The Loot box Lawsuit, Valve Vs. New York State | Design Club

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Good time zone internet. Hello and welcome to Design Club Live, the only game design show on the internet that is not lawyers, does not pretend to be lawyers, but is going to spend the next little bit looking at the law. I am your humble Design Club host Will, joined as always by my pal Jeff. Say hi to the people, Jeff. Hi to the people, Jeff. Good morning everybody and well, morning over here. Welcome to Design Club Live. I am Jeffrey Zatklin. I'm the studio director of Extra Credits and more importantly for this, a long time game designer. Joined as always by my co-host Will. Well, let me get my fingers away so I'm not getting chopped off. Yeah. Voice of the people and our overl- internet Twitch overlord. There we go.
And today we figured we'd jump into one of the fun things, which is that um hey, it's fun. Valve is getting sued for

loot boxes. Yeah. And or loot boxes specifically in terms of gambling. Yes. By the state of New York the attorney general of New York and both sides seem to have both the high ground and the low ground in different ways Yeah.
on this.
This is probably one of the weirdest lawsuits I think to tackle. Um because there have been like, okay. In the Craft and lawsuit, right? Which has also been in the news quite a lot and we talked about it before and there have been some updates and we might talk about that at some other point, but probably not cuz the updates are kind of weird. Um there was like a lot of they said, they said and there was a lot of dithering about what the facts are. Right? Like did people were people in dereliction of their duty as the CEO of the company, right? Was someone trying to prevent the earn out. Here, Possibly both. Possibly both. Here, that

feels like it's less the case and there are a bunch of facts that everyone is like on board with. Mhm. The and so it's much more interesting because it's about what the facts imply, mean, what the legal consequences of the facts are, what the legal consequences of the facts should be, right? And it all really centers quite heavily on a fundamental question, which is what constitutes gambling. That's sort of at least in my opinion, Jeff, what the what the like the fundamental question is. Um and that's also been much in the news recently, right? There's a um there are a large number of ongoing lawsuits around the United States right now against Colosse and Polymarket, which are two um prediction markets, uh which are not gambling in like huge scare quotes

um at the same time as there's a giant rise in sports betting, right? Many people commented that like um the Super Bowl this year, everything was either an AI commercial, a sports betting commercial, or an AI sports betting commercial. And like that was how it felt. So, there's a whole bunch of things going on in like the um in the US as pertains to gambling and here it's coming um to bear on Valve, who's like I would say this is central to the industry, but we'll talk a little bit about why Valve is probably the only company that's going to be affected like this. Um And and why that's weird. So, uh shall we shall we like start by looking at some facts, Jeff. Let's do that because, well, actually, there we go. Closing all this other

stuff because my social stream is still doing weird things, but I will not be distracted by this today. Okay. Um but that will mean will I may ask you to chat type something into chat for me because I may or may not be able to actually hold on. Yeah. Um let's see. Does this part work? Hey, okay. Yep. That cool. All right. So, um So, okay. There is definitively a company called Valve. Definitively, they both own Steam, but that is not the interesting point here. For this point, we're well, not as much.
Right. Yeah, we'll get to that in Because in this case, Valve is more getting sued as the develop owner and developer of a slate of games, all of which monetize via loot boxes. Correct. With an extra asterisk on the end of that. Yes. And the asterisk is the really important part because many, many companies use loot boxes. Right. And in this case, the lawsuit's getting brought by the Attorney General of the State of New York, Yep. who is alleging Yep. that

Valve's use of loot boxes, unlike many, many other groups, actually constitute gambling. Correct. And so, I have I have here to bring onto screen the press
Oh, no. Am I getting get small? Mhm. Yeah. Oh, yeah, we're getting small. All right. Okay. So, this is really small text and I'm going to make it bigger. Don't worry, chat, if you're if you're reading along at home. Uh I I will also put the relevant links in the description of this video if you're watching it later. Um there are some quite relevant [clears throat] links that I will I will put in the thing so you can read these for yourself. Okay. So, um this this was filed at the end of February. Um the For those interested, it is currently the middle of March, so we're two or three weeks post filing. So, enough time for things to surface and us to kind of research around it. Yes. So, um the press release states that she's the New York Attorney General Letitia

James is suing Valve for the alleged practice of illegally promoting gambling through video games popular with children and teenagers. Mhm. So, that's a whole bunch of arts?
The children and teens is the extra sticker on this because it could have just been illegally promoting gambling.
Correct, but that there there is there is a healthy dose in this of won't someone think of the children, which I take some amount of umbrage with.
[laughter]
Um so, uh
Oh, well, the children. The three games listed are Counter-Strike 2, Team Fortress 2, and Dota 2, all of which have identical for the for the for legal purposes, the loot boxes in all three of those games are identical enough that we're going to deal with them as a lump, right? Um That's a really great question. Uh when did Team Fortress begin to use that? Uh that's actually in the filing.

Um it was in the early It was in the second year of Team Fortress 2's existence, so like 2000 and nine? 2010? Somewhere in there? So, for a while. Yeah. But, again, the interesting part we're going to find out is it it isn't just the loot boxes because many, many, many other companies do loot boxes and I mean, actually, the oldest reference I can think to of loot boxes is packs of baseball cards. At least, I'm sure there were many things before that and then after that, packs of magic cards. Like Yes. buying a thing that gives you a possibility of things within it Right. not particularly new. Right. So, um if we go down here, the um involves this popular game the process resembles a slot machine with an animated spinning wheel that eventually

rests on a selected item. Okay, that's fine. The randomly selected virtual items have no in-game functionality, but can be sold online for money with one item reportedly being sold for more than a million dollars. This obfuscates things just a touch, but is technically true. And this is a from what I've read, the heart of the the heart of the lawsuit. Because again, it's not actually loot boxes, right? You can think about um there are other companies that do more volume of business in the form of loot boxes on the daily than Valve does, right? I am 100% sure that Hoyo, for instance, makes more money per day from gotcha pulls in its across its suite of gotcha games than Valve does off of loot boxes, almost assuredly, right? Because that is more fundamental to the experience of playing those games than Valves are because by everyone's admission, including the attorney general, the loot boxes are not

necessary to play the game. They are an additional optional form of monetization in this case. Right. And that's kind of where like the no in-game functionality goes to that part of it, but theoretically the loot boxes could have game functionality. And this would still be if it was set up the same way, like that's kind of an irrelevant fact. There is some the the way the law is written in New York specifically, appears to exclude cases where or games where skill is involved in wagering and receiving a payout. And so I I think Mhm. they are doing this to cleanly cut and draw a definitive line to say that this
Uh practice does not participate in that carve out, what might what you might

think of as the pinball carve out. Pinball was um a hotly debated uh early gaming/gambling discussion in the United States because you could receive something of monetary value, a free play, in exchange for your score, right? You could get enough score that you could earn a free play and the um what was being alleged was that it was a form of gambling because it was totally random and the argument that pinball players, creators, and owners made was that no, it's skill. Mhm. And demonstrations were performed in front of Congress that pinball is a skill and so uh there's sort of been a carve out in a lot of things for that sort of exception and I think this is an attempt to cut it cleanly from that. Right. But I was thinking the way a lot of other loot Like if this was like magic cards or it's like, "Hey, cool. I have a grizzly bear. I can now play a grizzly bear." Right. You know, if this was

I now have a this kind of gun. I can now wield this kind of gun. Right. Like that would have game func- You know, if this was Dota doing when the loot boxes had characters
Right.
in it. Right. But again, the interesting part here, actually, the one one one most interesting part can be sold online for money. Yes.
And as we keep going here, that's going to be the big difference where almost every other game that does loot boxes, it isn't gambling because you can put money in, money goes in, pool of possible things you could get, you get a selection of those. They come out. But then those are attached to you, the player, or your account. And there's no way for you to do anything with those other than use them. Right. Or to
take them out of out somewhere and sell them because at that point money goes in, random thing comes out, may or may not be more valuable. Oh, look, you got the valuable one. I can take and sell. That's the loop of money goes in, you get reward. You basically cash out

reward.
Yeah. Um we got some very relevant good questions here in chat that I'll I'll pull up. Is Valve based in New York? No. This lawsuit is on um on the basis that there are customers in New York who use Valve's products. And that gives
if DraftKings was illegal in New York for betting, you New York would be saying, "Hey, you're allowing people to bet here using your online platform. You should be excluding them because gambling is illegal here." Correct. Uh and then of course uh the bull and second last asked the same question seconds apart on two different platforms. How does selling the account come into play there? That's a great question. In this case from a legal perspective, it doesn't because the company has already said that that's not something that they allow and that the consequence for that is termination of the account. So it's not It is
Because it's against their terms of service and that they do enforce that

if they can find it, New York doesn't have anything to sue them on there. The worst they could say is you're not enforcing this strictly enough and that's a whole different thing than you are engaged in illegal gambling. Correct. So um the the the goal the goal that as as usual and we need to remember that this is a press release written by someone who believes that they are in the right and and shooting for the moon. Mhm. Um is that uh the Attorney General James seeks to permanently stop Valve from continuing to promote illegal gambling in its games and to pay disgorgement and fines um that that disgorgement and fines, I'll jump ahead a tiny bit, is 100% of all of the money lost by anyone in the state of New York to Valve's gambling practices plus an amount equal to like several times that as a fine plus court costs. They're never going to get it, but she has to ask for the maximum or like and then they start

negotiating down from there if if something
who are familiar, this is a negotiating negotiation tactic. You pretty much never get more than you ask for, but you almost always get less. So, you're encouraged based on how the system works to ask for your maximum amount. Yes. Right. Okay. So, um we uh there's you know, there's a whole bunch of other stuff um A thing that we're also going to say is is fact and um we're sort of in the background of this, we are also working on making this a potential script so that when we talk about this, that is part of this is our conversation with you and our conversation about this may make it into a script at some point. Um so, things that we have to make sure we're on the up and up are um This is This is a real This is a real problem, right? Illegal gambling can be harmful and lead to serious addiction problems, especially for young people. Yes, absolutely. No one is disputing that. Um The qu-

This is actually physiological. Like
Yeah. People at a certain point do not have a a developed prefrontal cortex. Yeah. Like this is just how humans work as then it takes a while. Like in some cases 20 years for that to really develop and therefore younger people are more susceptible to things that would basically would call poor impulse a poor impulse control. Right. And that can be
likely to get hooked on gambling or other things like that. Right. That is just how humans are program or how humans are built on the hardware. Right. So um So we're not I I think and nobody is disputing that, right? Like these are all we're still we're still very much in in like the the fact section, right? So facts are Valve exists, the state of New York exists, Valve makes those games, those games operate
with loot boxes. with loot boxes as described um Games are sometimes played by children. Games are sometimes played

by children. Sometimes children purchase these items with money that they have acquired. That's a little bit of a loose one because adding money to a Steam account does generally require credit card. You could buy it with cash from a store, but that is hard to both prove that it's children. That gets weird, right? So yes. Um Humans just need download more RAM. Um Okay. So one of the big deals is that and this actually happened like last year is that the the market cap on tradeable Counter-Strike skins was reportedly over 4.3 billion dollars. And this is where it gets kind of weird. Because Can we get one step before that?

Yeah, sure sure sure. For those unfamiliar, since they were saying cosmetic, hey Will. Yeah. See that one million dollar picture or picture in front of us for a thing that sold for a million dollars. Yeah. Having not or not playing Counter-Strike 2 in any recent about Actually, I only played Counter-Strike one. Sure. That looks like an AK to me. Yeah. Why is that worth a million dollars? Excuse me, not even why is it worth a million dollars? What is different about that gun? That is very good. Yeah, that's a very good question. So, um we have my mouse on screen, fortunately. So, um this the entire skin everything that could be considered the gun is a skin. Okay. Um the reason
of like League of Legends where I buy a character skin for Malzahar or Garen or Lux,
Yes. I get skins for weapons in Counter-Strike? Yes. Okay. Including the knife. Um the most desirable item is a knife

because they are the rarest. Classification, individual items are rarer. Okay, cool. I I can accept that there are I played Magic. I can accept that there are rarities in loot boxes. Okay, great. This one in particular um is a I believe, if I'm reading this correctly, this is a StatTrak Factory New weapon. StatTrak tracked in-game stats cosmetically. X number of kills, X number of kill streaks, X number of double kills, etc. These are common um Dota cosmetics have them. Team Fortress cosmetics have them. Yeah.
So, this means if I'm using that skin, it tracks my stats during that time and associates them with the skin? Yes, for me. If I traded it to someone else, it would reset and they would have personalized stat tracking. Okay. Factory New is the quality of the the wear and tear on the skin. The wear and tear on the skin uh varies and is a

um float, I believe, uh that is generated when the skin is generated. Factory New is just the rarest of those. So, this is a rare skin with an upgrade in the highest quality. Okay.
And then here's where it gets really weird, and we're not going to go too deep into this. The metal So, the wood pattern is probably set on this. Okay.
The metal patterning Mhm. is a randomized selection from a texture. Some skins are unique. Like one-of-ones.
Okay. Because of this portion of the texture that they are like using.
Accessing, okay.
Right. So, this one is considered highly valuable because of the portions of the texture that are um being shown, right? And that is a personal aesthetic choice, right? There isn't any objective market in which this

is valued at a million dollars. They didn't go to like CS:GO Antiques Roadshow to appraise this at like a million dollars, right? Someone probably did it to say that they had a skin that they paid a million dollars for, right? Which is the other weird part of this, right? That this is being used as a piece of evidence because someone made a stupid choice, right?
Someone made a prestige play for a very rare thing. Right. Okay. So, basically, what I'm getting here is that me playing this game, I wouldn't have noticed anything at all. But for people who play the game, this is a rare cosmetic that they would be very interested in acquiring it. In this case, someone sold for a million dollars because of its rarity. So, it is purely people paying for fun cosmetics. Yes. But this also implies there is some way to trade them. Yes, there is. So, there are two

methods three methods. But they really boil down to two for trading these. And this is again part of the key part that differentiates Valve. Cuz for example, in League I can't trade a Garen skin. Correct. I can I believe I can buy a skin as a gift. Right. But again, once the skin is delivered to the person, it is bound to that account. Yes. They cannot retrade it or re- You cannot gift a skin you own. You have to go buy something separately. And it is a one-time transfer. Yes. So
this is not the case. Tell me more about that. Um so, okay. So, there are two ways. We'll deal with the simple case first, the more complicated case, then sort of the overlap between the two. The simple case, you have a skin for an AK-47, but you don't like using the AK-47. You like using the Op. And I have a skin for the Op, but I don't like using the Op. I like using the AK-47.

We're friends on Steam. Mhm. We can trade. Okay. I can say, "Hey, Jeff, that's a pretty cool AK-47 skin you have. I have this Op skin. I know you're an opper. Let's swap." Cool. And then we There is some easy mechanism that we can within Steam swap. Correct.
Does this cost us anything? No. That is the There is a non-monetary trade option. Alternatively, we could I could go on Reddit and say, "Hey, I'm looking to trade this Op skin for an AK-47 skin." And I could find someone and I could become their friend. That takes a little longer because Valve has put certain restrictions in place for account security. Um so that uh it takes a while for trades to be processed, and it takes longer for um new friends to be authorized to trade as sort of account protection features. So, someone doesn't hack your account and immediately empty it of all of your valuable stuff. Makes sense. Cool. Good on Valve. Okay.

Yeah. The other way is I could go into the Steam marketplace. And the Steam marketplace is a um Actually, I should probably bring this up. Let's do that. Let's Let's actually go on the Steam and look look at the marketplace. I should have had that pulled up ahead of time. I do apologize, Chad. Give me 1 second. Let me Let me pull this up. Great. Boink. So, just pointing out that unless you're deeply into this Mhm. for a lot of people, all of the cosmetic seems ridiculous, but of course, I will counter to that that people who spend a lot of time in a thing pretty much anything, be it video games or something else tend to like to collect social things. Yes.
Human brain also wired for small displays of status. Right. Like when I play League, I like using skin to characters. Right.

It's fun. So, here's here's the other option that's available. And this is all live data from Steam, okay? I'm going to make this a little bit Actually, hold on. Let me finish that thought. With that being said, the prices for some of these do seem into the ludicrous. Um Okay. So, here what do we got? Okay, these prices seem more reasonable. Eight bucks for Sure. So, I'm Let's Let's say that I am an Oper and I want to buy this Oper. I can see that there are that there is a market here. Oh, okay. Wow, you can show you the That's pretty cool. Right. So, I can see what the lowest This is very similar to WoW's auction house. Mhm. Except it's using real money. Except it's using real money. Yes, correct. So, these are um options that are for sale. $46.09 is the current lowest. These are additional um

stickers or alterations that have been applied to that um to that skin. This has a charm on it, right? Some people do or don't care about that. And I can select from a range of these um I could even boot up the game and inspect it there. And there is price tracking, right? This is how many sold on the 10th. Um the you know
um yeah.
Seven sold at $48 and I can track it and it moves up and down. Kind of like a a real market cuz it is a real market and I can sell it and then that balance this is where it starts getting tricky is applied to my Steam account with no way to withdraw it. But Um actually hold that off for a second, Will.
Yeah. Can you then use you can though you then use that to buy other things on Steam. So for example I could sell this whatever that skin was you're looking at Mhm. take my $46 and go use it to buy

other skins for the game. I could
Could I use it to go buy Slay the Spire 2? Yes.
Okay. So I can use it anywhere within Steam. Correct. Including on things that are physical because you purchase things like the Steam Deck or the Index or um you know, the new Gabe Cube if and when that ever actually exists with the same purchase method that you buy Slay the Spire 2 or a key or Okay. So there's theoretically a way to get out Actually, I suppose then I could use it to buy games I gift to somebody else. Yes, you could do that as well. So there are minor ways to cash out, but no real way to say I've I've done a $1,000 worth of skin thing and I want that in my Bank of America bank account. Sort of. Cuz that's where we get into the third case. Oh, okay. So I'm

is a synthesis of these two and it involves uh another part of Valve. So this million-dollar skin was not sold on the community market and I know this for a fact because you can't sell things that expensive on the community market. There is an upper end limit, I believe it's like less than $2,000. Um that you can hold uh and the reason that that limit exists is that any more per individual account and Valve would have to register as a bank and Valve does not want to register as a bank and you do not want Valve to register as a bank under federal legislation. So that's not going to happen. So then the question is, but if if you can't do a transaction that big, how did this happen? Well, Valve has an API that lets third-party sites view your inventory. And we won't go too deep into the technical details, but suffice it to say there are websites where if I wanted a

million-dollar skin, I could send the million dollars to the website and say, "Here's my million dollars. I would like this person's skin." They give me the skin, the website gives them the million dollars minus a cut for processing the transaction. And now we use the trade mechanism to do that. We wait through all of the holds and the everything else and then the website processes the um processes the monetary exchange.
escrow as a neutral third party. Meaning that like the part before, like the biggest part of that story is you know you can't be scammed when you're buying within Steam because Steam of the is authenticating. This is indeed a virtual item that works in Counter-Strike 2. Like there is a and will hold the item and the money in escrow. So, no one player can take it and run off with it. They are safe trades. That is what these intermediary third parties are doing is

allowing the safe trades. Otherwise, nobody would actually pay large amounts for a thing because they'd constantly be getting scammed on the internet. Now, it's there are two two things are true here. One, Valve is enabling these these things with the use of the API. Yes. Without the API, this could not exist.
Correct. is providing it. Correct. And they bypass Steam's trading limit by using the trade function rather than the market function and transacting the business elsewhere. So, because Steam allows you to give a gift or because Steam doesn't check the value of two items, they just let you do the trade, you can do the trade and then leave a bag of money somewhere, essentially. So, there's that. And that is a thing that Steam is enabling with all of this. However, and I I really want to stress the the however.
[laughter]

It would still even without the third-party sites fall under the scope of the lawsuit that is being filed here. So, it is true that this occurs, that we have million-dollar skins, and that that is being used here correctly by the Attorney General to prove a point about the amount of money that is being transacted here to draw attention to the case.
[clears throat]
It is also true that merely having the marketplace which transacts business in dollars is enough for this to be within the bounds of the lawsuit as filed, at least in my understanding. I am not a lawyer, but I did spend all morning reading. So Right. And and that is because I could theoretically log into Counter-Strike, buy a loot box for I'm just going to say $5. I'm throwing out random money accounts here cuz I don't know. Okay. Get something that is worth a thousand dollars and

cash it out in the marketplace and I have basically put in my token, won a thing, cashed it out in some way that meaningfully gives me much spendable money, and therefore that is that constitutes gambling. If there was no way for me to sell those things, that would technically not be gambling. Because I'm paying, getting a random item that can only be used in game, which is basically the purpose of what I'm paying for. Right. Okay, so let's let's address this. But the system doesn't allow you to withdraw the money. Mhm. I don't think that matters here. You're correct. Valve's built-in system does not allow it to not allow someone to withdraw money from their balance. Mhm. However, [clears throat] you are exchanging that for objects of real monetary value in a one-to-one with money. Well, let's actually let's make it super easy. Pretend there was a Valve credit card Yeah.

that can only be spent on the Valve shop. Congratulations. You just had a thousand, you put in $5 and you won a thing and you have a thousand dollars on your credit card that you can only spend or hell, it's a Nordstrom's card. It's an Amazon card. Like the fact that you can then go take that money and spend it on the store to buy other things equivalently is enough to be considered a cash out. Yeah.
The third-party site lets you cash cash out. It's in your bank account. But there's plenty of legal precedent that basically says, "Sure, you can only spend it here, but that is still spendable money." Let's talk about a very fascinating exception and an example from elsewhere in the world that illustrates this point perfectly. Okay. Chad, have you heard of a thing called Pachinko? Ching ching ching ching ching go. Right. Pachinko.
because my wife is Japanese and we go to Japan. Correct. So, in Japan gambling is very tightly restricted.

There is a special cultural carve out for Pachinko which is if you've never seen a Pachinko machine, I'm going to oversimplify it. It is vertical flipperless pinball. Your goal is to get you fire off
vertical he means gravity powered. Thing at top, thing goes down. Yeah. So, the the way that it works there is you pay an amount of money for a number of steel balls that are used to play the game. You receive
a a box of them.
Yeah, it's a giant big heavy box. You then play the game for a while. You receive back a number of balls in relation to how well you scored. Um and then you take those to the counter and you say, "I'm all done. I would like my my prize, please." And they give you a ticket or a coupon or a fun little like

figurine or something. And it's not worth anything. Most people. But if you go next door, there is a And it is always next door. Yes, correct. Um Sorry, carry on. Right, it's always right next door. You go next door and you will find someone who very conveniently wants to purchase that item for you for a sum of money. Convenient, totally different establishment. Yep. Different establishment.
between the two of them and you don't even have to walk outside. Correct.
Building one has pachinko machines. Yeah. Excuse me, suite number one has pachinko machines. Yeah. Suite number two have people that will buy the tokens you can get from that in exchange for prizes and or money. Correct. So, that's gambling, right? I think we would say that that's gambling.
Yeah. Right?
It is hitting the letter of the law. The same establishment is not allowing you to do both. Right.

But, it is not hitting the spirit of the law, Correct.
which is Hey, I look, I walked next door. Right. So, in this case, if I could if if all I could buy there was Steam hardware, Mhm. I think we would still call it gambling, right? Even if I couldn't get actual dollars, Mhm. if I could get um Well, it's because with hardware, you could then sell the hardware to someone else. I could pawn it, right. It is a thing of value. Yeah. Um The same with virtual, like if I can go give 20 people copies of Slay the Spire, my 20 friends, because I earned enough gambled enough money for that, they might also give me something for it or it's Yep. Um So, Oh, there we go. Yeah. The item is fungible. Correct. Yeah. Yeah, yeah, yeah. So, uh and then later on in this in this

press briefing, we get a whole bunch of the public-facing highly um optics-motivated reasons that the attorney general is doing this specifically. Um this is part of a a general push by the attorney general of the state of New York to um sort of push back against the amount of gambling because of things like sports betting and prediction markets. Again, Polymarket, Kalshi, and then any number of uh air quotes reputable sports betting apps on your phone, right?
Yeah. There is a question as to why they're going after Valve and not sites that do it much more egregiously. Correct. And so, that's that's that's kind of where kind of where we're at, right? Is this is this thing. So, the great question, what about Roblox?

That gets more complicated. Roblox has a whole bunch of problems and I don't want to bog us down too much. Um Roblox is particularly weird and hard to deal with and could be its own episode on this. Suffice it to say, yes, they're not choosing to go against so I haven't read quite as much into the applicable laws there, but yes, it's a thing. Does Roblox let you cash out? Yes, Roblox will pay you. But then it gets sort of washed through the idea that you're providing a service and you're receiving payment for the service as a 1099 even if you're not of age. It gets really weird. Roblox is super weird on this. There's a bunch of videos on it um on on Roblox's business practices as they pertain to like employment and children and paying out and how that works. Yeah. But but isn't that more for

I made a game and the game I can make money off the game, not I can battle I can bet within a game and get money. Yes, but because they can push all of it through the same revenue stream, I'm pretty sure they can wash it in the guise of it being employment payout. Okay. So, um So, I can see extra hurdles in Okay, so
Yeah. Maybe we'll come do a thing on Roblox but for the and explain on Roblox but Yeah. for the moment and again, the big thing here for Valve is that Valve is the only one that stood up a marketplace that allows players to directly trade not just between themselves but to sell things for real money. Yeah. Like Blizzard isn't getting hit for um Hearthstone. Um League isn't getting or you know, Wizards of the Coast isn't getting hit for Magic the Gathering. Like there's a whole bunch of other groups that equivalently do loot boxes style things but don't have the cash out mechanism

and we're excluding the physical Magic cards will because that's its own whole separate cultural thing. Unless you want to say a thing right here. Yeah. There actually is one other There is a Wizards of the Coast property that does exactly this. And it's Magic the Gathering [clears throat] online and I'm willing to bet that the reason that they didn't hit MTGO with this is that no one understands MTGO and MTGO is too small. But technically speaking, Wizards has another Wizards has a property that does exactly all of the things that they're talking about in different dollar amounts. It's not really as big so it's probably not worth it to go after them. But Magic the Gathering online does all of these things. It has randomized loot boxes that contain cards that can be traded for money using external things. You can cash them in. They have a value. Right? Like it's denominated
you think is What's illegal is watching this with keen I would say so. Yes. And uh yeah. So

So again, just to reiterate the point though. Yeah. If the Valve marketplace did not exist Right. there would be no lawsuit. Correct. Like that is It isn't the fact that it's the loot boxes. It's the loot boxes with the possibility of cashing out and because there is a rarity component a random rarity component in the middle, pay money, get loot box, item of some small zero to large amount comes out of loot box, can take and sell. That's the loop right there the whole lawsuit is predicated on. Yes.
Again, without the marketplace Yes.
and especially without like the third-party market marketplace is what makes this egregious in some cases, but the marketplace itself is enough to expose them. Yeah, I agree. I think that it would be Yes, I agree. Um I'm trying to think if there's a world where it could be laundered enough

through a third through like another currency, but I don't think it would, right? Like if it was in Steam bucks, right? Or Yeah. Steamolians or whatever, right? Like Steam cloud.
it's still the question is why Valve and you know, part of this also that we can kind of get to is the New York Attorney General seems to not like video games. That's correct. The New York Attorney General really doesn't like video games and is part of this. Um Uh she's got this whole she's got like two and a half lines on um the video games cause violence, glorify guns and stuff. Ignoring of course that two of the three games cited are one of them is a MOBA uh that is high fantasy. One of them is a cartoon and only CS:GO has anything vaguely realistic with guns. Um but you know, this is this is the

the thing, right? So Right. And so that may be one of the reasons why Valve and not going after and the other one is I think some of the other companies make New York probably make New York money. Like I'm assuming DraftKings is taxed in a way that um Okay, so I actually did a whole bunch of reading on this. Okay. There are two different So, prediction markets and sports betting are two different groups of legislation governed by two different groups of people. Okay. And the state of New York has each state gets to do their own legislation with regard to sport betting. So, New York already has their own whole sport betting legislation package, which is different and specific because the law which governs sport betting was struck down by the Supreme Court in a 6-3 decision in 2018.

Oh, please. It doesn't matter exactly when.
18. 2018. I got it. I See, I did my research. I have a receipt. You did. I I've been first, by the way. Um so, um So, that's the don't hold thing. And then the production uh or then prediction markets are actually governed by the United States um Commodity Futures Trading Commission and is a whole different thing. And neither of those are strictly speaking the same category as the kind of gambling that's being discussed here. They're in their own weird buckets. Which is why like there's a difference here, too, in in kind um is that those are specifically covered under specific carve-outs in the um in the law and this isn't. So, she gets a clean shot at this specifically. Right. By the way, um chat is going wild on

both YouTube and Twitch, basically citing that there's lots of research that so far is says there is no real connection between violent video games and actual real world violence and that there are many other depictions in media that um are more graphic and or more intense. That that's correct. This is we'll we'll get to we'll we'll pull up in one just one moment Valve's response to this and that is a key part of that response is there's no data to support that. You just keep saying that and it keeps not being true. So Yeah. Um What about the company that allows you to bet on tragedy? That would be Polymarket. That's a prediction market and that's one of the reasons that it's not covered under the same thing is that it is a market that trades in a commodity which is cryptocurrency and it's obfuscated by enough layers that it's gambling without being capital G legally gambling.

Yeah. Yeah. So yeah, that's correct. It's Dutch tulips for modern audiences. That's correct.
Oh, there we go. Um okay.
looking at tulips the other day Will our our episodes on that. Yeah. Um they hold up well. Yeah. Okay. So so this is this is what's being alleged right and why we think they're going after Valve. Now this has been out long enough that Valve has responded. Mhm. While you start on that I'm going to grab a thing. Keep going. So um Valve makes many of the same points that we made well before we we were prepping for this before Valve statement came out and I agree with a lot of what they said. So um It mentions that physical products include things like um Pokemon, Magic the Gathering and I do love this Labubu.

I love I do love just like as a bit of levity in this that that they're like, all right, so wait, hold on a second. All of these other things do this too. So do and then grab one off screen. Labubus.
[laughter]
It doesn't you wouldn't hurt the Labubus, would you? Labubus, right? Like that's No, it's not wrong, right? It is a silly loot box, but I also love that like Valve just like grabbed the Labubu and held it in front of himself and was like, this is a shield. It's a Labubu. Anyway. Okay, cool. Yes, that's right. I also yep, I love this. Labubu is now a world word in an official discoverable document. That is correct. Yeah, right. Yeah. So um Okay, so so they bring up the physical the the physical arguments, baseball cards, Pokémon, Magic the Gathering, Labubu. Um and then they also bring up that they're

entirely optional. Right? Um just because because the items in the boxes are purely cosmetic, there's no disadvantage, right? Um They're also saying That by the way is kind of a nice obfuscation. Like nobody has to gamble. Right, correct. That is that is an obfuscation on Valve's part, right? That like they're hm So I do At no point, this is kind of interesting. At no point as far as I can tell so far, has Valve said, no, loot boxes aren't gambling. Hm. What they've said um is that they don't believe that they violate New York gaming laws, gambling laws. Which is different than not being

gambling. Yeah. So like that that fact, right, seems to be undisputed, but Valve doesn't want to say it cuz they're smart cuz they know that saying it makes them look bad, right? Yeah. There is a um Oh, Will, I forgot an important question back from a while ago. I asked, "Hey, if you and I swap skins, there's no charge." Correct. If I list something on the Valve is marketplace, Yes. do they pick take a any money off of that transaction? Oh, they do indeed, Jeff. They do take a a percentage-based cut of every sale on the Steam marketplace. Okay. So, it is gambling and Valve gets a cut of every transaction when people cash out. Yes. Sorry, that was an important thing I just realized I did not ask.
Yes. Yeah. So, um they're also saying uh

they have also said that they are um This is again true, but not the point, right? This is a very By the way, my my hat to the to the PR team at Valve. This is a masterfully crafted document full of true things that are not quite saying the thing that they appear to be saying. I Okay. So, they have shut down Mhm.
[clears throat]
many sites that gamble with Steam items in violation of the Steam subscriber agreement. Okay. All of those things are true, but that's not what's at stake here. What's at stake is the ability to process transactions in excess of the amount of money that is being allowed to um to be uh sent back and forth by Valve. That's not what they said. What they said was

they shut down a bunch of gambling lawsuits or gambling websites, right? So again, they're not really litigating the point that the New York Attorney General is making. They are saying a true thing that sounds like they are, but they're not because they're not, right? Um We also share with our our efforts to combat fraud and the theft of user items and our extraordinary measures to stop gambling sites from taking advantage of Steam accounts and Valve game items. We don't cooperate with gambling sites. Again, good, true, not the point. Today we blocked over 1 million Steam accounts are being misused by third parties in connection with uh gambling fraud and fraud and theft. Again, good, true, still not the point. We we haven't talked about the market, right? Because the markets are really the key here because the gambling that the New York Attorney General alleges is happening is happening on Steam. The third-party sites are just the transactional part of paying out. And Valve isn't addressing that at all,

right? So the uh and and like as a nice one, we forbidden the gambling-related businesses to participate in or sponsor tournaments for our games. Okay, cool, great, but like that's again
[clears throat]
not the point, right? So I feel like this is this is very interesting in that again, Valve is saying true things, but not Mhm. They're saying a lot of good stuff they've done in issues that are tangentially related.
Yes. Right. So then And everybody's happy they did those things. Like Yes. Yeah, right. And and I agree very much with Thunder here. When the AG made this about violence in video games, they did open the gates for Steam to just throw whatever else they wanted in, right? They were like, oh, it's non sequitur hour? By the way, look at all of the puppies we've saved with the money from our loot boxes. Look at that, Attorney General of the State of New York. What are you GOING TO DO NOW? RIGHT? LIKE, SURE, if we're going to play the non-sequitur
was really good PR on their part.
Yeah. Because they're trying to broaden

the issue. Mhm. They absolutely
these are both performative press releases are always performative. Yes, correct. This is This is another performative piece. Now, this is probably the most important paragraph to me because I think this is the the true part. Right? This is why I think a lot of this paragraph is I think A, the reason that Valve is being targeted and B, the reason that a lot of consumers like the Valve model the best for this kind of thing and is also the reason that they're uh open to all of this, right? We have serious concerns with many of the uh alterations that the New York AG claims are necessary to make to our games. First, they they seem to believe boxes and their content should not be transferable. They appear to assume digital mystery boxes and items in our games are different from tangible items like baseball card packs which contain random cards and to take issue with the fact that users have the ability to transfer

the items they receive through Steam trading or user-to-user sales on the community market. We think the transferability of a digital game item is good for consumers. It gives the user the ability to sell or trade an older unwanted item for something else. In the same way an owner can sell or trade a tangible item like a Pokémon or baseball card. New York Attorney General proposes to take away users' ability to transfer their digital items from Valve games. Transferability is a right we believe should not be taken away and we refuse to do that. Okay. So this is sort of the big sticking point here. Because this is good for consumers, right? You have control over your digital assets and you get to move them around how you want and sell them and control them. In [clears throat] a way that unlike Hearthstone or once you buy a card, that card is locked to your account. This is saying it should not be. It should be more like physical cards. When you go buy a magic card and when you pull the your fifth copy of the same rare, you

could be like, "Hey, I don't need all of these. Let me go sell a couple." Exactly so. And I think Demon works has a really great point. Using baseball cards is a very nice play there due to how tightly they're tied to Americana. Exactly. Right? They're not using the idea of a baseball card, right? Also lets them be like, "Well, this is kind of like sports and sports have gambling, right?" Like it's a very Using baseball cards as the primary analogy here is very good on Valve's part.
100%. Um So, uh the the problem here that Valve isn't addressing because they can't really address it is that it's not like those things. It's It's actually not like a baseball card.
Will? Hm? How so, Will? Well, you see we'll use magic cards as a quick example. I have a deck of magic cards here in front of me that I shuffle as I fidget while we talk, right? This deck of magic cards is mine. I own

it. I hold it in my hand. If Wizards of the Coast shut down right now, Wizards of the Coast shut down right now and never made another magic card ever again,
won't happen. That happen. But if they did, I would still own this deck of magic cards. It's my deck of magic cards and I could still play magic with other people who have a deck of magic cards and its use is not contingent on the existence of the company that made it. Yep. Okay. And when I trade them, I can sell them without getting permission from Wizards of the Coast, without giving Wizards of the Coast a cut. I can trade them to a shop. I can trade them to a friend. I can sell them on the internet. I can sell them on eBay or card trader or mana pool or wherever. You could go to a place that sells um Man, my my blind is that sells uh fireplaces and sell them as kindling. Like it is your choice of what to do with them.
That is correct. So, I have full control and ownership over this deck of magic

cards. Mhm. I don't with the contents of my Valve uh of my Steam inventory. Mhm. I don't have full control and ownership over them because if Valve stopped working, if Valve shut down Steam tomorrow, I would have no claim, I would have no control over those items. Furthermore,
And Valve's terms of services are explicit on this. Um So, uh and [clears throat] furthermore, I could get banned, right? I could get banned from If I get banned from playing competitive magic for cheating on camera, that's a fun recent bit of magic drama that I was hilariously amused by. Um I can still sell my cards. If I get banned from Steam for cheating, I lose access to my stuff. It's not really my stuff, right? Furthermore, if Valve stops supporting Team Fortress 2, all of my unusual hats aren't usable. If I can't beat

And suddenly have no value.
Right, have no value and cannot be accessed because if no one can play Team Fortress 2 because Team Fortress 2 doesn't exist anymore, then those items don't exist anymore either, right? It's a the the what we're really talking about is that these items, these cosmetics, are licenses to use a cosmetic item in a particular context that is wholly controlled by the company you purchased the item from or that the item was purchased from originally, right? So, there is a distinct difference here in the kind of thing that they're talking about and the kind of thing that they're doing. Because all of this only works inside Valve's walled walled Valve's walled garden with Valve's permission. Mhm. And while we kind of think
sufferance. Yeah. Um like while we may like oh, good guy

Valve, good guy Gabe, and sure, but it is still not the best for that all to be true, right? So, it's not exactly the same. It's close. It's very close. But different in a substantial enough way that I feel like and they know it, right? To be clear, they know. They know that this is a problem, right? This is not like a shocker to Valve, right? They are going to make the press release and they're going to do their darndest, right? Because as we've discussed before, Valve's legal team is a tank full of lawyer-eating sharks. Valve gets sued enough that they just have a legal team that isn't uh lawyer sharks, it's the sharks that eat the lawyer sharks. Because they get sued enough that they're used to it, right? Because they have a lot of money and people try and take shots at Valve all the time, right? So, like And and this whole area, by the way, is tricky. Like to your general consumer

Yes. Will and I's ability to go swap skins with each other when we're playing the game is a is only a perk. Right. Like, hey, that's a thing I can't do in most other games. You know, when your buddy starts a game, and you're like, here, here's a cool skin for you to use. I can't do that in League in the same way. That doesn't mean that it doesn't come inherently with other problems, but part of me very much believes that Valve being Valve, they're like, "Hey, this is a neat thing. This is a thing we can give people." But, part of me also believes it being Valve that they're like, "And here's a great way to make we can make extra money along the way with it." Yeah. Um And yeah, that might also be why they have public opinion on their side, right? They get hit by so many frivolous lawsuits, it's no surprise people think, "Oh, another one, huh?" Yeah, exactly. So, And I think that that's really what goes into the rest of their of their statement here, right?

Um The they're also bringing up the New York AG gathering additional information. Um And uh this is purely a get everyone on our side move, right? This is 100% purely like this is this is kind of a non sequitur, right? But again, this is very much like a And they want us to collect a whole bunch of evasive information, and us, good guy Valve, we don't want to do that. Yeah. You don't want us collecting your information. You don't want the New York Attorney General to have your information on the off chance you might be someone from somewhere else using a VPN, right? So, this is this is a whole this is a whole thing. Wow, Will, you just gave me a whole side thing. Yeah. How many people with the lawsuit starts looking bad or bad are going to VPN to New York to make it look like they're playing from there or trying to collect on some sort of settlement? It's a great question. I don't know.

[clears throat] Right?
Sorry, my my game designer brain just realized that um possibility and You would probably need to have an address registered in the state of New York. We'll see. How about an IP address that Yeah. And then they do they do the like, "Of course we we, you know, respect New York's right to determine the laws, and we believe that we're following all the laws and if you pass new laws then we'll follow them but this isn't a new law that you've passed. Right? Right? Okay, cool, great. And then also they Uh you took a pot shot so we're going to take a pot shot back. This case is about mystery boxes. We feel need to address the comments made by the AG about games where we'll violence children. Those extraneous comments are a distraction and a mischaracterization we've all heard before. Numerous studies throughout the years have concluded there is no link between media and real world violence and mean many studies highlight the beneficial impact of games to users. You gave them an opening and you didn't think they were going to take it? I don't know what she was doing.

Like that would that of all of the things she put in that press release, right? I can see the use of most of them. That just I don't know why she did the
Oh, I can tell you why. Because there's a whole community of non-game players that are also going to see the lawsuit. That's true. And you know, and they're not going to see this response. Like Fox News and others are going to be happily Yeah.
take that little bit of red meat and chomp around on it. Yeah, that's true. Um there are lots of groups that like to try and offset No, the things we like they're not the actual things causing the violence. It's this convenient scapegoat over here. Right. Yeah. Uh and so they're deciding to go to court. That's the other big one. Okay, and that is there were plenty of groups that would have worked out a settlement. Correct. For this straight up. Yeah, because it's cheaper.
And Yeah, and honestly that New York might have done the same. They would have found something to take the win. Valve would have done something to say,

you know, this is going to cost us X, we're going through with the lawsuit might potentially cost us Y and they'd do their risk analysis and there would be a happy settlement that both sides would get to put out a positive spinning press release. Right. This is one where Valve have thrown a big FU at them and saying no. We believe in this strongly and we are willing to go to court. Yep. And we are willing to spend money to do so. Yep. Because these things are not cheap. Correct. They are very not cheap. So let's do let's do one more piece of like digging, right? So we've kind of we've kind of talked about like what the allegations are. Um this is the actual complaint. This is the actual complaint from the AG of New York website. This is the full text of the complaint. You can read it for yourself. It's reasonably readable. Most of it is the first 145 paragraphs are literally

information that most gamers know already, but they have to put in the record because the court doesn't know them officially. Mhm. It's mostly like this is what a loot box is. This is how much a key costs. This is how Valve makes money. It's essentially what we spent the past like hour doing, right? Is the first 145 paragraphs. Okay, cool, great, awesome. The they're making three key arguments here and I wanted to just make sure that we're all on the same page. Three key arguments. Number one, that it is unconstitutional under the New York State Constitution because the Constitution prohibits lotteries or the sale of lottery tickets, pool selling, book making, or any other kind of gambling with specific exceptions, lotteries operated by the state, parimutuel betting on horse races, casino gambling in the prescribed number of licensed facilities, and bingos and other games of chance conducted by authorized nonprofits, and it's not any of those, and it's not skill based. So under those claims, they are saying that it's unconstitutional

under the New York State Constitution. And although I don't like it, Mhm. I think this is correct. If loot boxes are gambling, they're gambling. You In this case specifically, right? Because again of that loop where valuable things can come out and get turned into money. Right, it has monetary value and can be turned around, right? That is technically against that is a form of gambling that is unconstitutional under the New York State Constitution, at least as I'm reading it. There might be some Again, not a lawyer, but like on the outset, this looks like there's a point there, right? Um Uh Cool, great, awesome. Uh number two, um this is the executive and injunctive release uh relief of um illegal acts or persistent illegality.

And then this is um promoting gambling in the second degree, which is essentially advertising. Um for gambling. Uh and this is another one where the market comes into play because Valve is profiting from people receiving money from the loot boxes. They are profiting from gambling that other people are doing, so it counts. Um This is
advances gambling activity and a person profits from gambling activity and their Correct. Both of which, yeah. Correct. Uh and then the last one is um knowing it knowingly advances or profits from unlawful gambling activity. Um which essentially is you're an illegal bookie and you know it. This one I don't

think this is it. I I feel like this isn't going to stick. Um but I don't know, right? That this is the essentially you're the bookkeeper for all of these illegal gam- for all of these illegal wagers, therefore you're responsible for them. So, I don't I don't know, but my sense is that this one might be a little a little easier to um get out of because the uh knowingly advancing or profiting from unlawful gambling activity, Valve can be like, "We're pretty sure we were in on you know, under the law." And they could probably make that stick. That like we
But again, she's going to go for it because Yeah, of course she's going to go for it. She's got like again, she's the Attorney General, she's supposed to go for the maximum she thinks she can get stick. Mhm. Right? So, we end up in this place where

yes, correct, 100%. Uh Dark Wolf absolutely has it. It ten- it's hard to gauge with the thing itself. Yes, right? They'll get them on intent here or they'll they'll get out on intent here, right? If anything, at least in my understanding. So, I think my biggest problem with this personally and we can go we can we can inbiggen and get back to the coffee shop. Um is is this thing that Kata is saying, right? Um and I I think I agree with them, right? That magic is the same thing, it should be looked at with suspicion, that magic is a gambling game, which is primarily aimed at children. So, there's two problems, right? One, yes, true. Two, not what Not all look at what they're doing isn't a valid legal defense, unfortunately, right? Valve can't go, "Nuh-uh, this

isn't fair. They're doing the thing, too. Why aren't you looking at them? Right? Yeah, bandwagon effect or well, everyone's doing it. Right. Like, if five people run through a stop light, that doesn't mean that person number three can't be taken to court. Correct. And then the other question is
But, it's still good for setting precedent and other things. Right. But, Um And then the Unfortunately, I think the other problem here, right? The other problem is that while that is true, right? All of those things are true. Mhm.
[clears throat]
What is not true is that Wizards doesn't profit from the post-market circulation. Right. That is the really big thing with the physical part. Wizard can sell that and then people go

buy the Magic cards, but Wizards doesn't get 10% or whatever Valve takes every time somebody afterwards sells the Magic cards to each other. Right. And that's one of their single biggest defenses is we sell the thing. Right. We make no profit after that, you know? They will get What is a Magic card? Five bucks a Whatever a booster costs nowadays. Mhm? Like, five bucks a booster retail.
Sure. They get five bucks a booster, but no amount of money after that, no matter how valuable or not valuable the contents of the package are. Right. So, that also means they don't profit off of a lucky score. Right. If for some reason they mixed one black load Excuse me, one ring into a set of cards, they might profit from people wanting to go buy that, but they don't profit from people getting it and then selling the one ring to each other. Yeah. Um the the Secret Lair defense is that you are paying for the altered art. Not for the rarity of the cards. Because all of them are priced similarly

based on the number of cards in the art. You're paying for the art and the exclusivity, not the gameplay functionality. So, difficult? I agree that there is some that there is a there's a through line there, but it is difficult, right? So, um but again, I think while that might be true, it is uh it is that the if I want a Black Lotus, not only can I not buy one from Wizards, right? But uh I I I have to buy one from not Wizards, right? Like I can go out into the world and buy one, right? Why I would, I don't know. I'd rather buy a down payment on a house or a car or whatever, but like I could, right? Um and Wizards has no interaction with my ability to do that. Yep. If I want a Knight of the Ebon Legion, at some point, in order to obtain that digital item, I must interact with

Valve. Valve has a controlling mechanism over the acquisition of that digital item, making it entirely within their purview, and I think that is the big difference here, right? Like I'm not I'm not litigating whether or not Magic is good or Pokémon is good or whatever. I'm saying that there is a substantive difference in why I believe the New York AG is going after Valve specifically here, and it is that Valve is in such complete control of the vertical from I get a crate, right? I buy a key, I open the crate. All of this takes place within Steam, right? I use the I I receive an item that Valve determines from that crate, then I use Valve's system to either receive money or trade or whatever and then I use it inside Valve system versus these other elements which all absolutely do have the crack-a-pack

thing, right? But they don't um they don't benefit. Right? And so that's really the part where I think it's very difficult for I don't know how they're going to get out of this, actually. I'm going to be honest. Like the more I've read into this, the more I think this is a pretty solid case. Um yes, this is true. This would be true if
[snorts]
they ever actually acknowledged aftermarket prices, which they're very careful to never do. Mhm. Plus they still they still don't profit. Wizards does not profit Right. off of the aftermarket manip- manipulation. Let's just call it.
Yeah. Uh and Wizards does partner with marketplaces, but that's generally so that they can control flow of cards. Wizards has pretty tight agreements with marketplaces on where in the world you are allowed to sell cards to. Mhm. Uh or rather not cards, sealed

Wizards product. For instance, um if you are a digital retailer based in the United States, you are allowed to sell singles wherever you want because that's not a Wizards product anymore. You are only allowed to sell sealed product within North America. As an example, right?
Oh, then that's probably an arbitrage thing, too. Yeah. Because a magic For those unfamiliar, there's a term called arbitrage, which basically, if Wizards sells a sealed pack for five bucks in the US, for $6 in Japan, and for $2 in Brazil, that's because they it's what they think the market will bear in each. If you could go to the Brazilian dealer and have them sell you magic packs for two bucks instead of the five bucks in North America, there's going to everybody will arbitrate everybody will go down to Brazil Yeah.
equivalently to do that. Yeah. And so they and this is not just for magic cards. This is for all sorts of things

happen that way. Yeah. Where there are regional prices and part of your agreement as a vendor is which regions you are allowed to sell buy from and sell buy and sell to. Yeah. And uh yes, they don't get a cut of the secondary market. The market does drive their sales. They absolutely play to it, but they don't openly acknowledge it, which makes a difference because they have a a layer
they acknowledged it, they don't profit from it. Well, so you could hm there's a weird there's a weird line that some people have tried to put forward before that if they know that a card is worth a certain amount on the secondary market and they put that card in packs and they price the packs higher because that card, which is worth more in the secondary market, is in those packs, that they are in some way complicit in the secondary market in like an additional way. I agree it's very thin, but that line of thought has been put forward with magic before. So, magic both doesn't profit from it and doesn't acknowledge what the

secondary price of any given card is. So, those are both true.
But again, it is a far line from Valve who gets their whatever the X percent of every transaction of people selling Yes. the valuable stuff between each other. Yes. Um it's what we covered this earlier. It's a good time to bring it back around. Yes, um you could transfer things to a third-party service that acts as a brokerage and holds funds in escrow while you transfer the item. However, Mhm. while that is true, it is not in excess of the things that are already true about the marketplace. Right? So, like yes, that is a true thing. The marketplace still covers all of the things that the Attorney General is accusing them of. It's just not as flashy as the million-dollar skin. For those who didn't say, the Valve Wallet is the Valve Wallet. So, if I put five bucks in, get a rare loot case, sell a thing for a hundred, I now have $95 equivalently in my wallet that I can go,

"Hey, take my payout from the gamble, go buy a copy of Slay the Spire, buy another copy to give to my friend Will, um save up some money for Gabe Cube." There are thing other things I can do with the money Yeah. that make that enough to count it as money. Yeah. Um It is a spendable currency value that can be used for Yeah. a large quantity of things even if I can't take it out. Yes. Um move off to right on my face.
So, let's see. Will, we talked about the lawsuit. I talked about the whole I have one more question I wanted to get to you from Caliber. Do it. Do it. Caliber says, "Would a good question be what the New York State law sponsor would change if they theoretically win the lawsuit?" Yes, I think this is a great question. Um so, a couple of things. One, they want a lot of money from Valve. They want a truly ludicrous, mind-boggling sum of money from Valve. Um that's the big one. The other one is that they want to change They want Valve

to change the way those three games, Counter-Strike, Dota, and um Team Fortress, all do monetization. To [clears throat] either make it so that the goods are non-tradable Mhm. or so that they no longer use loot boxes. Right? You might be able to purchase that item directly and then trade it, but you can't do loot box So, you can either have item trading and no loot boxes or loot boxes and no item trading. And they I don't think they care which one Valve does, but they want them to not have both at the same time. Right.
Because it is that that makes it. And 100% I'll tell you Valve will kill the marketplace so fast. Like if Valve has the choice between marketplace or loot boxes It's Yeah. It's going to be loot boxes. Yeah. Or the very simple one is that they will simply geo-fence New York from being able to trade. Yeah. That's the other one. They'll just

geo-fence New York because they make so much money off of like Oh yeah, actually so now if if this was a worldwide thing, they would lose the marketplace instantly. Yeah. If it's a New York thing, you're right. They will geo-fence New York. Yeah. They'll just geo-fence New York so that you can't trade or use the market inside of New York. Or maybe you can't buy loot box keys in the state of New York. One or the other or both. My guess is they'll just take the marketplace off. Yeah. Because they they make you The answer is which one did they make more money from on a per player basis? And the answer will be they make more money from loot boxes. So they will shut the other thing down. Correct. Uh and yes, the the the Russian badger ban the the the one of the Valve devs was in chat when a streamer was going on a spending spree trying to get a knife and they banned him for spending too much. It's an interesting story, but like it's hard to make that play in court well, right? It's a good story and they probably will try and make it play in court, but like that's never going to happen. So

Yes, Jeff. Let's let's uh let's go over this.
I was just going to say I think we'd kind of gone through and hit everything we wanted to. So
Yeah. Hey, there's a lawsuit against Valve from the New York Attorney General. Yep. We talked about what it is. We talked about A, loot boxes. Yep. B, how Valve does loot boxes. Yep. C, what the kind what Valve cosmetics are. Yep. D, that there are how you do trades both within Steam. Yep. Excuse me. And then the ability for some to go outside of Steam. Yep.
[clears throat]
Uh brought in a real world or other fun example, which is Pachinko. Yep. Um talked about, you know, gambling's big, but, you know, why Valve? Yep. You know, out of the game industry. And part of it would be, by the way, if other companies were engaging in this, I think Valve would be a lower target. Like, there are companies that do loot boxes and monetization way more egregiously. It's just that Valve has the marketplace, and Valve is one of the only places

that let you cash out. Yep. Like, Valve's use of loot boxes is pretty decent. Like, if you take the industry scale of nice to horrific, like, Valve is much higher on the nice than the horrific scale.
Yeah. It's the marketplace part that Right. They're not Clash Royale, right?
Yeah. Um so, let's see. Let's see. So, then we, you know, went through the New York lawsuit. We talked about, you know, how the trading market is Valve's Achilles' heel. Kind of how there is an extra grind here, though, and the New York attorney general does not seem to like video games, and that's also probably playing into this. Yep. Valve's response. Yep. Well, what do you and I think about all this? Like, we've kind of gone through the story Yeah.
here. I I find myself struggling. Because I have fond I have incredibly fond memories of not

like, cracking keys, but like So, I played TF2 at like Orange Box. Like, I I was playing TF2 when they introduced hats. Like, I was playing TF2 before there were crates, okay? So, like, a long time. Um and I remember [clears throat] the enjoyment that came from trade servers and from the process of like, trading around and like, the pre sort of marketplace-ness of all of this, right? Where there was like player-to-player trading. And so, I really value that part. But, I also recognize that the Like and I'm not talking like big things. I'm talking like trading like weapons around and trying to get like you know, the pre-order bonus that came with the game or whatever, right? Like not big stuff, right? And so, that was enjoyable and fun for me as an activity to do. Um and I am also struck by the fact that this is is like very difficult

for Valve to be like, "No, we don't have anything to do with this." when the argument is presented pretty clearly, right? So, like I don't like it, but I feel like the New York AG very much has a a point. Right? Um at least that's
And it's interesting for me because I like a lot of things about Valve. Yeah. I think Valve does a lot of things right. I 100% think this is I mean, they have set up a way to do gambling and they are profiting from it. Yeah. And they unabashedly are making money off of in some cases people ability people going in and doing what looks and smells like gambling. Yep. And you can go to any number of streamers and TikTokers and other things who will sit there and performatively do, you know, go dump a whole bunch of loot boxes, see what they get out of that, and then go sell it and those people make their views off of gambling doing gambling videos aimed at kids.

Yep. And encouraging that behavior like they have created a whole ecosystem, not just of gambling, but of people who use that as performative theater to sell it to other to young people and kind of bring that in. Like um I said, I like many, many things about the way Valve does. This is one that's always been a little scummy, slimy. Yeah. Slimy, smarmy, all of that, and it's probably the one aspect of Valve that I think probably should be shut down. Like, there are bad The bad far outweighs the good here. Yeah. I kind Yeah, it's it's
[sighs]
it's so very difficult, right? Because I really like that one of the side effects of this, right? Which is that if you don't want the big ticket items, it's super cheap to get a bunch of cool cosmetics, right? Like, that there is like an entire additional secondary market for this, right? Element to this,

which is that like you can outfit your whole Dota 2 roster for like three bucks, right? Because there are so many like bad cosmetics that you can just get on the marketplace for a small amount of money because they're the uh People don't want them, yeah. Yeah, they're cosmetic equivalents of draft chaff, right? And so like I wish I could see a way through, cuz I agree that like yep, it's gambling, they're profiting from it, that's a problem, right? But I wish I could keep the positive parts of this, the low-end cosmetic circulation, the team market, like There are some good side benefits to come out of that. I absolutely will agree with you. And so
But it's just like Yeah. The thing that causes the bad can also have some good packed in with it. Yeah, right. This is And again, this that's one of the reasons why I think this is so worth talking about is it is such an interesting lawsuit and an interesting issue that we like how I think a lot of people have some

emotional investment in this, right? There is a very small part of the modern player base that isn't at least aware of one of those three games, right? Because those three games span so much of esports and uh Steam culture, right? Like CS: GO and Dota are usually two of the top three most played games on Steam at any given time in any on any day. Right? And it's that's just how it is, right? There are like a million people playing Counter-Strike concurrently most of the time. And about half a million playing Dota 2 again most of the time. So there are
You know the funny thing though, Will? I think my guess is that somewhere around 95% of those people would be completely unaffected by Steam removing the ability to trade. I don't know if I agree entirely with that on gut feeling, but I can see the point that you're making. Like they might be a little disappointed they

can't trade or they might have been like they probably most of them have never ever traded, but kind of like the ability that idea that maybe they could one day if they wanted to. Yeah. But I would say for the vast majority of the population like this would be an oh, well, that sucks. And they'd continue to play the games and buy loot boxes to get fun stuff. Yeah, I also imagine that Valve would do some other I firmly believe that Valve would come up with some way to have their cake and eat it, too. Like to to comply with this with a ruling against them in this case, but also to maintain those elements that people like. Right? Like everybody gets a free thing for logging in and that thing can be traded on the marketplace, but anything you crack with a key is trade banned. Right? Like they're trade banned items. You can do that. That's the thing they've done before. You can trade ban an individual item.

Um and that might be enough to say that anything that comes out of a loot box that you get from a key is trade banned, but anything that you get from a crate that you randomly open for playing the game or for winning a game or something is tradable. I can see them trying to cut a middle ground. I don't know how I feel about that.
already think of four or five things that wouldn't replicate it but might do something similar. Yeah. around Yeah. that but the way it currently is set up it has some is both illegal and has some extra bad stuff that goes along with it. Yep. In addition to all of the nice stuff like Yeah. I want to be very clear. There are lots of benefits for certain for people but most laws are set up because certain bad actors take them and press them to such a point that people are like people shouldn't be able to do that. Yeah. I'd love to be able to drive my car 90 on the freeway in some cases.

But certain people have done things like that in such a way that it is advisable for the entire population to no longer be able to do so that such a thing. Yeah. Yeah. I think that's I think that's a good place for us to leave it. Chat, thank you so much for engaging with this and for for helping us make sense of this. I it's such a this is probably one of the things I've done the most reading on for like just just in terms of like stuff I didn't know. I did a whole bunch of reading on Polymarket too and all of the lawsuits that are going on about that on the off chance that that was super relevant but thank you all so very much for for engaging and for for for disagreeing politely and for having different unique points of view. I really like this. Um We have a good community. We do. There will be no design club next week. I will be at PAX East.
That is correct. You can find the crew over at PAX East. There will be a design club live on Oh yeah. So Friday at 12:30

if you are at the bar Friday at 12:30, so just after lunch, Mhm. if you are at PAX, come see Matt, I, actually and a couple of really good friends. Oh, you know who we're going to have, Will? Who? Um, we are going to have, Jasmine, that bronze girl will be with us. Jenna Stroeber, who wrote a couple of our recent episodes and does very good videos of her own and is a good games journalist, will be there. And Jay from Dungeon Delve. Oh, that's awesome. will be on the panel with us. So, we will all be looking at the Resident Evil that just came out. Okay. Um, and doing an hour live discussion on that. I don't think it's broadcast this year. I'm always a little unsure of which rooms end up Yeah. being broadcast or not. But, if it is, I will get Will the information and he can hook up the stream. But, my get, I don't know. PAX cut down greatly on the number of streaming rooms for some reason. Yeah.

It's a It is a a bunch of tech and a bunch kind of a big pain to set those up. So, um, no design club next week. There will also be no breakfast on Monday. So, the next time that I will see all of you will be in for design club in like 2 weeks if you're on YouTube. Um, but don't worry, we'll be live here on Twitch. I'm going to be Slaying the Spire consistently. Hopefully, I'm on A7 and climbing. Um, there will be content here the entire time, but there will be our normal schedule of talk shows. So, uh, I think all that remains is for us to say goodbye to the people and sign off. So, Jeff, you say bye to the people? Bye to the people. Thanks, everybody.
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