Attorneys bet eSports cases will turn up again

By Deb Rogers | Dec 20, 2016

BOSTON (Legal Newsline) - Though a lawsuit against an online gaming company was recently dismissed, the issues in the case, including virtual money and injuries, are far from resolved, according to two Boston lawyers.

“Gambling in the future is turning away from brick and mortar casinos to online gaming, apps and social media games,” Abim Thomas, a partner at the Goodwin Procter Boston office and a member of Goodwin’s gaming, gambling and sweepstakes practice, told Legal Newsline.

Goodwin associate Louis Lobel wrote a Nov. 23 blog post after a federal judge in U.S. District Court for the Western District of Washington dismissed a suit against Valve Corporation.

The lawsuit alleged Valve and third-party websites had facilitated online gambling in violation of state gambling and consumer protection laws, in addition to a Racketeer Influenced and Corrupt Organizations Act (RICO) claim.

“The one federal claim that they had was a RICO claim and under RICO, you need to have a qualifying injury,” Lobel said, adding that gambling losses are not a sufficient injury for RICO standing in the Ninth Circuit. “Without a federal claim, they couldn’t get to the substance of the other questions."

Defining a loss in an online game is murky, he said, adding, "Skins” are virtual goods, often virtual weapons or other in-game items.

The “steam” platform, according to Lobel’s blog post, allows skin-betting to occur on third-party websites where skins are traded in for virtual currency, “with at least one secondary market allowing for the conversion of skins to cold, hard cash.”

Lobel further explained that when someone signs into a game such as Counter-Strike: Global Offensive, the player receives or can purchase skins that can be exchanged with other users.

“Because anyone can open accounts, the steam platform unfortunately allows third-party gambling sites to open accounts as well,” Lobel said. “As soon as you shut down one, 10 others can be created.”

Lobel shared a story from the World of Warcraft game.

“Someone spent a ridiculous amount of money – thousands of dollars – on a weapon for World of Warcraft,” he said. “As soon as the player entered the game with his new weapon, it was immediately stolen. Was this real stolen property or a virtual item?”

Lobel said this most recent case in Washington – even though it was dismissed – was the first for a judge to say “skin gambling is in fact gambling.”

“What’s interesting about this latest case ... is this is the first court that said implicitly that this is gambling,” he said.

What happens next?

“It’s always difficult to predict,” Lobel said. “Theoretically, they could file in state courts … but it’s more likely the next response will be legislative.”

According to Lobel’s blog post, the Washington State Gambling Commission sent a cease and desist letter to Valve on Oct. 5, the day after the court granted the defendants’ motion to dismiss, threatening charges against Valve for its part in the skins gambling enterprise if it does not stop facilitating gambling through its steam platform.

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

Valve sent a strongly worded response Oct. 18, refuting allegations that it is engaged in gambling, alleging it has “no business relationship” with operators of skin gambling sites and neither promotes nor profits from gambling.


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