STATE OF WASHINGTON GAMBLING COMMISSION “protect the Public by Ensuring that Gambling is Legal and Honest” September 27, 2016 Mr, Gabe Newell Valve Corporation 10900 NE 4th St, Suite 500 Bellevue, WA 98004 RE: Cease Facilitating Gambling Activities through Valve Corporation’s Steam Platform ‘Dear Mr. Newell, ‘The Washington State Gambling Commission contacted Valve Corporation in February 2016 about its Counter Strike: Global Offensive (CS:GO) video game product. Our agents visited with, Liam Lavery, Valve Corporation’s in house counsel, on February 17, 2016, about the Gambling Commission's concerns that Valve Corporation may be facilitating unlawful gambling through its CS:GO video game as it is used through Valve Corporation's online Steam Platform. Our main focus was the use of virtual weapons known as “skins” and how they were being used as virtual currency, “Skins” could be bought, sold, and traded through virtual marketplaces inside and outside Valve Corporation's Steam Platform. Then, these “skins,” that could only be acquired through CS:GO and the Steam Platform, were being used as consideration on third party gambling websites. ‘After this initial meeting with Mr. Lavery, Special Agent (SA) Terry Bach attempted to contact Mr. Lavery later in February and March through e-mail to gather additional information. Mr. Lavery was also asked for Valve's knowledge of how its Steam Platform is used to facilitate gambling of “skins” on third party websites. Mr. Lavery never responded to SA Bach's inquiries It is now well known that there are third party websites offering illegal gambling activities where “skins” are used as consideration to enter the illegal gambling contests. Players are allowed to ‘wager their “skins” in different types of games, including lotteries, raffles, match wagering, and virtual slot machines. Players then can win prizes by winning games of chance. Skins” transactions are usually conducted within Valve Corporation's Steam Platform. All third party gambling sites have Steam accounts and use the Steam platform to conduct their gambling iransactions. These transactions are usually automated and performed by a software program or “bot.” Velve Corporation appears to have rules against the use of “bots” in its User Agreement. However, it has not strictly enforced its user policy preventing the use of “bots” and continues to knowingly ?.0. Box 42400 Olympia, Washington 98504-2400 (360)486-3440 (600)345-2529 FAX (360) 486-3625allow third party websites to conduct gambling transactions through its Steam Platform. Therefore, Valve Corporation aids in these gambling activities because it knowingly allows players and third party gambling sites to use its Steam Platform to transfer “skins” for gambling activities. Valve Corporation must cease violating Washington State gambling laws. Valve Corporation must immediately stop facilitating the use of “skins” for gambling activities through its Steam Platform, Valve Corporation must take whatever actions are necessary to stop third party websites from using “skins” for gambling through its Steam Platform, including preventing these sites from using their accounts and “bots” to facilitate gambling transactions. Valve Corporation has until October 14, 2016 to provide me a response with supporting evidence showing the steps it has taken to bring the company into full compliance with Washington’s gambling laws, If Valve Corporation fails to comply, the Washington State Gambling Commission will exercise its authority under state gambling laws, Our actions could include: seizure and forfeiture of any property related to illegal gambling activities; forfeiture of Valve Corporation’s corporate charter; and possible criminal charges against employees for facilitating the above~ referenced illegal activities. ‘The Gambling Commission's goal is to obtain voluntary compliance with gambling laws and regulations without us taking any additional action. We appreciate your support in achieving this ‘goal and expect you will voluntarily comply by taking all necessary steps to stop the transfer of “skins” for gambling purposes through your Steam Platform, If you have any questions regarding this matter, please contact Brian Considine, Managing Atiomey, at Brian,Considine@wsge.wa.gov or (360) 486-3469. David E. Trujillo Director