New York sues Counter-Strike game developer saying ‘loot boxes’ promote gambling

New York’s attorney general has launched a major legal challenge against video game developer Valve, alleging that the company’s popular “loot box” features amount to illegal gambling operations that target both children and adults.

Attorney General Letitia James filed the lawsuit Wednesday in New York state court, focusing on Valve’s prominent game franchises including Counter-Strike 2, Team Fortress 2, and Dota 2. The suit claims these games illegally charge users for chances to win rare virtual items contained in digital “loot boxes.”

The lawsuit specifically highlights Counter-Strike’s implementation, which mimics gambling mechanics through an animated spinning wheel reminiscent of a slot machine that eventually lands on a selected item.

“Valve has made billions of dollars by letting children and adults alike illegally gamble for the chance to win valuable virtual prizes,” James said in a statement accompanying the filing. “These features are addictive, harmful, and illegal.”

While loot box contents are primarily cosmetic—such as character hats or weapon skins that don’t affect gameplay mechanics—they can hold substantial real-world value. According to the attorney general’s office, rare items regularly sell for thousands of dollars on secondary markets. In one extreme case, an AK-47 weapon skin from Counter-Strike reportedly sold for more than $1 million.

The lawsuit contends that Valve is violating New York’s constitution by promoting gambling activities through its games. The legal action seeks to halt the practice entirely while demanding restitution and damages for affected users. Additionally, the suit calls for substantial financial penalties amounting to three times Valve’s profits derived from loot box features.

James’ office emphasized the potential developmental harm of exposing young people to gambling mechanisms, citing research indicating that children introduced to gambling are four times more likely to develop gambling disorders later in life compared to those without early exposure.

“Loot boxes, like other forms of gambling, can lead to addiction and result in real harm,” the lawsuit states. “But Valve’s loot boxes are particularly pernicious because they are popular among children and adolescents, who are lured into opening loot boxes by the prospect of winning expensive virtual items that convey status in the gaming world.”

The economic ecosystem surrounding these virtual items has grown increasingly complex, with significant financial implications. Beyond casual players, the market now attracts online speculators and investors who have helped drive valuations to unprecedented heights. This lucrative secondary market has even attracted criminal elements targeting third-party marketplaces where these digital items can be converted to cash.

Valve’s involvement extends beyond merely creating these digital items. The company operates its own marketplace called the Steam Community Market, where players can sell their virtual items and use proceeds for purchasing other games, gaming hardware, or additional virtual items. The company also facilitates third-party marketplaces that deal in these digital goods.

The lawsuit represents one of the most significant legal challenges to loot box mechanics in the United States gaming industry. Similar features have faced increased scrutiny worldwide, with several European countries already implementing restrictions or outright bans on certain implementations of loot boxes.

Bellevue, Washington-based Valve has not yet issued a public response to the lawsuit. The case could set important precedents for how digital items with real-world value are regulated in video games, particularly when probability-based mechanics are involved in their acquisition.

Industry watchers note that the outcome could potentially reshape monetization strategies across the multi-billion-dollar gaming industry, where microtransactions and chance-based reward systems have become increasingly common revenue generators.