The Washington State Gambling Commission today announced that it has told Valve to "immediately stop allowing the transfer of Counter-Strike: Global Offensive virtual weapons for gambling activities" through its retail outlet Steam.

The state body, which regulates gambling in Valve's home state, said it had given the company until Oct. 14 to respond and "explain how it is in full compliance with Washington's gambling laws or it will risk having the Gambling Commission take additional civil or criminal action."

In a press release, the WSGC said it had first contacted Valve back in February to find out more about the issue of "skin" gambling, in which consumers use virtual items as proxies for real cash, to bet on esports events and online games of chance.

In July, following negative publicity about skin gambling, Valve started to crack down on gambling sites, with many now focused on skin trading or on gambling with virtual currency unrelated to Valve.

At the time, it was widely reported that gambling sites were being used by kids. Some YouTubers were also promoting gambling sites, without revealing their own commercial interests in these businesses.

Valve has been sued for its involvement with gambling, with one lawyer calling the company's actions "unconscionable." However, a federal judge in Washington state yesterday denied a proposed class action lawsuit from players who had lost money gambling with CS:GO skins, saying that losing money on a bet did not constitute a case against Valve.

“A disappointing gambling loss after receiving what was paid for is not injury to property sufficient for [a case],” Judge John C. Coughenour wrote. “Taken together, it is clear that each time plaintiffs played they received an opportunity to win and received a benefit of their bargain." A lawyer for the plaintiffs said they would likely seek to refile in state court.

"Based on the information it has gathered, the Gambling Commission directed Valve Corporation to stop facilitating the use of skins for gambling activities through its Steam Platform," stated today's WSGC release. "The Gambling Commission expects Valve to take whatever actions are necessary to stop third party websites from using skins for gambling through its Steam Platform system, including preventing these sites from using their accounts and bots to facilitate gambling transactions."

According to a new report on Daily Dot, gambling site CS:GO Lounge handled more than a billion dollars worth of bets, before ending its skin gambling operation in August.

"In Washington, and everywhere else in the United States, skins betting on esports remains a large, unregulated black market for gambling," said Commissioner Chris Stearns. "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.

"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."

When contacted by Polygon, a spokesperson for Valve commented,"Back in July we posted about third-party gambling sites. Our position has not changed and so far we’ve sent cease and desist notices to over 40 sites."

You can read Polygon's coverage of the CS:GO gambling controversy here.