The Dark Side of Counter-Strike 2

The Unregulated World of Counter-Strike Gambling

• Counter-Strike gambling sites have made millions of Euros, with some individuals promoting these sites for millions of dollars per year (0s).
• These sites often target young people, with some individuals being sent to distribute flyers in high schools and malls, and even protesting outside the homes of those who oppose them (6s).
• The Counter-Strike gambling industry is largely unregulated, with many sites operating offshore and using loopholes to avoid being classified as traditional casinos (3m24s).
• Counter-Strike is a first-person shooter video game where players can buy in-game items called skins, which can be used as currency in online casinos (54s).

Skins and the Counter-Strike Economy

• Players can obtain skins by paying $2.50 to open a loot box, which spins like a slot machine and gives a random skin (1m0s).
• The rarity of skins has created an entire economy, with some skins selling for tens of thousands of dollars (1m12s).
• Counter-Strike casinos accept skins as currency and allow players to gamble on various games, including slots and roulette (1m19s).

Underage Gambling in Counter-Strike

• Many people start using Counter-Strike casinos at a young age, with some individuals beginning to gamble at 12 or 13 years old (1m55s).
• A survey of over 9,000 players found that around 70% of Counter-Strike gamblers start underage (2m22s).
• Counter-Strike casinos often do not require ID verification, making it easy for underage players to gamble (2m38s).
• Underage gamblers are more likely to become gambling addicts, which is how casinos make most of their money (3m4s).
• Physical casinos have strict ID policies due to heavy regulation, but Counter-Strike casinos are largely unregulated and can operate offshore (3m11s).
• Underage gambling problems in Counter-Strike led to Valve and the FTC getting involved, but ultimately, there were not many consequences due to loopholes in the system (3m51s).

Loopholes and the "Race to the Bottom"

• One infamous casino, CSGO Lotto, claimed to be a sweepstakes rather than a casino, which helped them avoid trouble, and similar casinos have continued to operate with new owners and names (4m6s).
• The lack of regulation in the industry creates a "race to the bottom" problem, where consumer protection is compromised to attract more customers (4m29s).
• Some casinos, like CSGO Empire, block certain IPs where gambling is illegal and admit to being a gambling site, but most Counter-Strike casinos do not take these steps (4m40s).
• One gambler explained that the decision to geoblock one region, the US, affected their choice of casino, and that most people prefer casinos that ask fewer questions and require less personal information (5m4s).
• In the world of unregulated gambling, market dynamics play a role, and casinos can gain a competitive edge by not regulating and requiring less from customers (6m7s).
• Some websites even advertise their lack of regulation as a feature, with one CEO bragging about paying out a large sum without verification (6m25s).

The Lucrative Nature of Counter-Strike Gambling

• The industry is estimated to be worth tens of millions of dollars per month, with one owner claiming to have an eight-figure business and another site, Clash, making around $50 million per month (7m14s).
• The popularity of these sites and the lack of regulation have created a huge problem, with potential appeal to underage players, money launderers, and those looking to avoid hassle (6m57s).
• CSGO websites attract almost double the traffic of the biggest online casino, with the latter declaring a gross revenue of $2.6 billion in 2022, indicating that these businesses are making huge amounts of money (7m54s).
• There are many CSGO websites, each potentially making millions a month, and they will continue to operate with minimal regulation until incentivized to change by regulation across the board (8m26s).

A Voice for Change and the Hypocrisy of Self-Regulation

• Monarch, a prominent figure, has been a voice for change, claiming to understand the underage problem as he started gambling at 13 through Roomscape and the Dual Arena, which he considers a gateway to gambling (9m1s).
• Monarch argues that the case system on Steam is horrible, with no Know Your Customer (KYC) checks, making it a powerful tool for getting children and adults to gamble (9m22s).
• The case opening system can lead to addiction, with influencers promoting third-party sites and social media algorithms feeding users gambling ads, making it difficult for individuals to stop (10m40s).
• Monarch's methods are questionable, but he admits that the industry is based on gambling, not sweepstakes, and wants to see change, although he lacks the power of a regulator to effect change (11m2s).
• Monarch's own website, CSGO Empire, does not require age verification for withdrawals under 2,000 coins in crypto or for skin withdrawals, highlighting the hypocrisy in his stance on underage gambling (11m29s).
• The goal is to implement full KYC (Know Your Customer) before allowing deposits, to make the business as clean as possible, highlighting the limitations of self-regulation in the industry (12m3s).

The Role of Influencers in Promoting Gambling

• Influencers play a significant role in promoting online gambling, with many people learning about it through YouTube and Twitch streams, often featuring popular games like Counter-Strike (12m48s).
• YouTubers and streamers, such as Juicy, have been affiliated with online casinos, promoting them through case openings and using referral codes (13m9s).
• Influencers are seen as a primary advertising vector for online casinos, with many people expecting more from them due to their perceived authenticity and connection with their audience (13m29s).
• Three different influencers were confronted about promoting online gambling, with one stating that they enjoy doing it despite not thinking people should gamble, and another claiming it's not about the money, but rather their personal enjoyment (14m11s).
• The influencers' justification for promoting online gambling is questioned, with comparisons made to promoting smoking, highlighting the potential harm caused by their actions (14m32s).
• One influencer claims they don't sugarcoat the risks of gambling in their videos and don't try to convince people that it's a sustainable way to make money, instead presenting it as a form of entertainment (15m19s).

The Dark Side of Counter-Strike 2: Gambling and Addiction

• The discussion revolves around the dark side of Counter-Strike 2, specifically the gambling aspect, and how it affects people negatively (15m52s).
• The rewards system in the game is not the main concern, but rather the gambling side, which is known to be detrimental to people's well-being (16m6s).
• Streamers who promote gambling are essentially enabling addiction, despite knowing its negative consequences, as they receive millions of dollars in return (16m20s).
• The promotion of gambling is compared to a McDonald's ad, where the goal is to create a craving, but in this case, it's for a potentially destructive habit (16m46s).
• Gambling is described as a terrible addiction, with a personal anecdote about a close friend struggling with it, losing their entire paycheck within days of receiving it (17m3s).
• The friend's addiction is so severe that despite efforts to help, they find ways to continue gambling, highlighting the addictive nature of the activity (17m18s).
• Streamers are aware of the harm caused by gambling but continue to promote it, making money from it, and justifying their actions with partial admissions and rationalizations (17m31s).
• The harm caused by gambling is acknowledged, and it's questioned how streamers can justify promoting it, with some even labeling themselves as "drug dealers" due to their role in enabling addiction (17m56s).

Profits from Addiction and the Irony of "The House Always Wins"

• The CEO of Clash.io admitted that the majority of their revenue comes from a tiny fraction of their most addicted players, with less than 1% of accounts making up 80% of their revenue (19m2s).
• The irony of the CEO's Twitter profile, which says "never gamble, The House Always Wins," is noted, given that his success is built on the addiction of others (19m21s).

Hype Drop: A Case Study in Deception and Collapse

• People involved in Counter-Strike skin gambling often rationalize their actions despite knowing they are scamming others, and this behavior is particularly evident in the case of a casino called Hype Drop, owned by the same group as CSGO R (19m28s).
• Hype Drop allowed users to gamble real-world items, such as loot boxes, and featured a loyalty program called The Daily Cases, which provided users with free money every day, but was ultimately unsustainable (20m0s).
• The website's owners argued to the Danish government that Hype Drop was not a form of gambling because the daily cases paid back users' losses over time, but this claim was later revealed to be a bad-faith argument (20m43s).
• Hype Drop's promotional materials claimed that users would always make at least their money back, but this was a false promise, and the website was eventually shut down by its owner, Killian, on March 27th, 2024 (21m36s).
• The shutdown of Hype Drop resulted in users losing money, and the website's actions were described as a Ponzi scheme by Monarch, who had previously called out the website for its unsustainable business model (21m56s).

The Aftermath of Hype Drop and the Question of Accountability

• A gambling streamer, Juicy, had heavily promoted Hype Drop, and his actions were called into question after the website's shutdown, with some wondering what he would do to make things right with the users who had lost money (22m35s).
• Monarch had protested Hype Drop at the PGL Majors, calling it a Ponzi scheme that had collapsed, and Juicy's promotion of the website was seen as problematic in light of this (22m55s).
• A Counter-Strike personality had promoted a gambling site called Hype Drop, which had a rewards system that functioned like a Ponzi scheme, but they claimed they were only playing with the product and making content around it, not promoting the rewards (23m11s).
• The rewards on the site were cut down and eventually removed, leaving the personality and their audience upset, especially those who had invested money thinking it was a good monetary investment (23m44s).
• The personality criticized another streamer, Coach Juicy, for lying about not advertising daily cases on the site, when in fact he had promoted them as "free monies" and a way to make a full-time income (24m26s).
• Despite the controversy surrounding Hype Drop, Coach Juicy did not cancel his sponsorship with the site's sister company, CSGO Roll, which is run by the same people (24m55s).
• When questioned about his continued sponsorship with CSGO Roll, Coach Juicy stated that he had already promoted the site and had fans who used it, and did not think the reward offering would change (25m14s).
• The personality argued that Coach Juicy's decision to continue working with CSGO Roll was motivated by the fact that he was making too much money from it, and that this was the main reason why he and other gambling streamers continued to promote the site despite its questionable practices (26m18s).
• The personality also mentioned that another streamer, Grim, had told them that he would continue to gamble even if he wasn't getting paid, but the personality pointed out that Grim was actually making a few million dollars a year from his streaming activities, which gave him a strong incentive to lie about his motivations (26m38s).

The Financial Incentives of Gambling Sponsorships

• Grim's business made $5 million last year, which is public information due to the nature of his company, and this has led to questions about whether his involvement in Counter-Strike is motivated by money (27m3s).
• Despite making a significant amount of money, Grim claims that he would still be involved in Counter-Strike even if he wasn't paid, as he enjoys doing it (27m31s).
• Another individual, who prefers not to disclose their exact earnings, made around $5 million last year as well, similar to Grim's income (28m28s).

Gambling Sponsorships and the Counter-Strike Ecosystem

• It's estimated that 75% of the top 300 CS:GO streamers, ranked by watch time, are currently sponsored by at least one gambling company, with some having up to five sponsors (29m4s).
• Counter-Strike gambling is essentially funding over half of the scene with large paychecks, leading to questions about the morality of accepting such sponsorships (29m9s).
• Some individuals have turned down significant offers, such as $300,000 for a month of gambling, due to personal reasons or moral objections (29m35s).
• The incentives in the industry need to change, as the current system makes it difficult for individuals to turn down large sums of money from gambling sponsorships (30m19s).
• The Counter-Strike 2 scene is heavily influenced by large amounts of money from casinos and gambling sponsors, making it difficult for teams and influencers to resist their offers (30m46s).
• Many professional teams, including FaZe, PGL, and G2, have gambling sponsors, which creates a problem where teams feel pressured to take these deals to remain competitive (31m34s).
• The entire ecosystem of Counter-Strike, especially in lower leagues, is largely funded by the gambling industry and gambling addicts (32m1s).
• Without gambling sponsors, many teams, especially in tier 2 and beyond, would likely struggle to survive or constrict significantly (32m27s).
• Traditional sponsors bring in significantly less value compared to gambling sponsors, making it difficult for teams to turn down these deals (33m6s).
• Not taking a gambling sponsorship can put a team at a disadvantage, as they would have less money to spend on players and attract talent (33m20s).
• It's almost impossible to compete at the highest level without a gambling sponsor, as they pay significantly more than other sponsors (33m46s).
• Many teams take the money from gambling sponsors, even if it means partnering with a site that allows minors to play with no ID, as long as they can maintain plausible deniability (34m10s).

The Difficulty of Refusing Gambling Sponsorships

• A Counter-Strike player named Mony was featured in a video promoting a casino when he was 17 years old, despite the casino supposedly having an 18+ age restriction, highlighting the lack of concern for underage gambling in the industry (34m27s).
• The day an investigation into Counter-Strike gambling was announced, CSGO Roll revealed they would start asking users to prove they are 18 before playing, which may be a coincidence or a token gesture (34m49s).
• For many professional teams, taking a gambling sponsorship is a difficult choice, as refusing can lead to being left behind and less successful than peers who accept such sponsorships (35m12s).
• The situation is reminiscent of the "CSGO Wild" days in 2016, when a gambling website secretly owned by FaZe Clan was used to fund the team, and the industry has not made significant progress since then (35m41s).
• FaZe Clan's owner, Banks, admitted that his motivation for creating the website was to make money to buy a CS:GO team, which he believed would increase in value over time, and his plan ultimately worked (35m52s).
• FaZe Clan still has a successful Counter-Strike team, now funded by a different gambling website, Rollbit, in a reportedly multi-million dollar deal (36m37s).

The Systemic Issue of Gambling in Esports and Valve's Role

• The problem of gambling in esports is a deep, systemic issue that cannot be fixed at the individual level, but rather requires addressing the underlying incentives and looking at the root cause (36m53s).
• Valve, the company behind Counter-Strike, has a significant role in the problem and has not taken sufficient action to stop underage gambling, as they reap the majority of the money and have the power to make changes (37m49s).
• A crackdown occurred to allow something to keep operating, but the specific details of the crackdown and what it refers to are not provided (38m19s).