Valve hit with illegal gambling lawsuit by Native American nation that operates a casino in Washington state

Valve CEO Gabe Newell. (GeekWire Photo / Kevin Lisota)

A Native American nation that operates a casino in Washington state filed suit against Valve Software, accusing the gaming giant of fostering illegal gambling and benefitting from an environment of unfair competition with casinos that are heavily regulated by state and local governments.

The lawsuit from Quinault Nation, which owns and operates Quinault Beach Resort & Casino in Ocean Shores, Wash., alleges that Valve has facilitated the use of textured digital weapons, known as “skins,” in games such as Counter Strike: Global Offensive as collateral in online betting through third-party sites. The lawsuit argues that through so-called “skins gambling” Valve has “subjected Washington citizens to scam, unsafe and unfair gambling.”

“Valve is well aware of the skins gambling that goes on, is well aware that skins have real world cash value, which has increased their popularity and value, and actively encourages and facilitates skins gambling,” according to the suit, filed last week in Grays Harbor County, where Quinault’s tribal government headquarters is located.

Bellevue, Wash.-based Valve has been taken to court in the past and butted heads with regulators on similar illegal online gambling allegations. In 2016, a judge dismissed a class action lawsuit against Valve over alleged illegal gambling with Counter Strike: Global Offensive.

The company has consistently maintained it has no relationship with third-party gambling sites. In 2016, Valve said it sent cease-and-desist letters to more than 40 of these sites that use the company’s Steam gaming marketplace for gambling and shut down the Steam accounts used by those sites.

We’ve reached out to Valve and Quinault Nation for comment. We’ll update this story if we hear back.

Despite all the recent attention on skins gambling, the Quinault lawsuit alleges that Valve continues to facilitate it. Quinault alleges that skins gambling has been instrumental in the success of games like CS:GO, which has become a centerpiece of televised esports competitions.

“Valve has profited handsomely for years from illegal online gambling, and has made only token efforts to stop it,” the lawsuit says.

Much of the 25-page court document lays out Valve’s alleged involvement in skins gambling, but the lawsuit also claims skins gambling hurts casinos. In order to operate, Quinault’s casino has to take steps to ensure fair and secure gambling conditions and pay taxes and fees to state and local governments. Valve, the lawsuit argues, doesn’t have to do any of that, creating an alleged unlevel playing field.

Washington state has become a battleground over the legality of online gambling. A landmark ruling last year against the then-parent company of Seattle-based Big Fish Games found that it was facilitating online gambling because the chips in the company’s casual casino games represented a “thing of value” under state law because users can’t play without them.

That case is still tied up in court, but it has opened the floodgates for other online gambling lawsuits.

The vague “thing of value” clause also comes up in the Quinault suit. Since skins can be sold for real money on third-party websites, they are valuable, the lawsuit argues.

In the suit, Quinault compares skins to casino chips and Valve to a bar where backroom gambling happens. The lawsuit alleges that Valve knows about what’s going on and isn’t trying to stop it.

“Users buy chips from the bartender, gamble in one backroom and cash out in another, all under Valve’s roof,” according to the lawsuit.

Here is the full filing from Quinault Nation:

Quinault v. Valve by Nat Levy on Scribd