Over the last few months, the intersection between competitive video gaming and eSports with gambling has gone into proverbial overkill. More and more mainstream gambling operators are adding eSports betting services to their 24-hour betting options menu.
However, the evitable has happened. The murky world of Skin Gambling on popular eSports game franchises has blown up just like one of the characters in Counter-Strike: Global Offensive (CS: GO). Are we witnessing another Daily Fantasy Sports styled backlash from conservative regulators looking to quash a flourishing albeit yet unregulated activity? Industry eSports and digital betting consultant Mark McGuinness explains.
Yes, folks, the elephant in the room, has well and truly stampeded into the world of eSports, and it’s the evil twin in some quarters referred to as skin gambling or skin trading.
Firstly let’s recap on what skin gambling or trading is? Skin Trading is an economy built around the buying and selling of decorative virtual in-game items or more commonly referred to as ‘skins’ that can be acquired in the video game and sold for real money.
Skins are central to the actual player and game experience for the titles by American video game developer and digital distribution company, Valve, who introduced them a few years ago via their digital marketplace platform called Steam.
The company which is located in Washington and is the maker of the immensely popular video game franchises such as Dota 2 and Team Fortress. The jewel in their crown CS: GO (Counter-Strike Global Offensive) has sold 21 million copies of the game and made $567 million in total revenue for Valve, provides an idea as to how popular and lucrative these games are.
Skin gambling or skin trading has given rise very quickly to prodigious eBay style community marketplaces which are connected indirectly to Valve’s Steam platform via API technology. These platforms of which there are many like CSGO Lounge, CSGO Diamonds and OPSkins provide the ability to buy and sell ‘skins’, such as knives, guns related to the video games Counter-Strike, Dota 2 and Team Fortress 2. The players use or transfer their skins from Valve’s Steam platform and can then bet these in-game skins in tote pools, either on the outcome of eSports matches or in casino style jackpots on the likes of CSGO Lounge, CSGO Diamonds or OPSkins. They generate millions of dollars in betting trades per day.
The actual market size is difficult to determine as most of the skin trading platforms are unregulated, but some industry observers including Bloomberg suggested that the skins market in 2015 was worth $2.3billion with some 3million plus active players. The stats are significant and growing. If we take OPSkins, of which their website publishes user data, they had 1,845,384 players total to date and 8,482 players active in the last 48 hour period. You can visit the site to see the real-time stats yourself, the skins listed, of which over 881,447 skins sold each week. Skins can go for a couple of dollars to thousands of dollars, with thousands of transactions a day and OPSkins is just one of hundreds of similar sites.
Regarding the money flow and economics, its supply and demand. The majority of these skin platforms accept and cash-out daily using Bitcoin as the digital currency of choice to facilitate the trading activities taking place on the platform.
The elephant in the room
In somewhat striking similarity to how insider trading brought about the implosion of Daily Fantasy Sports in the USA, a similar series of unfortunate events has arisen in eSports and Skin Gambling. A games player named Michael John McLeod recently filed a lawsuit in June of this year against Valve Software, the owners of the Steam platform and the game maker of Counter-Strike: Global Offensive (CS: GO).
The lawsuit centres on the accusation that Valve is indirectly profiting from illegal gambling surrounding its game Counter-Strike: Global Offensive and therefore aiding and abetting illegal online wagering as it pertains to the various Federal Acts in the USA.
Furthermore, while details are still sketchy according to the lodged papers, McLeod hasn’t indicated how much he is seeking in punitive damages and compensation. He did state that the company (Valve) did and was aware of the interdependencies between its game, its platform and skin gambling.
It’s been well-known from within the burgeoning eSports fixed odds betting vertical that skin gambling which is virtually an offshore and unregulated activity could have a ‘first kill’ on the growing regulated eSports betting market by association.
It’s clear with this lawsuit that district attorneys shall be looking to shut down the industry, not just because it’s grey and unregulated, but one of the highly controversial natures of skin gambling is that, players can set-up accounts with little to zero age verification or the acceptable legal age of eighteen. This has huge societal issues if a thirteen-year-old can register an account for a skin platform and start gambling his game skins.
Only time will tell as at the date of writing Valve have yet to respond to the allegations as to what the ramifications could be. My personal take is that because the skin gambling websites which are connected to Valve’s Steam platform via the API’s which are readily available, is that this access is bound to be rescinded or restricted thus cutting off the supply of skins. This, in turn, is then obliged to affect the popularity of the actual games such as CS: GO of which skin trading is intrinsically linked. It is likely to result in millions upon millions in lost revenue within the skin gambling ecosystem which has to by the laws of economics flow elsewhere.
Therefore perhaps using the idiom of; one man’s loss is another man’s gain, could result in regulated operators both pure play eSports and sportsbooks that are offering eSports betting products could gain some short-term customers. Let the games begin.
About the author:
Mark McGuinness has more than 15 years’ experience in digital marketing director roles within the iGaming industry. He is the co-founder of esportsbet a resource for gamers and sports bettors who wish to start betting on eSports.