Washington State Gambling Commission orders Valve to stop skins gambling

Lincoln Lau, whose gamer tag is fnx, practices for the ELeague finals against Cloud9 at Turner Studios. Kevin D. Liles for ESPN

The Washington State Gambling Commission has notified Counter-Strike: Global Offensive developer Valve that it must stop all transfers of in-game weapon skins for gambling purposes, the commission announced Wednesday in a press release. The commission, which sent the company a letter about the issue on Sept. 27, has determined that skins gambling is illegal and unregulated. The commission asked that Valve respond by Oct. 14 to explain how it will comply to avoid potential civil and criminal actions against the company.

"In Washington, and everywhere else in the United States, skins betting on esports remains a large, unregulated black market for gambling," Washington State Gambling commissioner Chris Stearns said in the press release. "And that carries great risk for the players who remain wholly unprotected in an unregulated environment. We are also required to pay attention to and investigate the risk of underage gambling which is especially heightened in the esports world. It is our sincere hope that Valve will not only comply but also take proactive steps to work with the commission on future measures that will benefit the public and protect consumers."

The September letter says that the Washington State Gambling Commission first visited Valve in-house counsel in February to begin investigating the skins gambling market. After the initial meeting, the commission claims that Valve's representative did not respond to several emails from one of the commission's agents.

Furthermore, the letter states that Valve is allowing third-party sites, such as online skins gambling sportsbook CSGO Lounge, to use Valve's API for illegal gambling, which violates the law in the state of Washington. CSGO Lounge does not have any regulation or age verification.

The letter and press release came after Valve sent its initial cease and desist in July to skins gambling websites, including CSGO Lounge, CSGO Lotto, CSGO Wild and more. Citing violation of Valve's game marketplace Steam's user agreement, the letter gave websites 10 days to alter their model or shut down or face potential legal action. Many of these sites -- including Lounge, Lotto and Wild -- have either changed their betting systems or completely shut down their services.

The skins gambling market was set to see $7.4 billion bet this year, according to a report by Narus Advisors released prior to Valve's action against gambling websites.