes widened. A company was willing to pay him $280,000 over two months in exchange for just a handful of 30-second advertising spots on his YouTube channel.

But rather than grab the opportunity with both hands, Jeff took a different approach. He decided to break ranks with the elite CS:GO player community and battle a new enemy by exposing the murky business behind the tantalising offer: “skins gambling”.

“I wanted to show how unregulated gambling is rotting the brains of young people,” he said.

For the uninitiated, “skins” are virtual items within a computer game that can be bought for money, or won as a reward for gameplay. Skins might be devastating weapons, a snazzy uniform for a character or – in a football game – a player who could be the missing link to complete an all-conquering team.

Characters from Counter-Strike: Global Offensive. Weapons and outfits can be bought for real or virtual currency. Photograph: Screengrab

As the cost of developing video games has soared, such in-game spending opportunities have helped gaming companies open up new sources of regular, repeating revenue that extend beyond the initial purchase.

Typically, skins are contained in “loot boxes” or “cases”, which gamers pay small sums for without knowing what they will get.

Loot boxes have already become a lightning rod for controversy due to their gambling-style mechanism, although the UK government has refused to recognise them as gambling products.

While skins can be found in loot boxes, they can also be bought in the online marketplace operated by online gaming platform Steam – the medium through which many games such as CS:GO are played.

Through that marketplace, skins can also be transferred between players and into the game. There, competitors can use them to gain an advantage, or just for cosmetic effect.

What bothered Jeff, however, was not so much the loot boxes or the skins in themselves but another phenomenon that they have spawned: skins gambling.

This works like any other casino. You load up your account with funds, place a bet, watch the graphics spin and either win or lose.

The big difference in this case is that the casino taking your bet has no gambling licence and, in some cases, no reliable mechanism to stop under-18s getting their first taste of gambling – via an online ecosystem that is, to many parents, a total mystery.

Nor can you win any money, at least not directly. In the world of skins gambling, websites allow gamers the opportunity to stake cash, cryptocurrency or even other skins for the chance of winning a skin of great value.

If you do win, the gambling website effectively procures the skin on your behalf, through a peer-to-peer skins trading platform, and passes it on to you for use in the game.

Some skins carry enormous price tags in the real world. One website that tracks skin prices values a “Gungnir” sniper rifle, available in the CS:GO game, at more than $18,000. A knife – a “factory new, case-hardened Karambit, pattern 387 (blue gem)” – is reputedly the most expensive CS:GO skin in history, attracting a $1.5m offer that its owner turned down. Further down the scale, guns, outfits, stickers and knives sell for hundreds of dollars.

The buying of ‘loot boxes’ – an assortment of items sold sight unseen – also contains an element of luck. Photograph: James Thew/Alamy

The overall size of the skins wagering market is not well charted but one estimate from 2016 put a figure of $3bn on the amount wagered through skins casino sites.

CS:GO is almost the only game in town when it comes to skins and their use in gambling, with the majority of such sites focusing almost exclusively on skins linked to the game.

The operator that offered the promotional deal to Jeff, Cyprus-based KeyDrop, attracted almost 17 million visitors in one month last year. It has dozens of competitors, sites such as Hellcase, from Singapore, Belize-registered CSGORoll and CSFail, whose website cites a UK address in Ellesmere Port, Cheshire.

None of these sites has a licence from a gambling regulator such as the UK Gambling Commission. Yet the service they offer bears striking similarities with an online casino, including games that mimic roulette, slot machines or other games of chance. The only difference, ostensibly, is that you are wagering to win a digital asset rather than cash you can take to the bank.

So far, in the UK at least, the ability to “cash out” is a crucial determining factor in whether an activity is defined as gambling or not. The government stopped short of designating loot boxes as gambling earlier this year partly on this basis.

But the reality is that it can be literally child’s play to turn skins into hard cash. To use sites such as KeyDrop, players must have an account on the Steam platform, which was created by the maker of CS:GO, US-based game developer Valve.

Steam has its own marketplace, where gamers can trade skins. Gift cards to help gamers buy such skins are big business at Christmas, an obvious choice for anyone with a relative or a friend who loves nothing more than spending hours in front of a game.

The Steam marketplace is self-contained, at least initially. You can load cash into your wallet and use those funds to buy skins from Steam or from other gamers. You cannot, however, withdraw the funds. In ­theory, therefore, the marketplace is not somewhere you could properly cash out any winnings.

But an industry has sprung up: third-party marketplaces such as SkinBaron and Skinwallet, where you can sell skins, including those won on gambling sites, for real money.

Jeff thinks that while Valve does not endorse or take a cut from skins gambling, or the third-party websites where bettors can effectively cash out their winnings, it benefits indirectly from this little-scrutinised industry. “It [skins gambling] helps drive the value of the skins up and Valve takes a cut of every Steam market sale. So in the end they get more.”

Plenty of other participants in the world of online gaming benefit too. When Jeff rejected the offer to promote skins gambling, he instead set about making a documentary, raising his concerns about the industry.

That meant exposing some of the biggest names in esports – the professional video gamers who make a good living from sponsorship deals with the very websites Jeff was openly condemning.

Of the top 300 CS:GO streamers, more than 200 are sponsored by the industry.

Two professional gaming teams competing against each other in Counter-Strike: Global Offensive. Photograph: Christophe Archambault/AFP/Getty Images

Perhaps unsurprisingly, there has been some backlash to Jeff’s decision to blow the whistle. While the response from ordinary gamers has been positive – comments on his YouTube channel are overwhelmingly congratulatory – he has received threats and intimidation too.

“We know where you live my dude,” one anonymous person wrote.

Skins gambling has grown increasingly controversial in the gaming world amid the growing realisation that what looks like just another facet of gaming is actually more akin to bog-standard gambling.

A study published last year, led by Dr Heather Wardle of the University of Glasgow, found that, among adults, participation in skins gambling was a reliable predictor that someone would develop a gambling problem – more reliable than the playing of high-octane casino products such as online slot machines.

Slowly, parts of the CS:GO community and the wider world of gaming appear to be growing uneasy about this. Soon after Jeff’s documentary aired, Twitch – the user-generated video-streaming site where gaming is big business – banned the promotion of skins gambling.

G2, one of the world’s top esports teams, came under fire recently for announcing a partnership with the skins website CSGORoll – a tie-up launched by one of their star players, who had turned 18 the day before.

G2 appears to have started removing CSGORoll imagery from its own material recently, although the team still features prominently on CSGORoll’s own site.

CSGORoll said it was not offering a gambling product and that it used third-party age verification services to check that customers who deposited more than £500 were aged 18.

Some governments are taking notice. Denmark has blocked the IP addresses of several skins gambling sites, while countries such as France are taking similar steps and the Netherlands is understood to be behind proposals to legislate at European level. The UK, by contrast, has taken no action at all.

The UK Gambling Commission has previously expressed concerns about this but there is little, in practice, that the regulator can do when the law does not recognise skins casinos as gambling platforms. The regulator said it was “continuing to explore the legal position of different models”.

A spokesperson for SkinBaron said Steam’s owner, Valve, had introduced a seven-day lock on trades of skins, making skins “not a valid short-term payment option” for gambling. They said SkinBaron operated a strict over-18s policy.

Hellcase said its service was not gambling and that it operated an over-18 age gate.

CSFail and KeyDrop did not return a request for comment. Skinwallet could not be reached. Valve did not return a request for comment sent via its website.

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