The Original Esports Lounge
On Jul. 10, 2016, the world’s largest esportsbook, CSGOLounge,
took in 321,000 skins on a Counter-Strike: Global Offensive
match between professional teams SK Gaming and Team
Liquid. The betting handle was the site’s largest of 2016.
By Aug. 16, the site no longer offered any skin betting at all, and
said it was converting to an alternative entertainment platform.
The events of the 37-day period in between, and Lounge’s
subsequent pivot to a different type of sportsbook style betting,
are the subject of this report.
It uses Lounge as a case study for the decline and transformation
of an industry that took in $1 billion in handle in the first half
of 2016 alone.
Facing four skin gambling scandals in the span of a month as
well as multiple lawsuits alleging it supported unregulated and
underage gambling, game maker Valve ordered skin gambling
sites to cease and desist using its API, Steam, to facilitate
commercial gambling transactions.
This action dealt an enormous blow to the industry, resulting in
the closure of dozens of skin gambling sites, including Lounge
and its sister site for the game Dota2, Dota2Lounge.
Lounge’s tortuous shut down process illustrated the near impossibility
of skin wagering sites thriving in the face of Valve’s disapproval. It
also showcased the inability of skin wagering sites to achieve
regulatory approval, even if Valve had wanted them to.
Skin wagering is not completely dead. Some sites continue to
flout Valve’s ruling, but simply do so from countries outside of
the US.
Plus, CS:GO players still acquire skins—in-game items acting as
cosmetic alterations to weapons—through normal gameplay, as
well as on buying and trading platforms. As long as skins remain
a critical part of the game’s ecosystem, they will likely serve as
a virtual currency that those so inclined can exploit for wagering,
and other purposes.
And now, wagering on Lounge itself isn’t even dead: The site
partially released in late September a virtual coin-based,
sportsbook-style wagering platform.
But several key questions remain: Will Valve continue to
aggressively go after skin wagering sites? Where and how will
new skins casinos start to pop up? And what will they look like?
WHAT’S IN THIS REPORT
• Comprehensive skin betting data for over 200 professional
CS:GO matches from top 2016 tournaments: Match odds,
tournament betting volumes and total USD handle sizes,
demonstrating how large the industry grew
• A breakdown of the four major skin gambling scandals
precipitating Valve’s crackdown: Whom they implicated,
how they eroded trust, and the elements of the skin betting
industry they helped cast greater scrutiny on
• An analysis of Lounge’s decision to shutter skin betting,
and how it relaunched: How it attempted to stay in the
market, its shift to a coin-based betting product, and the
challenges facing esports betting with virtual currency
• A recap of how targeted sites reacted to Valve’s crackdown:
The attempted workarounds by sites, and how websites
named in the company’s cease and desist letters have closed,
stayed open, or pivoted to something new
• An overview of regulators’ reactions to skin gambling: How
governmental bodies are beginning to interpret various forms
of esports wagering (including skin gambling), and what
their comments and actions signal about the industry’s future
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