What is Skins Betting?

The concept of skins betting is that dark side of the ESports industry that we referenced earlier. At its most innocuous, a video game skin is nothing more than an unlockable or purchasable item through a video game Marketplace. These items can be used in-game and make the game easier to beat and offer an advantage over other players in head-to-head combat.

In some cases, the item in question offers no real benefit and is only a highly sought after item (with value accordingly) because it is rare. The item in question may be nothing more than a new gun design or an outfit for a character that is desired for no reason other than it is difficult to get.

In the purest of cases, many players will pursue those items for bragging rights. Even then, a player can sell any unwanted items on the marketplace and that can provide a stream of a small amount of income for a serious player of the game who goes around collecting highly sought after items. Unfortunately, the skins were also used to create and facilitate a black market of unlicensed and unregulated online betting in which untold numbers of players were ripped off by the betting sites in question.

Basically, players had the option of signing up for some seriously shady third party websites that offered gambling games that the players could play while depositing skins to use in the place of actual cash. Essentially, players would, ‘Drop,’ their skins to the site and then they would be credited with either skins on the account of the third-party site or with actual credits. The players would then participate on any of a variety of different betting games in an effort to win more skins that could then be sold on the Steam Marketplace.

One of the most common forms of betting on these third-party sites was casino-style gambling, but the sites hosting the games were not licensed or regulated by anybody and any remaining sites are still not. These sites can offer slots and table games, even going as far as to offer con-flip games, that may be gaffed and do not correspond to the natural probabilities of the games that they are simulating as any licensor would demand that they do from a legitimate online casino. The players are essentially playing an unbeatable game rather than a random one.

Even if a player does get lucky and beat the game, there is no recourse against any of these third-party operators if they choose not to give the skins back to the players or to pay out on skins that are owed to the players. The simple fact of the matter is that there is no regulatory agency to which these sites can be reported as having defrauded their players, and as a result, the players often end up being out whatever they deposited to the sites, win or lose.

The sites will often also act as a third-party for player-vs-player combats similar to that which is found in the sanctioned ESports games and tournaments. They simply link one player to another for those purposes and then they take a cut of whatever it is that is wagered. While that may seem wrong, it is actually one of the cleaner things done by these illicit third-party operators.

Another thing that can happen is that many of these operators offer betting on traditional sports through their unregulated channels. Players will deposit their skins into the site and use their credits to bet on various sporting events usually at worse odds than are offered anywhere else. These third-party sites, being unregulated, will often cancel bets after games have already started, give spurious excuses to refuse to pay out on winning bets or outright defraud the players of the skins that were deposited into the games. Again, they get away with it because there is no regulatory mechanism in place preventing them from doing that.

In addition to those means, many of the third party operators will also offer ESports betting as would some of the legitimate licensed and regulated traditional sports betting sites, such as Pinnacle Sports. With the ESports betting, these illicit operators would often find capricious and arbitrary excuses to cancel bets, not to pay out to players and to outright defraud players of the skins that they put into the games.

In fact, some of the darkest of these third-party sites were owned by the players who were actual participants in the ESports and became trusted and well-liked by their fans. What the players would do is endorse the sites as being a safe place to gamble without disclosing the fact that they had an ownership interest in the sites. The player would then go to those sites to bet on their favorite player, and on some occasions, when enough money would be put down on a major event: The player who owned the site would deliberately throw the match in order to collect all of the money that was put on him.

Some of these match fixing tactics would be so blatant as to be undeniable, while others were at least a little more well-concealed through what looked like a legitimate attempt at winning.

The fact of the matter is that almost all forms of Skins betting were illicit then and continue to be illicit to this day. Players should avoid any of these unlicensed and unregulated operators at all costs and should confine their ESports betting to regulated and licensed agencies that offer an ESports betting platform. Many ESports betting platforms, such as SkyBet, are actually quite sophisticated and offer a wide variety of betting options of their players. They cover as many matches and games as a player can possibly want, and offer head-to-head bets as well as more exotic bets on the matches and tournaments.

Steam/Valve the creators of the games and the runners of the marketplace have cracked down on the vast majority of the largest of the illicit third-party operators who facilitated the skins betting. This crackdown consisted largely of finding the person behind the sites and sending them cease-and-desist letters demanding that they quit using their product (the skins) for the purpose of offering illegal and unregulated online gambling.

In the meantime, the skins themselves are not always used for gambling and can often be quite innocuous. As we mentioned before, many players might acquire the skins through the normal course and scope of game play and then, if they want, can sell them on the marketplace for a few extra bucks. There are several players who do that for fun and as a source of a little extra cash. If nothing else, it can at least be used so that the game, “Pays for itself.”

The acquisition of these skins by more respectable means is also something of an industry unto itself. Just like the collection and sale of items for real world currency, such as takes place in games like World of Warcraft, became an industry of appreciable size overseas, so too is occasionally the mining and sale of these video game skins. While the players who engage in this are not professional tournament or matchup players, they are professional in the sense that they are utilizing the game in order to achieve a profit.

In the case of World of Warcraft, there were even overseas companies that would pay players an hourly rate to go in and mine or otherwise collect the items that would later be sold for real world currency. It is quite possible that this is going on in the world of skins, although, they probably would have suffered as a result of the Valve/Steam crackdown on the illicit third-party gambling operators. The only downside of the crackdown and shutdown of the biggest sites for skin betting is the fact that it devalued the skins quite precipitously as they were no longer being wagered as a surrogate for real world cash.

Another problem that skins bettors would face is the fact that, even if they do win, it is possible for any skins that they have bought/collect/won to have lost substantial value in the meantime. When it comes to selling the skins for cash, the Steam Marketplace is literally the only place where that can be done. I suppose one alternative would be for a player to sell his entire account, but most players would be loathe to do something like that. For the most part, the only means by which a skin can be converted into actual money is the Steam Marketplace.

The above is a link to the marketplace if you want to get an idea of the way the whole thing works. It’s actually quite similar to a stock market as the skins in question will all have a specific value at any point in time and there are Bid/Ask offers on the skins in question. The marketplace itself stores sales information and keeps a historical price chart as to the price of the goods and quantities sold. It’s actually pretty sophisticated and entertaining just to look at.

In addition to the crackdown on the largest of the illicit third-party betting websites, Steam/Valve has also put other measures in place to make the Marketplace more fair and secure. For one thing, they have made it so that an item bought from the market place cannot be sold or traded for a specified period of time in order to avoid price manipulation of the skins in question. The result of that is that the skins tend to be a little bit more stable in price these days than they were before when individuals or groups would work together to essentially fix and influence the short-term trends of a particular item.

The way that the items could be influenced at one time, and might still be able to be to a lesser effect, is nothing more than the traditional techniques that have presented themselves in limited markets for centuries now. One tactic was to gather up a ton of a particular item and then pull it from the marketplace thereby generating a supply/demand disequilibrium. By hoarding a ton of a highly sought after skin, the holders of the skin were able to influence the price upward.

Another thing that they might do is short sell on skins which is to say that they would dump them on the market, usually for a small profit, that would cause a price crash. Again, if you look at the site, it also shows how many units are on the overall market. After the price crashed even below the levels that they had sold the items for, they would then buy them all back up again and wait for the price to rebound a little bit thereby essentially selling the same thing twice and making money on it.

Furthermore, individuals who are participating in the market without any kind of serious profit motive are also hindered by the fact that the marketplace itself charges a fee of 15% of any items that are purchased directly from another player. Now that the prices of many of these items have somewhat stabilized, there is simply almost no way to sell the items profitably when one is taking a 15% haircut. For example, let’s look at this item.

If you look at the lifetime price of the item, you will notice that it started off extremely high and then dropped precipitously. If you observe the chart of multiple items that have been in existence for that long, you will notice that these massive price drops often occur at right about the same time. The reason for that is because it correlates pretty closely to right around the time that Steam/Valve were cracking down on the illicit third-party gambling site operators that used skins as a proxy for actual currency. The owners of these sites, of course, had a ton of skins available and put them all on the market in the hopes of cashing out in fear of perhaps being found out and having their accounts shut down. They wanted to get out while the getting was good, so to speak.

The result of the panic, of course, was that they were essentially inclined to take whatever price they could get to get rid of the skin and convert it to actual cash. Don’t cry too hard for those people, though, they largely only acquired the skins in the first place by defrauding many other players of the game, many of them minors. They did this by running the illicit betting websites that were not licensed or regulated in any meaningful way in the first place.

Looking at the last month for the item to which I linked above, I notice a price fluctuation with a low of $9.20 and a high of $11.28 over the last month. In other words, after the marketplace takes its 15% cut out of a cash sale, someone who comes in and buys the item at the lowest possible price over the past month would have a very small window of opportunity during which the item could be sold at a profit. In order to profit, a person would have to be able to buy it at the $9.20 price and sell it at $10.83, or higher. Of course, not very many units were sold in any sort of price range in which anyone could even potentially profit, so barring the price of the item increasing substantially in the near future, most of the buyers are going to lose money on whatever quantities of the skin that they purchased.

Someone who is sophisticated and studies the market to achieve an understanding of short-term market fluctuations might be able to buy and sell in the marketplace to his/her advantage, but it is unlikely when they are having having to give up a fifteen percent cut. To put a fifteen percent cut in perspective, stock brokers often charge commissions of only 2-2.5% on sales of legitimate stocks, so that tells you how serious bucking 15% is.

The players who gamble using skins are actually making two gambles. The first one is that they are playing on fly-by-night sites that are not legalized, licensed or regulated in any way and are essentially specifically designed with the goal of ripping people off. The second handicap against them is that they are counting on the skin in question to hold its value until they are ready to cash in, if they ever actually do so (many just play until they have lost everything) and even if they do cash in, they have to eat that fifteen percent commission.

The Game for Children

After reading all of that, you probably wonder why anyone would partake in these illicit third-party websites in the first place. The reason is usually because they cannot play at a licensed and regulated gambling website due to the fact that they are children. Another potential reason is because they are located in the United States and cannot gain access to the majority of the sports betting websites that are licensed operators.

These outside websites very rarely have any sort of age verification mechanism in place, and when they do, it is not in anyway meaningful. A player might have to check a box saying that he or she is 18+ or put in a fake birthday, and that’s about it. In most cases, these operators don’t care at all and it is a simple matter of just creating an account and playing.

Being weaker of mind than the majority of adults, many of whom have their own issues with problem gambling, these children will fall under the spell of these websites and continue to bet with the goal of winning ever increasing skins until they have eventually lose everything. It is unfortunate, but true, and they are the primary market...especially for those looking to bet on ESports events.

Unfortunately, other than Steam/Valve taking it upon themselves to try to crack down on the largest of the third-parties there is very little that can be done because there is some question as to whether or not what is going on is even illegal. At the end of the day, the participants are betting in video game accessories which are certainly not cash and, arguably, have absolutely zero in terms of real world value.

Fortunately, for those who wish to bet on ESports in a safe environment, and who are old enough, there are w wide variety of legitimate betting sites out there. We here at the World Casino Directory are going to talk about a few of them today.