New York accuses gaming giant Valve of getting kids hooked on gambling with ‘loot boxes’

MANHATTAN (CN) — For the better part of three decades, Seattle-based software company Valve has reigned supreme over the PC gaming space. Its lineup of iconic franchises has attracted hundreds of millions of players globally and been incredibly lucrative for the company, despite many of the games themselves being free-to-play.

But according to New York Attorney General Letitia James, much of the success of Valve titles is backed by widespread, unregulated gambling by its largely underaged playerbase in the form of “loot boxes.”

“Illegal gambling can be harmful and lead to serious addiction problems, especially for our young people,” James said in a statement on Wednesday. “Valve has made billions of dollars by letting children and adults alike illegally gamble for the chance to win valuable virtual prizes. These features are addictive, harmful, and illegal, and my office is suing to stop Valve’s illegal conduct and protect New Yorkers.”

In a 52-page complaint, filed in New York Supreme Court, the state takes aim at three of Valve’s most popular games: Counter-Strike 2, Dota 2 and Team Fortress 2. The latest iteration of each game is free to download, but allows players to open virtual crates for around $2.50 a piece to earn cosmetic items that vary in rarity. 

In Counter-Strike, a strategic first-person shooter, those items are colorful skins for otherwise realistic weapons. In Team Fortress, a more cartoonish shoot-em-up, players can find flamboyant hats for their characters to flaunt.

It’s hardly a new concept. In 2021, Fortnite maker Epic Games agreed to a more than $26 million settlement for a loot box model that raised similar gambling concerns.

But James says that the Valve system is particularly insidious since, despite offering no in-game benefits, those items have real-world value — both in Valve’s own virtual marketplace as well as in various third party sites. 

Some particularly coveted cosmetics fetch thousands of dollars; a rare AK-47 Counter-Strike skin recently sold for $1 million. But the more common items, which users are far more likely to unbox, are worth mere cents. 

“Most people, therefore, purchase a key and open a loot box for the same reason people play the lottery or a slot machine — potential of winning a large prize,” James claims. 

Loot boxes in Counter-Strike, currently Valve’s most popular title, even visually resemble slot machines, according to James. She argues that’s by design, as Valve uses the addicting gambling aesthetic of a spinning wheel of prizes to lure in young users and encourage them to open more cases.

“The spinning wheel may come to rest immediately next to the icon for the rare and valuable item,” James adds. “This visual gives users the impression that they ‘almost’ won the valuable item, a design feature associated with slot machines known as a ‘near miss.’ In reality, the item that the user is awarded is determined by a random number generator on Valve’s server after the user clicks the button to open the case.”

James says Valve is breaching the state constitution by promoting gambling, citing research that shows children introduced to gambling are four times more likely to develop a gambling problem than those who are not. 

Her lawsuit could have massive implications on Valve’s virtual economy, which is estimated to be worth more than $4 billion. James is seeking to permanently stop Valve from promoting gambling in its games. She’s also asking that the company make “full restitution to consumers and pay damages caused.” 

A spokesperson for Valve didn’t immediately respond to requests for comment. 

Founded by former Microsoft employees Gabe Newell and Mike Harrington, Valve launched its debut game Half-Life in 1998 to widespread critical and commercial success. Five years later, the company released Steam, now the largest digital distribution platform for PC games in the industry, with an estimated 75% market share.

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