Sports Gambling Statement

By Shaun Assael 1/20/17

On Aug. 9, 2015, two young millionaires worked their way through a pool party on a hotel rooftop in the Hollywood Hills. One was clean-cut, with hypnotic green eyes, the other more rakish, with a British accent slightly muted from the time he’d spent in LA. Trevor Martin and Tom Cassell had rocketed to fame as teens by streaming themselves playing video games and now, at 22, were two of the most recognized gamers on YouTube.

The sky was a turquoise blue and the weather a perfect 86 degrees as the pair, known to their fans as TmarTn and Syndicate, found a quiet spot to chat. Both had already leveraged their fame to make themselves wealthy. Martin, who has 3.2 million subscribers on YouTube, was dabbling in real estate; Cassell, whose videos are seen by his 10 million followers, had his own clothing line. Fans would line up to meet them at conventions, and their endorsements were enough to make or break new games. Now, as they settled in under the shade of a palm tree, the men plotted their next fortune in esports. They were about to move into a new multibillion-dollar world that had virtually no regulation — a burgeoning Wild West of gambling centered on a game they’d spent countless hours playing online, Counter-Strike: Global Offensive.

The first-person-shooter game pits terrorists against counterterrorists and was played by an average of 342,000 people at once in 2016. Its biggest tournaments, such as the ELeague Major scheduled for Jan. 22-29 in Atlanta, can have million-dollar prize pools and as many as 27 million streaming viewers. An estimated 26 million copies of the $15 game have been downloaded since its debut four years ago, helping make its manufacturer, Valve, the world’s leading distributor of PC titles.

While other titles such as Call of Duty offer similar gameplay, one distinctive feature has helped fuel Counter-Strike’s growth: collectible items in the game called “skins.” Although they don’t improve anyone’s chances of winning, the skins cover weapons in distinctive patterns that make players more identifiable when they stream on services like Twitch. Users can buy, sell and trade the skins, and those used by pros become hotly demanded. Some can fetch thousands of dollars in online marketplaces.

Valve controls the skins market. Every few months, it releases an update to Counter-Strike with new designs. It decides how many of each skin get produced and pockets a 15 percent fee every time one gets bought or sold on its official marketplace, called Steam. Valve even offers stock tickers that monitor the skins’ constantly shifting values.

But Valve also leaves a door open into the programming of its virtual world, one that allows skins to move out of Steam and into a murky constellation of gambling websites, where they’re used as currency. Some $5 billion was wagered in skins in 2016, according to research by the firms Eilers & Krejcik Gaming and Narus Advisors. While about 40 percent of them are bet on esports matches and tournaments, says Chris Grove, who authored a study for the companies, roughly $3 billion worth flows to a darker corner of the internet — one populated by fly-by-night websites that accept skins for casino-style gaming. Here, the games are simple, the action is fast and new sites open as soon as others close. Plenty of adults visit these sites, but with virtually no age restrictions, kids are also able to gamble their skins — often bought with a parent’s credit card — on slots, dice, coin flips or roulette spins. At least one site even has pro sports betting.

None of this could happen without Valve, a privately held company run by its charismatic co-founder, Gabe Newell. The billionaire, who according to Forbes owns more than 50 percent of the company, has watched his personal wealth rocket to $4.1 billion, due in part to Counter-Strike’s success.

As they sipped cocktails in the Hollywood Hills that day in 2015, Martin and Cassell decided that as long as the casino was open, they would get their cut.

Video and Story Source: ESPN.com; http://www.espn.com/espn/feature/story/_/id/18510975/how-counter-strike-turned-teenager-compulsive-gambler