Valve has responded to a legal action notice sent by the Washington State Gambling Commission, arguing in a strongly-worded letter that it is not responsible for unregulated gambling with in-game items and does not facilitate or receive revenue from gambling sites.

"As we have explained on multiple occasions, Valve is not engaged in gambling or the promotion of gambling, and we do not 'facilitate' gambling," the company wrote in a letter signed by Valve legal counsel Liam Lavery and obtained by TechRaptor's Robert Grosso.

On Oct. 5, the Washington State Gambling Commission, which has jurisdiction over the state where Valve is based, sent a cease-and-desist letter to the Valve, ordering it to stop allowing in-game skins to be traded for gambling purposes. The letter argued that skin betting was a form of unregulated gambling that Valve was knowingly allowing to exist, and threatened to take criminal action if it did not respond to the issue. The commission initially gave Valve until Oct. 14 to reply, but Valve later notified the commission that they would not reply until Oct. 17.

Valve's response said it does not "understand the legal or factual reasoning supporting this position, from the Commission's letter or from our conversations with the Commission." It added that it is not aware of a "specific criminal statute or regulation" that it is violating.

"We were surprised and disappointed that the Commission chose to publicly accuse Valve of illegal activity and threaten our employees with criminal charges," the company wrote. "There is no factual or legal support for these accusations."

Though Valve could effectively eliminate skin gambling by preventing any trading of in-game items, the company argued that this would have adverse effects on users and other publishers using Steam to sell games.

"In-game items, Steam trading, and OpenID have substantial benefits for Steam customers and Steam game-making partners," it said. "We do not believe it is the Commission's intention nor is it within the Commission's authority, to turn off lawful commercial and communication services that are not directed to gambling in Washington."

The letter also pointed to actions already taken by Valve to curb skin gambling. In July, Valve sent shutdown notices to dozens of gambling sites, many of which ceased operations as a result. The company now says it has sent notices to over 40 such sites, and that it has begun to disable Steam accounts associated with them in order to enforce its policy.

However, Valve noted it may not be able to identify all bot accounts that have been created for gambling purposes, and new ones can be created faster than Valve can shut them down, making it difficult to catch the most determined operators.

"Valve can enforce its user agreements against the Steam accounts of skins gambling sites, where we can identify the site and identify the corresponding account," the company said. "In fact, we would be happy to cooperate with the Commission, if it is able to identify more skin gambling sites that are illegal in Washington and the Steam accounts through which [they] operate."

In its conclusion, the letter appeared to address remarks made by Washington State Gambling Commissioner Chris Stearns after the commission's letter to Valve was made public. Stearns softened many of the threats in the original letter, saying that the commission was looking to gain more information from Valve, and that they hoped to collaborate with the company in putting an end to unregulated gambling.

Valve wrote that it would "welcome the chance for further communication with the Commission, if it would like to clarify the legal allegations against Valve, or alternatively to work with Valve to identify offending Steam accounts of gambling sites."

Daniel Rosen is a news editor for theScore esports. You can follow him on Twitter.

Jeff Fraser is a supervising editor for theScore esports.