New York Sues Valve Over Loot Boxes, Calling Them Illegal Gambling Targeting Children

Valve is in serious legal trouble. On 25 February 2026, New York Attorney General Letitia James filed a lawsuit against the Steam developer in Manhattan, alleging that loot boxes in Counter-Strike 2, Dota 2, and Team Fortress 2 constitute illegal gambling under New York state law.

The suit doesn't dance around it. James called the mechanic "quintessential gambling" and accused Valve of making billions off a system she says is deliberately built to hook younger players. "Valve has made billions of dollars by letting children and adults alike illegally gamble for the chance to win valuable virtual prizes" said James. "These features are addictive, harmful, and illegal."

The core argument is fairly straightforward. Players pay real money for loot boxes with no guaranteed outcome. In Counter-Strike 2 specifically, the process mirrors a slot machine: a spinning wheel animation slowly lands on a randomly selected item. Those items, while purely cosmetic, hold real monetary value and trade freely on Valve's own Steam Community Market, as well as various third-party platforms that the AG's office claims Valve actively facilitates.

One AK-47 skin reportedly sold for over $1 million in June 2024. The CS2 skin market as a whole surpassed $4.3 billion in value as of March 2025. These aren't small numbers.

Why Children Are at the Centre of This

The AG's office leans heavily on research showing that children introduced to gambling are four times more likely to develop a gambling addiction later in life. James argues Valve's games are especially dangerous here because the virtual items carry social status within the games' communities. Kids want the rare skins. They open boxes chasing them. The complaint describes this as deliberately predatory.

It's not purely about Dota 2 or CS2 in isolation either. Team Fortress 2, despite being nearly two decades old, still features the same crate-opening system and is still played by a large enough audience to be included in the lawsuit.

The state wants Valve to permanently stop using loot box mechanics in its games. Beyond that, it's seeking restitution for affected users and a fine worth three times whatever Valve profited from the practice. In 2023 alone, Valve reportedly pulled in close to $1 billion just from Counter-Strike case keys. Triple damages on figures like that would be eye-watering.

Not the First Time Valve Has Faced This

This isn't exactly new territory. Back in 2018, the Netherlands restricted case openings after their Gaming Authority ruled that paid loot boxes qualified as gambling. That ruling was eventually overturned in 2022, though restrictions still remain in place there. The European Parliament's Internal Market and Consumer Protection Committee adopted a report in October 2025 recommending the EU ban loot boxes outright for anyone under 16.

Brazil went further. Earlier in 2026, the country's president signed legislation banning loot boxes for users under 18, with that law set to take effect in March 2026.

The US has largely lagged behind on this front, so New York's lawsuit is a notable move. Whether it succeeds is another question entirely. Some legal observers have already pointed out that existing US precedent doesn't cleanly classify virtual cosmetic items as gambling, since you're not technically winning money, you're winning a skin. The counter-argument, which the lawsuit makes, is that those skins have real monetary value and a readily available secondary market to cash out on. So the distinction is thinner than Valve would probably like.

Interestingly, Valve itself showed some awareness of the shift happening. In September 2025, it introduced the "Genesis Uplink Terminal" in CS2, a feature allowing players to directly purchase a specific skin from a dealer rather than gambling on a random drop. Whether that was a concession to mounting pressure or just a product decision is unclear.

Valve has not yet issued a public response to the lawsuit. GeekWire reached out to the company for comment but received nothing at time of writing.

This case is going to take years to resolve. But it could push the conversation in the US in a direction that other countries have already been heading for a while. Whether it results in real change to how loot boxes work across the industry, not just in Valve's games, remains an open question.