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In June 2016, Valve was sued in the American state of Connecticut by resident Michael John McLeod. The lawsuit cites “illegal gambling” issues “knowingly” created by Valve and three of the trading sites, CSGO Diamonds, CSGO Lounge and OPSkins, including potentially gambling by minors, stating that Valve not only provides the currency in the form of skins for gambling, but also profits from the resulting trades when such skins are won. McLeod’s lawyers are seeking to treat this as a class-action lawsuit once proceedings begin.[47][48]

A second lawsuit, also filed as a class-action, was initiated against Valve, Martin, Cassel, and CSGO Lotto by a Florida mother in July 2016 shortly after the CSGO Lotto discovery. This suit states that Valve enables gambling by minors and users such as Martin and Cassel promote this, all considered illegal activities under federal racketeering laws and Florida consumer protection laws.[49] ESPN outlined the story of Elijah Ballard, one of the 44 plantiffs in the case, who had become addicted to skins gambling when he was twelve years old, using his parents’ credit cards and bank accounts to purchase skins.[4]

Jasper Ward, a lead counsel in both cases, undertook the lawsuits due to his current involvement in the legal investigation into gambling issues with DraftKings and FanDuel, sites that allowed players to bet on fantasy teams. Ward stated that Valve “created and is profiting from an online gambling ecosystem that, because it is illegal and unregulated, harms consumers, many of whom are teenagers”. Ward noted that, as of a July 6, 2016 interview, Valve had not issued a response to either case, and believed that the company’s “public silence […] is unconscionable”, particularly in light of them unbanning CSGO Lotto.[36]

Part of both suits asserted there were Racketeer Influenced and Corrupt Organizations Act (RICO) violations at play, requiring part of the suit to be heard at the Federal Circuit Court. The presiding judge in the first case ruled in favor of the defendants’ motion to vacate this aspect of the case in October 2016, stating that “gambling losses are not sufficient injury to business or property for RICO standing”.[50][51] Valve successfully lobbied to transfer the case to a federal court in Seattle in August 2016, and subsequently had the case dismissed on juridical grounds in November. The plaintiffs attempted to refile in King County Superior Court in Seattle, but Valve also lobbied this to federal court and similarly received juridical dismissal. The plaintiffs were joined by additional plaintiffs in Washington and Illinois and filed in federal court in Seattle; the new filing includes the actions of the Washington State Gambling Commission as part of its assertions.[52] Similarly, the second case against CSGO Lotto was kicked out of federal courts on the same RICO arguments, and was refiled in Florida state courts where CSGO Lotto was incorporated. Ward noted that Martin had moved out of the United States to the United Kingdom around the time the lawsuits had been filed, making it difficult to see any legal action towards him

Shortly after the second lawsuit above, Valve’s Erik Johnson stated in a July 13, 2016 letter to Gamasutra that they will demand the third-party sites that use Steam functionality to aid in gambling to cease their use of Steam in that manner, as their methods of connectivity and use go against Steam’s acceptable use policy. Johnson also stated that Valve has no business relationships with these sites, and will pursue legal action if they continue to violate their service terms.[54] Valve followed by issuing several cease and desist letters on July 20, 2016 to 23 sites they believed involved in skin gambling that were inappropriately using their services, giving them ten days to discontinue use of the Steamworks API.[55] Another 20 sites were issued similar cease & desist notices by Valve on July 30, 2016.[56]

Twitch.tv warned its users on July 14, 2016 that streams depicting or promoting CS:GO gambling sites were a violation of its terms of service, which forbids streams that depict content which violates the terms of service of third-parties.[57] On July 19, 2016, Twitch banned “PhantomL0rd”, the highest-viewed CS:GO player on Twitch with over 1.4 million subscribers, asserting the ban was for violating their terms of service, though did not clarify further for the specific reasons. This ban had followed a few days after yet-proven allegations regarding PhantomL0rd’s connections to a skin gambling site were made public.[58][59]

In the wake of Valve’s statement, several of the gambling sites either went dark, closed off the use of the site by United States residents, or formally announced their closure, such as CSGODouble.[60] Valve warned users that they should move any skins they have transferred to such sites back to their Steam inventory, while several affected sites have promised users they will automatically return skins in the near future.[18] One site, OPSkins, remained active, claiming in a statement that they were not a gambling site and do not believe Valve can take action against them.[60] CSGO Lounge had announced plans to obtain legal gambling licenses in the countries it plans to operate within, and restricting access to users from countries with these licenses.[61] However, by August 17, 2016, the site announced they were shutting down all virtual item gambling, offering users an opportunity to recover their virtual items, while shifting to a general eSports entertainment website.[62] As of January 2017, only about half of these sites contacted by Valve have shut down, and more off-shore sites are being set up.[4]

In January 2017, Valve announced that they are taking similar action to block sites and accounts that are engaged in gambling using Team Fortress 2 items