Three days after SK Gaming swept Team Liquid 2-0 in the ESL One Cologne grand final on July 10, 2016, Valve posted a short note on Steam about the gambling sites that had started using its item-trading system. Erik Johnson, who signed it, put distance between those sites and the company: "we have no business relationships with any of these sites. We have never received any revenue from them."
That note was neither Valve's first line on gambling nor the last one anyone drew. Over the next decade the lines came from a state regulator, a federal agency, a court, sweepstakes operators, a league owner and state legislatures, and taken in turn they explain why esports, social games and casino-style sites live under such different rules.
Skins Had a Market Price Before Anyone Bet Them
Valve added item trading to Steam in 2011, by its own account to help players get the items they wanted. For CS:GO, the trade that mattered began in August 2013, when Valve's Arms Deal update brought in collectible weapon finishes that players could swap or sell on Steam's marketplace.
A cosmetic with a market price can stand in for money, and outside websites started taking skins as stakes. Players logged in through Steam's OpenID system to prove they owned their accounts and items, while the sites ran automated accounts that behaved like ordinary users.
Valve said Steam itself had no way to turn items into real-world currency. The Federal Trade Commission, describing the same items in 2017, said skins could be bought and sold for real money. The betting sites did their business in the gap between those two statements.
A Thrown Match Got Seven People Barred From Valve's Events
Skin betting reached the pro game well before Valve addressed the sites. On August 21, 2014, iBUYPOWER, one of America's top teams, lost a CEVO Professional Season 5 match 16-4 to NetCodeGuides.com, a side it should have beaten easily. According to the Daily Dot, which laid out evidence of a fix months later, most Counter-Strike bets then ran through CSGO Lounge, where people staked items with real-world value on matches, and bets placed just before that one had won more than $10,000.
Valve responded on January 26, 2015. Its check of the accounts involved, it said, showed that a substantial number of high-value items won on the match had passed to iBUYPOWER players and to NetCodeGuides' founder. It told its event partners to keep seven people out of Valve-sponsored events in any capacity, and it set a rule for the rest of the pro scene: players, managers and team staff "should under no circumstances gamble on CS:GO matches."
Valve Answered With Its User Agreement
Valve's 2016 note never called skin betting illegal. It treated it as a breach of contract: using Steam's login and automated accounts "to run a gambling business is not allowed by our API nor our user agreements," Johnson wrote, and the company would send notices asking the sites to "cease operations through Steam" and pursue the matter further as necessary.
Washington's gambling regulator wanted Valve itself to act. On October 5, 2016, the Washington State Gambling Commission ordered Valve, a Washington company, to stop third-party sites from using skins as collateral for online bets through Steam, with civil or criminal action possible if it fell short. The commission's release quoted a market estimate that CSGO Lounge alone took in roughly $1 billion in skin gambling over the first seven months of 2016.
Valve's note turned on whether the sites had broken its terms. Washington's order turned on state gambling law, and it put the duty to stop the betting on the platform carrying the skins.
The FTC Charged CSGO Lotto's Owners Over Their Own Videos
Federal regulators came at skin gambling from another direction. CSGO Lotto, a site where people gambled with skins, began operating in late 2015, and the people promoting it included its owners. Trevor Martin and Thomas Cassell, creators widely followed in online gaming, posted YouTube videos of themselves gambling there. One of Martin's was titled "$24,000 COIN FLIP (HUGE CSGO BETTING!) + Giveaway," and Cassell's promotional videos alone drew more than 5.7 million views.
In September 2017 the pair settled Federal Trade Commission charges that those videos presented them as impartial users while they owned and ran the company. The order barred them and their company from passing off any endorser as an independent user.
The agency described the site as gambling, but the case never rested on gambling law. It targeted the endorsements, and advertising law drew its line through the people holding the audience.
Washington's Statute Counted Extra Spins as Value
The next line came from a courtroom, with Washington law again at the center. Big Fish Casino was a free download that came with free chips for casino games such as slots and blackjack. Once the free supply ran out, more play meant buying chips, which the app's terms of use described as having no monetary value. Cheryl Kater sued the game's owner, Churchill Downs, and a federal district court dismissed her case.
A Ninth Circuit panel revived the case on March 28, 2018. Washington's statute counts as a "thing of value" any form of credit "involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge." The panel held that chips which keep a player spinning fit that wording, so on the facts in Kater's complaint the app amounted to illegal gambling under Washington law.
The panel kept its reasoning narrow. It refused to count black-market resale, since the game's terms banned selling chips, and it set aside other federal rulings, a Fourth Circuit decision under Maryland law among them, because each read a different state's statute. Its conclusion, the opinion said, "turns on Washington statutory law."
Sweepstakes Casinos Drew Their Line Between Two Coins
Licensed real-money online casinos grew up at one end of the U.S. market, confined to a handful of states such as New Jersey, Michigan and Pennsylvania and to players 21 and over who are physically inside them. Social casino apps sat at the other end, selling chips that never cashed out.
Sweepstakes casinos built a business in between, and unlike every earlier line here, theirs runs through the product itself. A play coin with no cash value sits beside a second currency that players can later redeem for prizes, and a no-purchase route to that second currency stays open. Operators point to that free route when they run the setup under promotional sweepstakes rules instead of a gaming license, a reading some states have since legislated against.
The play coin's no-cash-value label is the one Big Fish put on its chips, and in Washington that label didn't stop a court from finding value.
Crown Coins, a brand on the market since late 2023, runs on the two-coin design. LineUps' review of the Crown Coins sweeps casino sets out how the brand's two coins work, the routes a redeemed prize can take, its minimum age of 19 and the states where it doesn't operate.
The coins don't change the math of the games underneath. Pragmatic Play's page for Gates of Olympus, one of the slots in Crown Coins' lobby, lists a return to player of 96.50%, a long-run average that leaves the game about 3.5% of everything played through it.
Riot Put Itself Between Its Teams and Betting Sponsors
For esports teams, the question was sponsorship money. Riot Games had kept betting brands away from its leagues, then on June 26, 2025, it opened betting sponsorships to teams in its Tier 1 League of Legends and Valorant leagues across the Americas and EMEA.
Riot's president of publishing and esports, John Needham, was blunt: "betting activity already exists around our sports and will continue whether we engage with it or not." He cited Sportradar's figure of $10.7 billion in global betting turnover tied to LoL Esports and VCT in 2024, and added that 70% of bets across all sports are placed in unregulated markets with unlicensed bookmakers.
The conditions drew a line inside the sport. No betting brand could approach a partnered team without Riot's approval, and each team would decide how betting content appeared on its own channels, inside Riot's guidelines. Riot's broadcasts and social accounts would carry none of it. Needham conceded that sports betting "isn't for everyone," and his turnover figure measures money staked, not money won.
Statehouses Put the Sweepstakes Model in Statute
The most recent lines have come from statehouses, and they name the model in statute. Connecticut's governor signed Public Act 25-112, a Department of Consumer Protection bill on lottery and gaming rules, on June 24, 2025. Its section 14, in force from that fall, reaches sweepstakes that offer real or simulated online casino games or sports betting without a state gaming license, and a breach carries the penalty for professional gambling and counts as an unfair trade practice.
New Jersey acted less than two months later. Its Assembly Bill A5447 took effect the day it was approved, August 15, 2025. The law treats a sweepstakes that people in New Jersey pay to enter as unlawful gambling unless it fits the statute's exceptions, and it lists two-currency systems, where one currency converts into prizes, among the ways such a game pays out. A first violation can cost an operator up to $100,000 in civil penalties, and later ones up to $250,000 each.
One clause reaches back to 2016. New Jersey's "prize or prize equivalent" includes a "virtual facsimile" that can be exchanged or redeemed for cash "through means such as a third-party marketplace, external service, or cash-out function." It describes the kind of off-platform cash-out that turned CS:GO skins into betting currency, now written into a sweepstakes statute.
Neither statute settles the question nationally. Each binds only its own state, more legislatures have passed their own versions since, and operators redraw their closed-state lists as the law changes. So for a coin package or a bet with a team's sponsor, the deciding question is whose rules cover the spot where the person paying is standing, and the next state over may answer it differently.