Valve is one of the most influential companies in PC gaming, but its size and reach are now drawing increased legal scrutiny. Valve owns Steam, the world’s largest online PC storefront, and is the developer behind some of the biggest multiplayer games on the market. With continued expansion into hardware, including the upcoming Steam Machine, Valve sits firmly at the center of the gaming industry – it’s also currently dealing with a wave of lawsuits across multiple fronts.
Valve Just Won Its Rothschild Lawsuit
Popular developer and Steam Deck creator Valve emerges victorious in a lawsuit that could have major implications moving forward.
Valve is Facing At Least Five Different Lawsuits Right Now
Valve is currently being sued in two different states in the US for its loot box mechanics in Counter-Strike 2, Team Fortress 2, and Dota 2. In Washington, where Valve is based, the company is being sued by law firm Hagens Berman on behalf of players.
In New York, Valve is also being sued for allegedly engaging in illegal gambling. The key difference is that this case is being brought by the government, rather than on behalf of consumers. The timing of these two cases is unlikely to be coincidental.
Valve is also facing an antitrust filing from developers in the US. Originally filed by Wolfire Games in 2021, the case was granted class action status in 2024, meaning it can now apply to any developer that has paid Steam its 30% cut on purchases made through Steam on or after January 28, 2017.
In the UK, the company is also dealing with another antitrust lawsuit for similar reasons. The UK litigation claims that due to Valve’s market dominance, it essentially forces developers to pay its 30% fee and locks consumers into using its storefront after purchasing a product.
In addition to these cases, Valve is dealing with a copyright case in the UK by British music copyright collective Performing Right Society (PRS). “[PRS] is basically saying Steam is making these games available to the public, allowing them to download them without paying appropriate licenses. And this is a newer thing in the digital era,” Rebecca Rechtszaid, a creator economy and music industry lawyer said. According to Rechtszaid, it’s a fairly standard licensing case.
That’s quite a few potential payouts Valve could have to deal with, not to mention the effect the cases’ precedents could have on future litigation in both the US and the UK. GameRant reached out to Valve for comment about the various lawsuits, but the company has yet to respond.
Are Loot Boxes Illegal Gambling?
Valve is currently dealing with two separate legal challenges that allege the same core issue: that Valve is engaging in illegal gambling through loot boxes across Counter-Strike 2, Dota 2, and Team Fortress 2. However, there is an important distinction between the two cases.
The case against Valve in its home state of Washington is being brought on behalf of consumers. The legal action in New York is being brought by the government. The latter filing is the first of its kind, as prior loot box litigation in the US has been consumer-based, and has historically failed.
For example, a lawsuit against Supercell, the developer behind Brawl Stars and Clash Royale, was tossed out in California in 2021 when it failed to prove consumer harm resulting from loot boxes, which, similar to the current lawsuits facing Valve, were likened to slot machines and said to use psychological gambling strategies.
The Washington lawsuit, brought by Hagens Berman on behalf of consumers, alleges that Valve is engaging in illegal online gambling disguised as video game mechanics, including systems designed to get players to spend money, particularly minors, through casino-style psychological tactics. The filing claims the loot box mechanic is a “carefully constructed” way for Valve to profit from minors. Valve earns revenue from loot box keys, and also takes a 15% fee when players sell an item on its Steam Community Market.
The lawsuit brought by New York Attorney General Letitia James hinges on that last aspect – the Steam Community Market. This is a secondary market that allows players to sell their digital goods, like those earned from loot boxes, for real-world money.
According to Dr. Leon Xiao, Assistant Professor at the School of Creative Media of the City University of Hong Kong, the NYAG needs to satisfy three conditions in order to prove its argument that Valve’s loot boxes contravene gambling law. Xiao has a PhD in video game law and specializes in the regulation of loot boxes. “There’s only one argument to be made, just that you have to see that [certain] conditions are satisfied, and if they are satisfied, that is it,” he said.
The three conditions are:
- Players must spend money to access the item, i.e., risk something.
- The contents need to be randomized.
- Items can be exchanged or sold for real money.
That last condition is the main focus of the NYAG’s case. Prior cases, like the Supercell case that was tossed out, couldn’t satisfy that third condition. Xiao said from an academic perspective, it seems all the necessary conditions are met by Valve’s loot boxes.
“Across the world, these cases have been stuck on this third element, which is that, whether what you get is something that is of value, that is transferable. And from an academic perspective, certainly, the loot boxes on Steam that could be transferred through the Marketplace do satisfy that particular condition,” Xiao said.
Valve has responded to the NYAG’s lawsuit. As its defense, Valve likened its loot boxes, and specifically, the transferability of the items players receive, to physical collector items including baseball cards and Magic the Gathering cards. Valve’s comparison between loot boxes and physical collectibles, including Labubus, forms the basis of its broader legal defense.
The Trading Card Defense
It’s an interesting response, because it’s essentially the same thing as saying, these things are also breaking the law, so why should only Valve be held accountable? And yes, Valve technically isn’t wrong – under New York law, trading cards also seem to satisfy the aforementioned conditions.
In the US, there have been lawsuits alleging that trading cards are a form of gambling, though none have succeeded. More modern illegal gambling lawsuits involving trading cards in the US center around “card breaking,” where viewers bet on the outcome of a card pack that a live streamer opens. But older cases, like Schwartz v. Upper Deck Co, which was filed in the 1990s and decided in 1997, saw prosecutors build the case around the Racketeer Influenced and Corrupt Organizations Act (RICO).
That particular case argued that buying trading card packs was essentially a form of gambling disguised as a retail product. The prosecutors tried to invoke the RICO Act, which is typically used against organized crime. According to Xiao, a RICO case hinges on the individual who is making the claim being able to prove they suffered direct injury to their business or property caused by the defendant’s violation. Since they couldn’t do that, the case failed.
“Basically, those products are also illegal gambling. I believe if we look at the legal conditions, it’s simply that the law has not been enforced against them. But just because the law is not being enforced against something, doesn’t necessarily mean that it cannot be enforced against a similar product,” Xiao said.
If the NYAG’s lawsuit succeeds, Steam’s player marketplace could be removed in New York, and Valve could have to pay fines and damages relating to its loot box systems. Thought it will likely be many years until a decision is reached. “In the lawsuit filed today, Attorney General James seeks to permanently stop Valve from promoting gambling features in its games, disgorge all ill-gotten gains, and pay fines for violating New York’s laws,” the NYAG office wrote in its post.
However, just because one aspect is technically unlawful, doesn’t necessarily mean the system should be removed entirely. It’s possible that a law whose origins can be traced back to the 1800s isn’t equipped to be applied to a modern-day online economy like that found within Valve’s ecosystem.
That’s not to say loot boxes aren’t predatory and can’t cause harm, particularly to minors, or that they shouldn’t be regulated, but it could be that the law isn’t nuanced enough to account for these more modern aspects. “At the end of the day, this is not that technical. It’s not that difficult to understand. It’s the law, but the law is outdated,” Xiao said.
Transferability On Its Own Isn’t a Bad Thing
Rather than removing transferability outright, a more nuanced approach that blocks items received in loot boxes from being sold on secondary markets could be a better solution. Because, as Dr. Xiao points out, transferability of online goods isn’t inherently a bad thing.
“In today’s context, everything is subscription-based. You don’t own anything. You stop paying, you lose access to everything. I can certainly see the benefits of your virtual items having transferability and value. But that does, unfortunately, breach gambling law when it is offered in this context,” Xiao said.
A more nuanced look at the transferability of digital goods, and perhaps a point toward Steam’s argument likening its system to that of trading cards, is that a secondary market allows players to ignore gambling mechanics. It’s another aspect Valve’s digital economy shares with the trading card market.
For collectors who don’t want to buy full packs, they can buy singles, targeting a specific card, which can save collectors money in the long run. “So having that transferability also means people have the additional option of just buying that thing directly, without being forced to engage with a loot box,” Xiao said. Ultimately, it will be up to the courts to decide how these systems should be classified, and what that means for the future of loot boxes.
