Underage skin gambling on the rise

While skin gambling has been slowly becoming a problem on a global scale, especially for underage players, not much has been done yet to curb it.

This month, Danish gambling regulator, Spillemyndigheden, has zeroed-in on several illegal skin gambling sites in Denmark. The regulator has started working with authorities to stop all such operations in the country.

Of the 25 sites that the Spillemyndigheden targeted, ten were gaming sites and 15 were skin betting destinations. Birgitte Sand, Director of the regulator told CalvinAyre, “Here we are focusing in particular on sites that offer skin betting, as they often target children and adolescents under the age of 18.”

What is Skin Gambling?

Loot boxes and skin gambling are the two emerging gaming growth sectors. Loot boxes are in-game packs that include a random selection of consumable virtual items, which the player can redeem to receive a randomized selection of further virtual items.

‘Skins’ are in-game cosmetics that change the appearance of weapons or characters. Skin gambling makes use of virtual goods, which include these cosmetic elements called ‘skins’. Although these items don’t directly impact the gameplay, they can be used as virtual currency to bet on the results of professional matches or on other games of chance.

The practice started amongst players of Counter-Strike: Global Offensive (CS:GO), a multiplayer first-person shooter video game developed by Hidden Path Entertainment and Valve Corporation, but has caught on to other games as well.

Youth Skin Gambling

In a 2017 study, the Gambling Commission found 11% of 11-16 year olds in the UK were involved in placing bets with skins, which means some 500,000 children under the age of 15 might be skin gambling.

31% were found to have opened loot boxes in a computer game or an app at least once, in pursuit of in-game items. Also, 3% claim to have placed bets with skins at least once.

According to the Gambling Commission, the ability to convert in-game items to cash, or to be able to trade them for other items of value lends them a real-world value, becoming articles of money or money’s worth.

Places that offer British consumers facilities to gamble require gambling licences even if they use in-game items or skins that can be converted into cash or traded for items of value.

To deal with operators who make gambling facilities within children’s reach, the Gambling Commission has taken action against them. These include unlicensed websites offering facilities for gambling using in-game items as methods for payment.

While identifying the British youth’s awareness of these methods, the Gambling Commission found that 54% of 11-16 year olds were aware of the possibility of paying money or using in-game items to open loot boxes, crates, or packs to get other in-game items within the game.

31% had used in-game items in this way at least once. Moreover, 64% of boys were likely to be aware of this type of usage as opposed to 43% of girls.

Skins as Virtual Currency

A new Juniper Research study, Daily Fantasy Sports & In-game Gambling; Skins and Loot Boxes 2018-2022, predicts that the total spend on loot boxes and skin gambling will reach US $50 billion by 2022, spiking up from less than US $30 billion this year.

The study has revealed that regulators should be quite concerned with skin gambling. Not only are skins used frequently for betting as virtual currency, but are also cashed-in for real money through online trading platforms.

Youth participation is steadily becoming a problem in this field, reiterating the need for regulation for skin trading and gambling. The websites are often run by fraudulent entities that steal skins or short-change users. When third-party websites enable skins bets on eSports matches and casino-style games, an unregulated gambling market forms.

The Valve Corporation runs Steam marketplace, a digital distribution platform, that can also be interfaced by third-parties to enable trading, buying, and selling of skins from players’ Steam inventories for real-world or digital currency. Ironically, Valve condemns the gambling practices and such activity violates Steam’s Terms of Service.

After class-action lawsuits in 2016, Steam has tried to address the concerns. However, gambling participation still exists up to a great level. Also, as Juniper says, Steam earns revenue from transaction fees on marketplace trades, and hence are reluctant to curb trading where users ‘cash-out’.

As research author Lauren Foye says, “Skins are acquired both through playing video games and from opening purchased loot boxes. These items have value depending on rarity and popularity within game communities. On PCs, skins are traded for real money via Steam’s ‘Marketplace’; the platform has 125 million registered users globally.”

Juniper’s findings reveal that skin gambling tends to be pushed underground, which is resulting in lesser counter-measures. In the absence of such counter-gambling steps, the amount of bets worldwide are projected to surpass US $1 billion by 2022, a fifth of the global market seen prior to Steam’s interference.