Industry

The Valve / CS:GO Betting Scandals Explained in Simple Terms

CSGO scandals

If you follow eSports or gambling news, you’ve probably heard a lot of hubbub recently regarding some sort of betting scandal involving a company named Valve and a game called CS:GO. News reports have been breaking pretty much non-stop for the last few weeks and it’s gotten to a point where it can be overwhelming for anyone not clued in to how this all started.

Today’s post will serve as an introduction of sorts to the Valve and CS:GO betting scandals that we’ve all heard so much about lately. If you don’t know the difference between a “skin” and a “Twitch,” this article is for you. I’m here to explain what the fuss is all about in simple terms, starting from the beginning.

Cast of Characters

I’m starting with introductions of the main characters in this saga so I can cover the story itself without having to stop and explain everything as we go. Feel free to skip past this part if you’re already familiar with the main characters.

Valve: Valve is a video game development company and software distributor that has produced some of the most successful games of all time. Valve’s biggest titles include the Half-Life series, Counter-Strike, Counter-Strike: Global Offensive (CS:GO), the Portal series, the Left 4 Dead Series and Dota 2.

CS:GO: This term is shorthand for the game titled “Counter-Strike: Global Offensive.” CS:GO is a hugely popular first-person shooter that was released by Valve in 2012. Each player joins either the terrorist or counter-terrorist team and then works to kill everyone on the other team, complete an objective (such as planting a bomb) or block the other team from completing an objective (such as disarming said bomb).

CS:GO is also a staple of the competitive video gaming scene (eSports). Valve and other organizations have begun hosting tournaments and committing money to attract professional gamers – and eSports are beginning to take off. Valve is now throwing $250,000 CS:GO tournaments and just two weeks ago, an event in Germany handed out $1,000,000 in prize money to the players.

What’s more, these competitions are generating some pretty crazy viewership numbers. Multiple events over the past couple years have each attracted more than a million live viewers at times. So to summarize, Counter-Strike: Global Offensive is a video game that anyone can play, and it is also an eSport that people can play competitively for cash.

Twitch: Twitch.tv is a streaming video website that specializes in all things related to gaming. Users can stream live video of themselves playing games such as CS:GO while others can watch and chat in real time.

Twitch plays an important role in eSports as it providers regular gamers and fans the ability to watch the pros in action. Broadcasters can talk and share their thoughts as they play while viewers can comment on the action and interact with the broadcasters. Twitch also serves as a platform for major eSports competitions and gaming media companies to stream live events and provide commentary on the latest happenings in the gaming world.

Broadcasters who attract enough viewers can also earn an income off the Twitch platform through a revenue-sharing advertising program and by encouraging viewers to subscribe to broadcasters’ channels.

Skins: An update for CS:GO in 2013 introduced new decorative weapons that players can collect in-game or by trading with other players. Skins do not affect the mechanics of the game in any way, but they do have a collectible aspect with some skins being common and others being extremely rare.

The introduction of skins soon led to a thriving secondary economy revolving around trading, buying and selling skins. Some of the rarest skins in the game have been bought and sold for thousands of real world dollars.

Steam Marketplace: The Steam Marketplace is a virtual market managed by Valve that allows players to buy and sell skins. If you find a handy item in-game, you can list it on the Steam Marketplace for someone else to purchase.

Funds that you receive for selling items are added to your Steam account, but those funds cannot be withdrawn as real money. Your funds may only be used to make other purchases through the Steam store.

Secondary Markets: With the Steam Marketplace only allowing players to sell items in return for what is essentially store credit, a bunch of third-party websites popped up and began allowing players to trade their skins for real money that can be withdrawn as real money.

The secondary market is not officially linked to Valve, although Valve does offer indirect support with the Steam Trading API, which can be used by anyone to create third-party websites to facilitate transactions that take place outside the official Steam Marketplace.

Skins Betting: While the original secondary markets focused on actually buying and selling of skins, it didn’t take long before certain enterprising entrepreneurs introduced third-party websites that allow people to gamble with their skins.

For example, CSGOLounge.com allows users to bet on eSports matches in a manner similar to sports betting. Instead of betting actual money, however, players bet skins on matches. If you pick the correct team to win the match, you win additional skins. If the team you bet on loses, you lose any skins that you wagered on the match.

A multitude of other skins betting sites have taken things even further by setting up virtual casinos that revolve around skins betting. There are now simple coin-flip games, lottery-style games and even games that work exactly like roulette – except it’s all done with skins rather than actual money.

Now this is where we start to get to the heart of the controversy. Because skins are easily converted into cash through secondary markets, betting with skins is essentially the same thing as betting with real money. Skins wagered on matches and casino-style games are the virtual equivalent of using casino chips at the casino. Whether we’re talking about CS:GO skins or clay casino chips, both can be converted to cash when you’re all done gambling.

The Bloomberg Betting Report

This CS:GO scandal we’ve all been hearing so much about lately is actually more of a string of scandals all tied together by the common thread of skins betting. Things first truly broke into the mainstream consciousness with a Bloomberg report published in April that detailed the massive betting industry that has popped up around skins betting.

That same report noted that an estimated 3 million people wagered $2.3 billion worth of skins on eSports matches alone in 2015. Eilers Research later estimated that total skins betting so far in 2016 is closing in on $5 billion.

Depending on who you ask, the fact that this sort of gambling is even happening in the first place counts as a scandal. This betting is completely unregulated and that brings up many legal questions right off the bat.

Online betting is either strictly regulated or prohibited in nearly every country on the planet. An underground betting industry of this size is bound to raise the eyebrows of more than a few lawmakers.

To make matters worse, underage gamblers are getting in on the action as well. At least one lawsuit filed against Valve so far has been filed on behalf of a player who lost money both as a minor and as an adult. And that leads to the next section…

Valve CS:GO Lawsuit

Shortly after the Bloomberg report broke, a player from Connecticut filed a lawsuit against Valve. The suit alleges that Valve and third-party skins betting sites “knowingly allowed, supported, and/or sponsored illegal gambling by allowing millions of Americans to link their individual Steam accounts to third-party websites.”

The suit also points out that few of these sites even require age verification and notes that “most of the people in the CS:GO gambling economy are teenagers and under 21.” Furthermore, the suit notes that Valve profits from gambling activity by charging a 10% transaction fee on all items bought and sold on the Steam Marketplace.

Quotes taken directly from the lawsuit argue that Valve is complicit in and profits from the underground gambling economy that has sprung up around CS:GO skins:

“Valve has knowingly allowed an illegal online gambling market and has been complicit in creating, sustaining and facilitating that market.”

“In sum, Valve owns the league, sells the casino chips, and receive a piece of the casino’s income stream through foreign websites.”

“Because Valve has helped to create an unregulated, international gambling concern with no oversight that targets teenagers, Plaintiffs and the class have been damaged. This unregulated market is ripe for scams, cheating, fraud and other harms to users.”

The lawsuit is asking for class action status, which would expose Valve to massive financial penalties. Even worse for Valve, that last part about “scams” and “fraud” seems to have been right on the money as several scandals involving major skins betting since have since been brought to the light of day.

CSGOLotto Scandal

The events we’ve discussed so far on this page are scandalous from a general media perspective, but they didn’t particularly raise the ire of players. Most people playing Counter-Strike and betting on skins were probably aware Valve was treading dangerous waters allowing all this gambling to happen, but none of it was particularly a bad thing for the players who were just having fun.

That all changed in June when CSGO Lotto was implicated in misleading and taking advantage of the players. This latest revelation would prove disastrous for Valve, multiple skins betting sites and several large YouTube personalities.

CSGOLotto.com is one of the more popular skins betting sites and is especially popular due to the widespread exposure it received courtesy of two prominent YouTube personalities: ProSyndicate (Tom Cassell) and TmarTn (Trevor Martin).

ProSyndicate and TmarTn would occasionally upload videos of themselves betting valuable skins and winning large numbers of skins worth thousands of dollars. For example, one video titled “How to Win $13,000 in 5 minutes CS GO Betting” showed TmarTn winning serious cash gambling skins on CSGO Lotto. TmarTn has since made the video private, but someone else has since re-uploaded the video on a different channel.

Watch this video and note TmarTn’s reaction upon winning skins worth thousands of dollars:

Here’s another video from ProSyndicate titled “WINNING BIG $$$$!!! (CS:GO Betting):

Looks great, right? There’s just one problem. It has since been revealed that TmarTn and ProSyndicate were co-owners of CSGO Lotto – and failed to disclose that little fact.

In other words, what we have here are two well-known YouTubers publishing videos of themselves winning a lot of money on CS:GO Lotto, promoting the website, acting like they have no connection to the site and failing to disclose that they were actually the owners of the site.

This fact remained secret until a smaller YouTube channel called HonorTheCall uploaded a video alleging that ProSyndicate and TmarTn were faking everything. They weren’t even gambling – they were rigging the games to show them winning lots of money for the sole purpose of promoting their own gambling site.

You can watch HonorTheCall expose the video here, but this other video uploaded by h3h3Productions breaks it down even better for anyone not as acquainted with skins betting:

CSGO Diamonds Scandal

CSGO Lotto is hardly the only skins betting site to find itself in hot water. In June, another gambling website called CSGO Diamonds admitted to sponsoring a prominent Twitch streamer who goes by mOE and telling him the outcomes of future bets. Their purpose in doing so was to show mOE betting big and winning big during live streams in order to build hype for CSGO Diamonds.

This particular scandal was broken by mOE himself after a disagreement between him and the owners of CSGO Diamonds. CSGO Diamonds attempted to get out in front of the story and released this statement via Twitter and TwitLonger on 13 June.

https://twitter.com/CSGO_Diamonds/status/742310946048204800

Here is the full statement:

“Hello to all members of the CSGO gaming and betting community. We wanted to touch on a subject that has come up this week in order to dispel any concerns or rumors that may arise.

When we first launched CSGO Diamonds, we contacted Moe looking to sponsor him. This involved him playing on CSGO Diamonds during his stream to generate traffic and build interest. After discussing details for a few days, we agreed that he would get 20% of all profits made in the first month and 10% of all profits the following months. In addition to this, he would be given Diamonds on the site to use while on stream which he could bet but not withdraw. This was in exchange for him streaming. He told us he would be streaming for roughly 110-130 hours a month.

Everything went well for the first six weeks but then we noticed he began streaming less and less. At the two month mark and noticing the decrease in exposure, we approached Moe about it. He said he was busy with real life and dealing with Echo Fox which we sympathised with. He continued on to say, I quote, “If u feel that at the end of May I didn’t pull my own weight u can simply say we’re done or renegotiate or something”. That sounded fair to us so we continued things as they were. Unfortunately for us, nothing changed and his streams were less frequent in comparison to the agreement. Then, he notified us that he was going to be busy with E-League so he would not be able to stream.

We approached him on the 1st of June, roughly 2 weeks ago, ready to either re-negotiate or provide him a severance payment and end our sponsorship with him. This conversation did not go very well and Moe got upset and threatened to ‘expose’ us for something he himself was also involved in. This relates to the twitter post from June 12th.

Allow a moment for us to explain this situation. Since we’re a provably fair site, we are able to check all future rolls just like any other provably fair site. For example, CSGO Double could tell you what the next 100 colours will be. It’s important to note that just because we can see future results doesn’t mean we can change them. If a roll’s result were to ever be manipulated, you would be able to see this when you go to verify the roll (the result of the check would not match what you saw during your roll). In a quick decision, we made a mistake with Moe and decided to tell him some of his future rolls in an effort to make his stream more entertaining on our site. (It’s important to note we did not do this with any other sponsor and, rightly so, have learned from the mistake.)

This happened in both directions, at times we provided him a future roll and other times he would ask us for a roll result while on stream. This is what he is threatening to ‘expose’ us with, although he had a willing part in this too.

He threatened this in efforts to keep the 10% of all profits deal with us. After we saw this, we knew immediately that we did not want anything further to do with the situation so we decided to offer him the severance payment and part ways. He agreed to the payment and to part ways. Following this, we found out that he had been providing false, negative information regarding our site to our sponsors. He has now taken to Twitter, regarding the withdrawal of Diamonds that, as mentioned previously, were never to be withdrawn as part of the original agreement.

In the interest of transparency, we have instead chosen to explain the situation ourselves to you all. We welcome all discussions or questions and apologize for any confusion this may have provided you throughout this situation. However, we want to maintain our integrity and plan to continue our growth in the future. You, the community, are a critical key to our success and have gotten us to this point. In return, we shall continue to give you our best efforts in order to provide you with the best experience we can offer.”

Long story short: mOE and CSGO Diamonds were teaming up to promote the gambling website by streaming live video of mOE winning big – by telling him the outcomes of future bets. They conveniently forgot to disclose this little fact while promoting CSGO Diamonds to their many fans.

CSGO Wild and FaZe Clan Scandal

The same YouTuber who broke the CSGO Lotto scandal has more recently published another series of videos alleging that members of eSports team FaZe Clan have also been promoting a skins betting website without disclosing their relationship with the site in question. This time, it involves CSGO Wild.

Let’s kick this all off with a video posted by FaZe Rain that shows him winning a bunch of money quickly at CSGO Wild.

Take a look at this video posted by FaZe Rain for just one example:

If you visit the actual YouTube page and see the video’s description, you will see a line that says “this video is sponsored by CSGOWild.” That counts as disclosure, right?

Well, it’s not that simple. HonorTheCall published a video on July 20th exposing the FaZe Clan members and presents evidence that indicates the disclosure was not present when FaZe originally published the video. Additionally, HonorTheCall claims that the title of the video was also changed from “HOW TO WIN $30,000 IN 5 SECONDS” to “I Got So Lucky.”

Watch as HonorTheCall breaks it all down:

https://www.youtube.com/watch?v=Jm1F5idOs0A

Here’s another suspicious video posted by FaZe Adapt (action starts at around the 10:30 mark):

Once again, we have high profile YouTubers and Twitch streamers publishing videos that appear to show them getting lucky, winning lots of money and not mentioning anything about a relationship with CSGO Wild.

CSGO Shuffle and Phantoml0rd Scandal

The latest chapter in this ongoing Valve skins scamming scandal involves James “PhantomL0rd” Varga and skins betting website CSGO Shuffle.

Before he got banned from Twitch, PhantomL0rd was one of their most popular streamers with roughly 1.3 million followers. He also published numerous videos showing him gambling at CSGO Shuffle:

https://www.youtube.com/watch?v=7UTP97rRRgs

Now, PhantomL0rd has joined the ranks of other prominent gamers caught up in skins gambling scandals.

On July 16th, eSports journalist Richard Lewis released a video in which he reveals that Skype logs sent to him by a hacker indicate PhantomL0rd was an owner of CSGO Shuffle. The hacker originally hacked into CSGO Shuffle operations with the intention to steal money from the site, but in the course of doing so, also obtained Skype chat logs between PhantomL0rd and someone named “Joris” who writes code for and partially owns CSGO Shuffle.

The Richard Lewis video presents compelling evidence that PhantomL0rd was an owner of CSGO Shuffle, that he played entirely with house money on video and that Joris fed him information related to future bets as PhantomL0rd gambled.

Here is the full report:

The Fallout

Everything reported so far brings us up to date as of the time of this posting. I cannot even begin to predict the full magnitude of any fallout as a result of these various eSports betting scandals. A whole lot of people could soon find themselves in a whole lot of trouble.

As far as Valve goes, they are already facing one lawsuit that seeks class action status. That’s a big deal for any company because class action lawsuits can get very expensive, very quickly. Their first response since all this recent news broke has been to issue cease-and-desist letters to multiple CS:GO betting websites.

It seems unlikely that anyone at Valve will face criminal penalties, but that is far from guaranteed at this point. Gambling laws are open to interpretation and it remains to be seen if anyone at Valve was actually complicit in helping run these third-party betting sites.

The YouTubers and Twitch personalities involved in these scandals may be open to both criminal and civil penalties. Three attorneys who specialize in eSports hosted an “ask me anything” thread on Reddit recently and one of them noted that he has already received 75 emails from people who lost money to TmarTn and Syndicate and want to sue them.

As the case picks up steam in the media, the odds of individual YouTubers and Twitch broadcasters facing criminal penalties increase. I can imagine there are potential FTC violations, fraud charges and gambling-related charges that could soon come down on everyone involved. The fact that this case is becoming so visible and involves underage gambling makes me think someone will be interested in prosecuting eventually.

I don’t think it does much good to speculate too much, so we’ll just leave it at that for now. The only way we’ll know the full extent of the fallout will be to watch it unfold for ourselves. Anyone with “skin” still in the game should be paying close attention to the news. I have seen what happens when unregulated gambling sites suddenly make the news – and it rarely works out well for the players caught in the middle with money deposited on those sites.

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