Loot boxes and skins · Brief · 8 min read
Loot boxes and skins: what they are and the test that decides them
A paid key, a random cosmetic item and, in some games, a market to sell it in. Under state gambling law the deciding question is whether the item is “something of value” — read here against Valve’s own terms, New York’s lawsuit, Kater and the app-store rules.
A loot box sells a random draw from a list of virtual items. In some games the item stays inside the game. In Counter-Strike 2 and Valve’s other titles it can be traded and sold, and that difference is where the law divides. Chance is not in dispute: the item is drawn at random. The argument is over the two ends of the transaction, whether the player stakes something of value and whether what comes out is something of value. New York’s February 2026 lawsuit against Valve puts both questions to a court for skins.
How a case opening works
The New York Attorney General’s complaint describes the Counter-Strike mechanic. A player gets a weapon case through an in-game drop or buys one from another player; opening it takes a key bought from Valve:
To open most of these loot boxes, users must purchase a key from Valve. Users can then use that key to “unlock” a loot box and win a randomly selected virtual item. … First, Valve charges for the keys that are required to open the loot boxes—currently, $2.49 plus applicable sales tax ($0.22 in New York) for most keys.
The key is the payment. What comes out is cosmetic; the complaint itself says skins “provide no advantage or other impact on gameplay.”
Counter-Strike 2 cases listed on Steam’s public market, each with a quantity for sale and an asking price.
Each case lists its possible items in color-coded rarity tiers. The complaint alleges that Valve makes the top tier, “Exceedingly Rare Special Items,” far harder to win than the rest, and ties an item’s resale price to its rarity. Resale is where the legal question starts.
What sets Valve’s items apart from a closed-loop prize is what the player does next. The Attorney General’s release sets out the State’s view:
Valve allows users to cash in on the virtual items they have won in two ways. Users can sell the items they won through Valve’s own virtual marketplace, the Steam Community Market, where they can use the proceeds to buy other video games, video game hardware, and other virtual items. Users can also connect their Valve accounts to third-party marketplaces where the virtual items can be sold directly for cash.
Two routes: a platform market paying in store credit, and outside sites paying cash.
Valve’s own terms draw the line between those two routes. The Steam Subscriber Agreement, last updated September 10, 2026, says wallet funds are not cash and that marketplace items are licenses whose off-platform transfers Valve does not recognize:
Steam Wallet funds have no cash value and are not exchangeable for cash. … You also understand and acknowledge that Subscriptions acquired in any Subscription Marketplace are license rights, that you have no ownership interest in such Subscriptions, and that Valve does not recognize any transfers of Subscriptions (including transfers by operation of law) that are made outside of Steam.
On Valve’s terms, the Community Market sits inside a closed loop and a third-party cash sale sits outside it.
The complaint alleges a third route that runs through the closed loop itself: an investigator for the Attorney General sold a skin on the Community Market, used the wallet funds to buy a Steam Deck, and sold the Steam Deck for $180 in cash. Valve, for its part, says it has locked over one million accounts misused in connection with gambling, fraud and theft, and shuts down accounts found using its items on gambling sites in violation of the Subscriber Agreement.
The test: something of value, at both ends
New York defines gambling by value on both sides of the bet, and defines value broadly:
"Gambling." A person engages in gambling when he stakes or risks something of value upon the outcome of a contest of chance or a future contingent event not under his control or influence, upon an agreement or understanding that he will receive something of value in the event of a certain outcome. … "Something of value" means any money or property, any token, object or article exchangeable for money or property, or any form of credit or promise directly or indirectly contemplating transfer of money or property or of any interest therein, or involving extension of a service, entertainment or a privilege of playing at a game or scheme without charge.
The last clause counts extra play as value. A cosmetic skin buys no extra play, so the dispute over a skin turns on the earlier clauses: is it property, or exchangeable for money or property?
Map the case opening onto the statute. The stake, on New York’s reading, is the $2.49 key. The chance is the draw. The disputed elements are whether paying for a guaranteed item is a stake at all, and whether a cosmetic item with a resale market is something of value.
What courts have said about closed-loop items
The federal appellate decision on point is Kater v. Churchill Downs. Washington defines a “thing of value” with the same extra-play clause New York uses. The Ninth Circuit held that Big Fish Casino’s virtual chips met it because the chips bought more play, and in a footnote it rejected a second theory, resale on a secondary market that the operator’s terms prohibit:
In sum, these virtual chips extend the privilege of playing Big Fish Casino. … However, Big Fish Casino’s Terms of Use prohibit the transfer or sale of virtual chips. As a result, the sale of virtual chips for cash on a secondary market violates the Terms of Use. The virtual chips cannot constitute a “thing of value” based on this prohibited use.
Two holdings in one case: extra play is value in Washington; a resale the terms forbid does not create value.
A federal trial court in California applied that footnote to loot boxes in mobile games. In Coffee v. Google, it dismissed claims that loot boxes in apps distributed through Google Play were illegal slot machines:
Plaintiffs do not allege that either of the two games they downloaded from the Play Store – Final Fantasy and Dragon Ball Z – allow transfer or sale of Loot Box items. … The Ninth Circuit has held that a virtual item cannot constitute a thing of value where its sale would violate applicable terms of use.
The result followed the facts: no alleged transfer in the games, and store terms prohibiting it.
Read together, the two decisions give a design choice with a condition attached. An item that neither extends play nor leaves the game through a route the operator allows has, so far, not been treated as a prize by these courts. The condition is the operator’s own terms and conduct, which is why New York’s complaint concentrates on the Community Market and third-party sites.
Where skins differ, and what each side says
Valve’s items sit on the other side of Coffee’s facts, because transfer and sale are built into Steam. New York says that makes them things of value. Valve answers, in its May 18, 2026 motion to dismiss the amended complaint, that nothing is staked and nothing of value is won:
Because every player always receives exactly what he paid for—one skin per mystery box—there is no “stake” or “risk.” While users enjoy and subjectively value skins, they are not money, property, tokens exchangeable for money or property, credits, or promises, so as a matter of law they are not “something of value” as that term is defined under New York gambling law in § 225.00(6).
Valve contests both ends of the statute: no stake going in, and nothing of value coming out.
One skin’s public market page: a price history and listings from other players, the resale at the center of New York’s case.
The motion is fully briefed. On September 22, 2026 the court adjourned oral argument to October 21, 2026, and no decision has issued.
Valve’s March 2026 statement to New York customers defends transferability itself, and says where it thinks the question belongs:
We think the transferability of a digital game item is good for consumers—it gives a user the ability to sell or trade an old or unwanted item for something else, in the same way an owner can sell or trade a tangible item like a Pokemon or baseball card. … We will of course comply if the New York legislature passes laws governing mystery boxes—something it has not done despite considering the issue a few times.
These are competing positions in litigation. The complaint states allegations, and none of the filings read for this brief decides them.
The disclosure rules that apply either way
Apart from gambling law, both major app stores make odds disclosure a condition of distribution for paid random items. Apple’s rule:
Apps offering “loot boxes” or other mechanisms that provide randomized virtual items for purchase must disclose the odds of receiving each type of item to customers prior to purchase.
Google Play’s is to the same effect, with a timing requirement:
Apps and games offering mechanisms to receive randomized virtual items from a purchase including, but not limited to, “loot boxes” must clearly disclose the odds of receiving those items in advance of, and in close and timely proximity to, that purchase.
Neither rule speaks to transfer or resale. They govern how a random item is sold, not what it becomes afterward.
What a builder does with this
- Decide the item’s exit first. An item that stays in the game, under terms that prohibit transfer and sale, matches the facts of Kater’s footnote and Coffee. An operator-run resale market, or accounts that connect to outside cash marketplaces, matches the facts New York alleges.
- Write the closed loop into the terms and apply it. In both Kater and Coffee, terms prohibiting transfer carried the point.
- Check each state’s definition for an extra-play clause. Under Washington’s and New York’s definitions, a prize that buys more play is value even without a cash-out; that is what decided Kater.
- Disclose odds before purchase. Apple and Google require it for paid random items, whatever the state-law answer.
- Follow New York v. Valve. Valve’s motion asks the court to decide, for a tradable cosmetic item, whether a skin is “something of value” under § 225.00(6).
The next briefs set out the enforcement record on skins and the structures built around the closed-loop line.