Counter-Strike Is One of the World’s Most Successful Videogames. How It Also Became a Gateway to Gambling.
Videogame makers have disavowed connections to gambling, while regulators have looked the other way. Meanwhile, young gamers are placing their first bets.
By Nick Devor
As sports leagues and media companies embrace gambling, videogame makers have stood out for a more sober approach.
Popular games, often played by young consumers, are filled with rules that ban gambling and related sponsorships.
And yet the games have become the source of a booming underground betting economy.
Underage users, who are banned from physical casinos and sports gambling websites, often place their first-ever wagers with the help of their favorite videogames.
Players can take weapons, apparel, and other virtual items purchased for use in videogames and convert them to digital currency at specialized online gambling sites, akin to chips at a Las Vegas casino.
The games at such sites include roulette, coin flips, and slots.
The stakes are real—a virtual gun adorned with bright colors can fetch up to $400,000 on digital marketplaces. In videogame parlance, these items are known as “skins.”
At risk is the financial and mental health of millions of underage gamers around the globe.
A 2018 survey in the United Kingdom revealed that 10% of the country’s adolescents had participated in some form of skin gambling.
Academic research shows children exposed to skin gambling are more likely to report lower well-being and suffer from gambling addiction.
In recent years, videogame developers have tried to crack down, Congress has held hearings, and states have conducted investigations.
But a Barron’s investigation shows the efforts falling short, with game makers, regulators, and law-enforcement officials often standing by as the thriving ecosystem goes unchecked.
Barron’s found at least 73 gambling websites—largely based overseas—linked to Counter-Strike: Global Offensive, a popular game made by Bellevue, Wash.–based Valve Corp. Nearly a million people play the game, better known as CS:GO, every day.
Meanwhile, Big Tech platforms have fueled the issue by hosting popular videostreams that promote gambling sites and offer detailed tutorials.
Barron’s identified 120 streamers on Amazon.com –owned Twitch that are sponsored by skin gambling sites.
Google’s YouTube is replete with its own skin gambling content.
“You cannot look at CS:GO and not look at gambling anymore.
It is not possible,” says a YouTuber known as Houngoungagne, whose CS:GO-focused channel has 724,000 subscribers.
Houngoungagne is one of many popular content creators who have attracted massive followings around their videostreams posted to YouTube and Twitch.
The videos highlight not just CS:GO gameplay but also how to gamble with the game’s virtual items.
The posts, all in apparent violation of terms put forth by Twitch and YouTube, have millions of views, generating significant revenue for the creators and, less directly, for Valve, Alphabet -owned Google, and Amazon.
None of the companies responded to questions from Barron’s about what resources they dedicate to the enforcement of anti-gambling terms.
Since CS:GO was released in 2012, an estimated 205 million people have installed the multiplayer game, according to industry tracker Gamalytic.
The game, which pits teams of terrorists against counterterrorists, is one of the most successful entries ever in the first-person shooter genre, in which players see the action through the eyes of their character.
In September, Valve replaced CS:GO with Counter-Strike 2, or CS2, an almost identical game with updated graphics and performance.
There were no changes to the skin market; a player’s CS:GO skins became CS2 skins.
COURTESY CSGO STASH (LOOT BOX, SKIN); COURTESY SKINBET.GG (SCREENSHOT)Gambling isn’t exclusive to one videogame, but Counter-Strike is at the center.
The game has spawned nearly two billion in-game items that are traded, bought, and sold by players around the world.
Most new skins originate inside virtual treasure chests known as “loot boxes.”
Counter-Strike players open each one by paying $2.50 to Valve, the game’s developer.
That payment triggers a digital slot machine that eventually lands on a new skin, most often a gun decorated in special colors and designs.
The items are cosmetic, with no impact on the actual gameplay; a camouflage AK-47 inflicts the same digital damage as a bright pink one.
Still, the unique attributes are valued by gamers, the way record collectors search for rare first pressings.
Valve doesn’t release sales figures for its skins or loot boxes.
A third-party estimate from CS2 Case Tracker says that players spent $980 million opening more than 400 million Counter-Strike loot boxes in 2023.
In total, there are some 1.7 billion Counter-Strike skins in existence.
Loot boxes have drawn scrutiny from regulators and lawmakers around the world, but the gambling economy built off their contents has gone largely ignored.
Skins are particularly lucrative for third-party sites that allow Counter-Strike players to upload and wager their items, ultimately converting them into cash or cryptocurrency.
Valve’s own programming code, known as an application programming interface, or API, makes this possible.
Using the API, game players can log in to a gambling site with their Valve credentials, giving them access to their Counter-Strike inventory.
APIs are used across the internet to allow communication between websites.
One common use case of APIs is allowing consumers to log in to various internet sites using credentials from platforms like Apple or Google.
Valve’s website says it provides the API for developers to use its data “in new and interesting ways,” but the company prohibits the “commercial use” of the API, specifically for gambling.
Sporadic enforcement of those rules has led many skin gambling sites to operate without fear of retribution.
Dozens of the sites have “CS:GO” in their names (e.g., CSGO.net), and most make use of the company’s logos and other intellectual property.
Rules against Counter-Strike gambling content go largely unenforced and ignored on other tech platforms, too.
Over the past 12 months, viewers spent 700 million hours watching Counter-Strike livestreams on Amazon’s Twitch, where skin gambling sites dole out six- and seven-figure sponsorship deals to the game’s most popular streamers.
Barron’s found that 120 of Twitch’s top 300 Counter-Strike streamers are sponsored by skin gambling sites.
Twitch initially told Barron’s that it was “unable to verify whether there’ve been violations of our community guidelines.”
Barron’s provided an example of one Twitch user livestreaming his virtual betting session, with multiple sponsorships from gambling sites spread across the screen.
In a follow-up, a Twitch spokesperson confirmed that the company prohibits “CS:GO gambling—and any promotion or sponsorship of skins gambling.”
When asked how those rules reconcile with the behavior Barron’s found, the company said: “Our team is digging into the examples you raised.”
ILLUSTRATION BY ARI LILOANCounter-Strike also has a massive audience on Google’s YouTube.
The three most popular creators of Counter-Strike content have a combined following of more than 11 million.
Each of them is sponsored by skin gambling sites.
Like Twitch, YouTube terms ban such sponsorships.
“Our policies make it clear that YouTube creators are responsible for ensuring their content complies with local laws, regulations, and YouTube’s Community Guidelines,” YouTube spokesman Javier Hernandez told Barron’s in a statement.
“If content is found to violate these policies, we take action to ensure the integrity of our platform, which can include removing content.”
Barron’s sent multiple examples of videos with skin gambling content to YouTube.
In one video, a YouTuber with 2.3 million subscribers spends $750 on a virtual slot machine.
After winning skins, he has the option to transfer them to his Valve account or sell them back to the casino for $487.
The site he’s playing on, SkinClub, says on its own website that “every participant has an equal chance of obtaining an expensive skin.”
In the description section of his post, the YouTuber wrote: “Thanks for sponsoring the vid skinclub!”
Barron’s also sent Google a YouTube account operated by Hellcase, an online gambling site.
A recent video on the channel promises that “120 incredible skins from a $4,550+ prize pool are waiting for our most competitive users.”
“After review, it was determined the channels in question do not violate YouTube’s community guidelines,” YouTube said in its statement to Barron’s.
Valve is a private company and doesn’t disclose financials or other details about its business. Company executives are rarely quoted in the press.
When reached over the phone, Valve’s general counsel, Liam Lavery, declined to comment; subsequent calls and voicemails went unanswered.
The company didn’t respond to separate requests for comment, which included a detailed list of questions sent to its media contact.
Valve is unusual in the tech community for its lack of venture-capital involvement.
PitchBook, which closely tracks start-up funding, has no record of the company raising outside money.
That hasn’t stopped it from becoming a dominant player in the PC gaming industry.
Founded by two Microsoft employees in 1996, Valve has created multiple award-winning franchises, earning the company a cult following among gamers.
While game consoles from Sony, Microsoft, and Nintendo are the most popular ways of playing games on large-screen TVs, Valve’s business is focused on gamers who prefer to play games directly on PCs.
In addition to developing genre-defining videogames, Valve also owns Steam, a digital distribution platform where the company sells its own PC games and those from third-party publishers, similar to Apple’s App Store.
“They probably account for more than 50% and possibly as big as 70% of all PC game downloads,” says Michael Pachter, an analyst at Wedbush who covers the videogame industry.
“And that total market is between $10 billion and $15 billion a year.”
Gamalytic estimates that Steam users spent some $4.6 billion buying games in 2023.
Like Apple’s App Store, Valve takes a 30% cut of purchases.
Separately, Steam is part social network, allowing users to connect and play games and congregate in user-generated forums.
It also operates a marketplace where users can buy, sell, and trade in-game virtual items.
This Steam Community Marketplace doesn’t allow gambling, but some of the items changing hands on the market sell at eye-popping prices.
Many players closely watch the skin market and treat their virtual items like investments, while others choose to take their skins to third-party sites and gamble for the chance to win even higher-value items.
One popular Counter-Strike YouTuber, known as TDM_Heyzeus, has 417,000 subscribers.
His videos are dedicated to the in-game economy.
He says CS:GO itself “probably wouldn’t have been as successful without skins.
There’s a lot of symbiosis.”
TDM_Heyzeus says he makes a decent income as a content creator and through trading skins, but not as much as skin gambling site operators: “Getting kids to gamble on your site and taking their skins—that’s where the real money is.”
By the time Valve publicly acknowledged the gambling sites’ existence in July 2016, special agents at the Washington State Gambling Commission had been investigating the company for months.
In late 2017, the commission concluded that “Valve knowingly facilitates the illegal wagering of skins” in Washington state and recommended charges to both state and federal prosecutors.
The findings, which haven’t been previously reported, were part of a case report that Barron’s received through a public records request.
Valve took issue with the commission’s view.
“Valve is not engaged in gambling or the promotion of gambling, and we do not ‘facilitate’ gambling,” Lavery, Valve’s general counsel, wrote to the Washington state regulator in late 2016.
“We were surprised and disappointed that the Commission chose to publicly accuse Valve of illegal activity and threaten our employees with criminal charges.
There is no factual or legal support for these accusations.”
“We do not want to turn off the Steam services…that skin gambling sites have taken advantage of,” Lavery added, noting that the company’s API has “substantial benefits for Steam customers and Steam game-making partners.”
Lavery wrote that the company had sent cease-and-desist letters to 42 online casinos, giving the sites 10 days to stop their “commercial use” of Steam accounts.
More than seven years after Valve’s 10-day ultimatum expired, six of the 42 sites remain in operation, Barron’s found.
The first site named in the cease-and-desist letters, CS:GO Lounge, is one of them. More than a decade old, its users congregate on a 600,000-plus member discussion board—hosted on Steam’s website.
A Steam Group forum hosted by Valve—devoted to a skin gambling site called CS:GO Lounge. CS:GO LOUNGE / STEAM GROUPS (SCREENSHOT)Steam’s rules for its discussion boards—called “Steam Groups”—and user-generated content ban commercial content, including “gambling and raffles.”
Barron’s found that out of the 73 skin gambling sites, 28 have Steam Groups.
Many of the groups include links to the gambling site and list promo codes for first-time bettors to use.
Ultimately, the Washington state investigation turned on whether Valve was directly benefiting from the gambling sites, which the company denied.
Gary Drumheller, who oversaw the investigation, told Barron’s that Washington state and federal prosecutors felt they wouldn’t be able to prosecute Valve successfully and declined to bring charges.
Drumheller, now deputy director of the Washington State Gambling Commission, says that the commission’s inquiry offered substantial evidence of Valve’s gambling benefit.
The company takes a 15% cut when players sell skins on its Community Market.
Those commissions grow as skins become more valuable.
If they’re allowing skin gambling to take place, Drumheller says, they “are benefiting because they’re getting a piece of that action.
You’re getting a piece of that pie.”
Gambling can indirectly increase the value of skins, says Victor Matheson, an economics professor who studies gambling at the College of the Holy Cross.
“If these things are valuable as a way to gamble, and not just as a way to preen,” he says, “obviously that’s something that’s going to drive things.”
He adds that the ability to gamble with skins increases demand for the virtual items.
Without gambling, Matheson says, “almost certainly the value of individual skins is going to fall.”
At the close of the investigation, Drumheller was convinced the company was doing “as much as they could” to curb skin gambling.
He told Barron’s about a 2017 meeting where Valve staff, led by CEO and co-founder Gabe Newell, demonstrated tools it had to curb gambling, including an ability to deny access to its API—effectively a kill switch for gambling sites relying on Counter-Strike players.
Valve didn’t respond to a question on why, seven years later, API access remains in place for 73 gambling sites.
Newell didn’t reply to email requests for comment.
Daniel Kaufmann, a gaming psychology researcher and director of gaming services at Kindbridge Behavioral Health, says the desire for a unique identity compels gamers and collectors to spend money on virtual items.
“The strongest motivator for why people invest large amounts of effort in videogames from a personality and motivation perspective is actually customization,” Kaufmann says.
“That’s why you have to have the glowing purple-flame automatic rifle.”
Max Center, a recent graduate of Ohio State University, started playing CS:GO in the eighth grade.
Skins granted “a certain level of authority,” he says.
Center would watch YouTube videos that offered a sneak peek of coming skins, and says he was “living vicariously through” popular YouTubers whose entire channels were dedicated to opening CS:GO loot boxes.
The YouTubers posted videos about which sites had the best odds or were offering promos for free bets.
Some of those content creators were sponsored by skin gambling operators.
After he and a friend collected enough skins, Center says, “we decided to start gambling.”
He was 13 years old.
Minors looking to gamble with their skins encounter little friction.
To create a Steam account, install Counter-Strike, and open loot boxes or buy skins, they check a box confirming they are above the age of 13.
Some gambling sites include an 18-or-older checkbox—but most do not.
At sleepovers with friends, Center says he took pizza money to nearby gas stations and bought Visa gift cards to refill his balance on the gambling sites.
On group Skype calls, he and his friends placed bets, cheering when someone hit it big.
“It was like a hive mind of addiction,” he says.
Center says he kicked his gambling habit when he was 17 and barely plays Counter-Strike these days. Not everyone is able to move on.
A 2021 study from the Journal of Behavioral Addictions of nearly 1,700 adolescents from 12 to 17 who had participated in skin gambling in the previous month found they “were more likely to have lower well-being, report gaming disorder symptoms, and meet criteria for problem gambling.”
The U.K.’s Society for the Study of Addiction has found skin gambling to be particularly problematic for young people.
Its longitudinal study published in 2022 of those ages 16 to 26 concluded that out of 19 forms of gambling, participation in skin gambling was “one of the strongest predictors of elevated” scores on the Problem Gambling Severity Index, a standardized measure of at-risk behavior among problem gamblers.
The Journal of Behavioral Addictions study said that the number of adolescent skin gamblers is likely to increase given “the normalization of gambling, and the poor regulation of skin gambling websites.”
Valve’s most sweeping attempts to combat skin gambling sites came after the Washington gambling commission ended its investigation.
Those efforts made it harder for the sites to operate, but they didn’t stop them.
In March 2018, Valve announced that CS:GO items received via trade—not all transactions involve money changing hands—would be subject to a seven-day cool-down period.
Third parties “rely on the ability to trade each item very frequently,” the company wrote, citing the existence of bots on its platform.
It wasn’t long before the sites found workarounds. Instead of using a bot as an intermediary, some sites effectively became brokers for trades: one gambler exchanges a skin for on-site currency, and another exchanges on-site currency for a skin.
Gambling sites aren’t the only ones cashing in on CS:GO skins.
A host of websites use Valve’s API to create third-party marketplaces for skins.
These sites function like the Steam Community Market but charge lower fees than Valve’s 15%, eliminate the $1,800 cap on a skin’s list price, and allow users to sell their skins for real currency that transfers directly to their bank account or crypto wallet.
While the sites are in apparent violation of Valve’s rules, Eduard Toma, a staffer at third-party skin market SkinBid, says Valve doesn’t take issue with his marketplace.
He says sites like his “create value for the users and Valve.”
On SkinBid, some skins are listed for more than $20,000, well above Valve’s own cap.
Drumheller says “a couple IT people” present at his 2017 meeting with Valve had the “sole job” of monitoring the Steam platform for wrongdoing “and trying to stop some of this activity.”
According to the Washington case report, Valve wants “to take care of their customers but don’t feel that they are in the business of enforcing laws.”
To be sure, enforcing the law is complex.
The shell companies behind skin gambling sites are typically incorporated in countries like Cyprus and Belize, outside the jurisdictional borders of a regulator like the Washington State Gambling Commission.
There are other obstacles to enforcement, says Jeff Ifrah, a Washington, D.C.–based attorney whose firm specializes in online gambling law.
When federal prosecutors went after online poker companies in 2011, “they had suspended a multibillion-dollar network of poker, they intercepted wires, they froze bank accounts,” Ifrah says.
“They had leverage.”
Prosecutors don’t have that leverage when it comes to skin sites, given their crypto-focused transactions taking place outside the U.S. And, Ifrah asks, “what’s the return on their efforts to remove a game that’s going to be just remade tomorrow?”
He likened the situation to Whac-A-Mole.
Many Counter-Strike players have accepted the prevalence of the gambling sites, even if they don’t like them.
This summer, Counter-Strike YouTuber Houngoungagne, or “Jeff,” as he’s known to his subscribers, posted a two-part video series exploring the unregulated nature of the gambling sites and the harms they’ve inflicted on the Counter-Strike community, ending with a plea to his fellow content creators to do more to bring attention to the problem.
“We have to escalate this to Valve,” he told Barron’s.
“We have to find a way to force Valve to react.”
Jeff says Valve never responded to his videos.
“The only response I got from them is that they unfollowed me on Twitter.”
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