The seedy world of video game gambling has recently been thrust into the spotlight after the revelation that a pair of successful YouTubers were promoting a gambling site, CSGOLotto, that they happened to own. They failed to disclose their relationship with the site, instead acting as if they merely stumbled across it.

That story has attracted a lot of attention to the massive world of game-related betting, and it has gotten players and critics riled up about the state of the third-party sites that promote and maintain those bets. But while those kinds of dubious-looking sites are easy to malign, the issue of kid-friendly gambling, and its rampant promotion, isn't just a third-party problem. It's a Valve problem. Not only does the software company enable these third parties, it also builds substantial gambling elements directly into its own games.

Hats and skins, the chips of the online gambling world

Valve's two biggest games at the moment, Dota 2 and Counter-Strike: Global Offensive, enjoy unabashed popularity among gaming's bettors. Gambling sites routinely sponsor tournaments and streams, making the phenomenon hard to avoid if you have any interest in e-sports. Most gambling is of the straightforward "bet on who will win a professional game" type, though not all; CSGOLotto, for example, creates pools of in-game items that one person wins in a randomized draw.

Those in-game items are the currency of e-sports betting. Dota 2 and CS:GO both have huge libraries of cosmetic items—"hats" in Dota 2 and "skins" in CS:GO—that change the appearance of in-game items. The market value of these items depends on their rarity and demand, with rare items trading for hundreds of dollars or more.

The gambling sites can use the in-game items because Valve has APIs that allow items to be browsed and traded by third-party sites. Sign in to a site with Steam, give it access to your inventory, and you can gamble away your items, or if you're lucky, win big.

This capability has led to a pair of lawsuits arguing that Valve aids and abets unregulated, illegal gambling, particularly appealing to underage players. While many games on Steam have an "enter your date of birth" gateway to lock out children (or at least, children incapable of lying about their age), this is missing when giving a gambling site access to a Steam account.

It's hard to endorse the idea of an unchecked, kid-friendly online system for betting. One hardly needs to be a puritan to acknowledge that while gambling can be entertaining—and need not be financially ruinous—it also comes with certain risks. Children on the whole are not known for their sound judgment and decision-making, and the combination of underage gamers and readily available online gambling seems like an unhealthy one.

Third-party sites may have brought this gambling issue to a head, but the part that's arguably more insidious is that Valve's own games include substantial lottery-style gambling elements themselves. Those cosmetics that are traded on external gambling sites are often themselves acquired through Valve-organized gambling.

You pays your money you takes your choice







Let's start with Dota 2's approach. While some Dota 2 items can be bought outright from the game's official store, ranging from perhaps a buck or less all the way up to $34.99 for an Arcana-level bundle, many of the most desirable hats can only be purchased through treasures. Each treasure, typically priced at $2.49, contains a random item from a selection of usually five to ten different hats, with the system randomly picking an option when the treasure is opened.

Historically, opening each treasure was completely random; there was a chance that opening a treasure would just give you a duplicate of an item you already own. If you only wanted one of the items from the treasure, a run of bad luck could force you to open (and, hence, buy) many, many treasures until you struck it lucky. That's no longer the case; the system now promises that you will get no duplicates until you have obtained one of each item, so the upper limit of your spending is at least now capped.

But there's a wrinkle here. In addition to standard items, most treasures also have one, two, or three rare drops. These rares aren't subject to the same no-duplicate guarantees as standard items. If a particular treasure has five standard items and one rare, opening five of the treasures will ensure you receive all five standard pieces. But you may not get the rare at all. Conversely, you may get more than one copy of the rare; it's random and driven by luck.

As such, there's a considerable lottery-style gambling element involved. If you want a particularly attractive rare hat, you can be on the hook for buying large numbers of treasures—all without any guarantees.

This is also true for particularly expensive treasures. There are three sets of treasures associated with the International 2016 Battle Pass, which is promoting Valve's large Dota 2 tournament in Seattle in August. New treasures can only be bought by increasing the level of the Battle Pass. While there are bulk discounts, and also a certain number of levels available for free by completing certain in-game objectives, a new treasure is awarded every ten levels, which cost around $5 to buy. With three different treasure sets, this means that one treasure of each series is awarded every 30 levels, or $15. If you don't get the rare you want, you can pay another $15 to roll the dice once more.

Dota 2, unlike some other free-to-play games, does not afford any material advantage to those that spend money. The differences are purely cosmetic; they have no gameplay implications. But being cosmetic does not make them unimportant. I'm a big fan of hats. Since I started playing Dota 2 three and a half years ago I've spent thousands of dollars on the game to buy the hats I like. I like playing dress-up with my heroes and giving them an appearance that sets them apart from their default configurations. I play the game for enjoyment, and you know what? I enjoy changing Lina's skirt, Crystal Maiden's hair, and Anti-Mage's glaives.

And Valve's lottery approach to hats works. People buy levels for their Battle Passes to try to get their hands on rare cosmetics, spending hundreds of dollars to try to get a sought-after item. Sometimes this is for the joy of the item itself—many people like me simply want their heroes to look pretty—but not always.

Valve has a resale market wherein hats can be sold for Steam dollars (with Valve taking a cut of every transaction). There's no way to withdraw this money, so any proceeds from selling items can only be used on new hats or Steam games, but this is no big deal; thanks to those APIs that the gambling sites depend on, there are third-party trading and selling sites that do allow items to be traded for real money, so Steam bucks can be converted to real dollars, albeit at a discounted rate). (: a previous version of this article said that Valve took a cut even when cashing out for real money; this was in error. Valve only takes a portion of the transaction when it is performed through the Steam store or the built-in community market).

Buying these treasures can pay off. Two of the hot items from the Battle Pass, both "ultra rare," are selling for $125 and $75, respectively. A successful $15 punt on a treasure could yield a relatively big payout.

Counter-Strike: Global Offensive uses a different scheme (one that Dota 2 used before moving to its current mechanism). There, chests drop for free in-game (or can be bought on the community market; most chests cost just a few cents, though a few are more highly valued), but to unlock them, you need to buy keys for about $2.50 a pop. Beyond that it's basically the same deal: each chest has a range of common skins that resell for a couple of bucks or less and then a number of rare skins that are valued at tens or hundreds of dollars. There's no protection against getting duplicates, either; buy ten keys for ten chests and you could get ten identical 10¢ items. Or you could hit the jackpot.

Again, the gamble can pay off. But as with most gambles, it usually doesn't. Valve gets richer; players get poorer. I suspect that many players don't even notice that they're gambling. I also suspect that many participants are under 18 when they make these gambles.

Valve is well-known for its employment of economists to optimize the hat economy, so it's hard to imagine that any of this is accidental. One can imagine schemes that eliminate this gambling element—for example, awarding the rare hats whenever you buy out the full set of treasures, as a kind of "buy five, get the sixth free" deal—but doing so would remove the incentive to achieve ever higher Battle Pass levels and spend ever greater sums of money on the treasures.

These gambling aspects aren't unique to Valve's games. Opening packs of cards in Hearthstone or Magic: the Gathering similarly leaves players at the whims of randomization. But I'd argue that the gambling in a game like Dota 2 is a little more egregious.

For one thing, it's much less rewarding. With enough bad luck, opening a pack of Magic cards could prove useless—with competitive decks limiting you to four of any individual card, and other cards being restricted to one per deck, getting a fifth copy of a card has little value—but it's unlikely that every single card in a pack will be a bust. Contrast this with hats: duplicate hats are strictly useless (except for whatever resale value they offer), since heroes cannot wear multiple copies of the same piece of clothing simultaneously. The small selection of items available in a typical treasure, combined with the low odds of getting one of the rare hats, means that players can acquire many, many duplicates of the common items as they try to get lucky.

Second, Magic card packs are not simply random selections of cards. There are guarantees regarding the distribution; these vary from pack to pack, but a player could be guaranteed to get, say, 11 common cards, three uncommon, and one rare. A Dota 2 treasure offers no such promises. Valve has started introducing a system of improving odds for some treasures, wherein the more treasures you open, the higher the probability of receiving an ultra-rare drop, but this is much weaker than the fixed distributions used by the card-based games.

Valve has done great things for PC gaming and produced games that millions love. But introducing many of those same millions to gambling—in a friendly, playful guise that would be trivial if it weren't for the real money involved—is a black mark against the company. Parents shouldn't just be concerned about the company's APIs and third-party gambling sites. Gambling is, unfortunately, an integral part of the games themselves.