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New York sues Valve over alleged illegal loot box gambling operation

New York Attorney General Letitia James is taking Valve Corporation to court, accusing the gaming powerhouse of operating what she… Continue reading New York sues Valve over alleged illegal loot box gambling operation
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[Image: Image of an AK47 Counter-Strike skin, which reportedly sold for more than $1 million in June 2024. New York sues Valve over alleged illegal loot box gambling operation]

New York Attorney General Letitia James is taking Valve Corporation to court, accusing the gaming powerhouse of operating what she describes as an illegal gambling scheme built around virtual “loot boxes” in several of its biggest titles.

The lawsuit, filed in Manhattan’s state Supreme Court, argues that Valve’s practice of selling digital keys to unlock in-game containers violates New York’s constitutional and criminal bans on gambling. James is pursuing the case under Executive Law § 63(12), a statute that allows her office to target repeated illegal business conduct.

Valve, a video game developer, has made billions of dollars by letting children and adults illegally gamble for the chance to win valuable virtual prizes.

These features are addictive and harmful.

That's why I'm suing to stop Valve’s unlawful conduct and protect New Yorkers.

— NY AG James (@NewYorkStateAG) February 25, 2026

At issue are loot boxes connected to hit franchises such as Counter-Strike, Team Fortress 2 and Dota 2. Players typically earn the sealed digital cases during gameplay. To open most of them, however, they must purchase a key for $2.49 plus tax, bringing the total to $2.71 in New York.

Inside each box is a randomized cosmetic item, often a weapon “skin” or character accessory. These items don’t change how the game plays, but they can signal status within online communities. According to the complaint, some of the rarest items command prices in the thousands of dollars.

“Charging an individual for a chance to win something of value based on luck alone is quintessential gambling,” the complaint states.

Prosecutors say Valve intentionally structured its marketplace so those virtual goods carry real financial value. Players can resell items on the Steam Community Market, where Valve takes a 15% commission, or on outside platforms. Funds stored in a Steam Wallet can then be used to buy new games, hardware like the Steam Deck, or additional loot box keys.

An investigator with the attorney general’s office reportedly turned a Counter-Strike item into $180 in cash by selling it on Steam, purchasing a Steam Deck with the proceeds, and reselling the console at an electronics store.

The complaint also zeroes in on the presentation. In Counter-Strike, clicking “Open to Keep” triggers a spinning wheel animation that slows and appears to nearly land on higher-value prizes before stopping. The state likens that “near miss” effect to tactics long used in slot machines. The odds of hitting the top-tier “Exceedingly Rare Special Item,” the filing notes, sit at roughly 0.26%.

In a separate press release, Attorney General James added: “Illegal gambling can be harmful and lead to serious addiction problems, especially for our young people.

“Valve has made billions of dollars by letting children and adults alike illegally gamble for the chance to win valuable virtual prizes. These features are addictive, harmful, and illegal, and my office is suing to stop Valve’s illegal conduct and protect New Yorkers.”

Growing scrutiny of loot boxes worldwide as New York targets Valve

The case lands as loot boxes face mounting pressure globally. Counter-Strike 2 alone generated more than $74 million in loot box revenue in a single month last year, underscoring how lucrative the model has become. At the same time, researchers and child advocates have warned that randomized rewards can mirror gambling mechanics, raising concerns about addiction risks among teenagers.

In Canada, experts have pointed to links between heavy loot box spending and problem gambling behaviors in adolescents. Similar debates are playing out across Europe. Austria’s Supreme Court recently ruled that certain loot boxes amounted to illegal gambling under national law, while legal scholars such as Leon Xiao told ReadWrite that regulators are still grappling with where to draw boundaries between gaming and gambling.

New York’s constitution broadly prohibits gambling, except for limited carve-outs that do not apply here. State law defines gambling as risking something of value on a contest of chance with the expectation of receiving something of value in return. James’ office contends Valve’s system fits squarely within that definition.

The complaint also accuses Valve of allowing a thriving secondary market, including third-party sites where items can be sold for cash or used in additional wagering, even though the company has said such transactions violate its terms. Prosecutors argue enforcement has been inconsistent.

ReadWrite has reached out to Valve for comment.

Featured image: Counter-Strike 2 screenshot via press release from New York State Attorney General’s Office

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