For years, private plaintiffs challenging loot boxes in video games have run into a brick wall in federal court. State consumer protection statutes and the pivotal question of whether in-game virtual items constitute a “thing of value” under gambling laws have consistently doomed class action complaints at the pleading stage. Now, New York Attorney General Letitia James has filed suit against Valve Corporation — the maker of Counter-Strike, Team Fortress 2, and Dota 2 — and the theory of liability she brings to court looks meaningfully different from anything that has been tried before.

The New York Complaint: People v. Valve Corporation

Filed in the Supreme Court of the State of New York in February 2026, the AG’s complaint alleges that Valve has operated an illegal gambling enterprise in violation of Article I, Section 9 of the New York State Constitution and Penal Law §§ 225.05 and 225.10 (promoting gambling in the second and first degree, respectively). The complaint seeks injunctive relief, restitution, disgorgement, and treble damages.

The factual core of the complaint centers on how Valve’s loot boxes — randomized virtual containers unlocked by purchasing a “key” for $2.49 — operate in practice. Users purchase keys to open weapons cases in Counter-Strike (and similar boxes in other games), with the chance of winning a virtual cosmetic item whose rarity determines its market value. The odds of winning the most coveted items are extraordinarily slim: in one Counter-Strike case, the chance of receiving the rarest “Exceedingly Rare Special Item” is approximately 0.26%. Nearly every user receives a common item worth pennies — far less than the cost of the key.

What sets the New York case apart from prior litigation is the AG’s argument that the virtual items won from Valve’s loot boxes are genuinely valuable — not just subjectively meaningful to gamers, but convertible to real money in a publicly visible and recognizable manner. Valve operates the Steam Community Market, where users freely buy and sell skins for Steam Wallet credits that can, in turn, be used to purchase hardware and games or effectively converted to cash. The complaint further alleges that Valve has knowingly tolerated and, at times, actively supported third-party cash marketplaces where Counter-Strike skins have sold for thousands — and in one documented case, over $1 million — despite maintaining a public posture that such sales violate its terms of service. The Counter-Strike skin market alone has been estimated to exceed $4.3 billion.

The complaint also devotes extensive attention to the harms of Valve’s system, particularly for minors. Valve does not verify the age of its users, and teenage boys are described as a core demographic of its games. The AG details the psychological mechanisms embedded in the loot box design — near-miss animations, variable ratio reinforcement, and the slot machine–style spinning wheel in Counter-Strike — and cites research linking loot box engagement to problem gambling, particularly in adolescents.

Why Prior Loot Box Litigation Failed

The contrast with earlier cases is instructive. In Mai v. Supercell Oy (N.D. Cal. 2023), plaintiffs sued the Finnish developer of Clash Royale and Brawl Stars under California’s Unfair Competition Law (UCL) and Consumers Legal Remedies Act (CLRA), arguing that loot boxes constituted illegal slot machines or controlled games under California Penal Code §§ 330a, 330b, 330.1, and 337j. The district court dismissed the case with prejudice on multiple grounds.

First, the court found the plaintiffs lacked statutory standing under the UCL because they received exactly what they paid for — loot boxes containing whatever items were promised — and thus suffered no cognizable economic injury. Second, the court held that virtual currency is not a “good or service” under the CLRA, a holding that has become routine in this district. Third, and most critically, the court concluded that the loot box items were not “things of value” under California gambling law, because their subjective value to gamers — aesthetic enjoyment, competitive edge, entertainment — did not constitute measurable monetary worth, and Supercell’s terms of service expressly prohibited the sale or transfer of virtual currency and in-game items. The court found the existence of gray market trading platforms insufficient to change this analysis, relying on Kater v. Churchill Downs Inc., 886 F.3d 784 (9th Cir. 2018), for the proposition that a virtual item cannot be a “thing of value” based on secondary market prices where the game operator’s own terms prohibit such transfers. On appeal, the Ninth dismissed the entire matter on standing grounds, but the district court's analysis remained instructive going forward.

Similar outcomes befell plaintiffs in Taylor v. Apple, Inc. and Coffee v. Google LLC, both decided in the Northern District of California in January 2022. In each case, courts found no cognizable injury and no “thing of value,” dismissing claims premised on the illegality of loot boxes under California’s gambling statutes.

The earlier wave of cases, as analyzed in a 2023 IMGL Magazine article on virtual gambling, demonstrated a clear pattern: where game operators’ terms of service prohibit cash conversion of virtual items, and no authorized secondary market exists, courts across multiple jurisdictions — Maryland, Illinois, California — have found no actionable gambling. The Fourth Circuit’s Mason v. Machine Zone, Inc. (4th Cir. 2017) reached this conclusion under Maryland law; so did the Northern District of Illinois in Phillips v. Double Down Interactive (2016) under Illinois law. The notable outlier was the Ninth Circuit’s Kater v. Churchill Downs (9th Cir. 2018), which found Washington state law violated because the virtual chips there could extend gameplay and were transferable between players — and the operator actively profited from that transfer mechanism.

Why New York’s Case Looks Different

The New York case is not constrained by California’s consumer protection framework or its “thing of value” jurisprudence. New York’s Penal Law defines gambling broadly as staking something of value on a contest of chance for the chance to receive something of value in return — without requiring the item to be freely transferable under an authorized marketplace. More importantly, the AG has assembled evidence that Valve has, as a matter of internal policy, tolerated and facilitated the cash sale of its virtual items through third-party platforms even while publicly claiming otherwise, and has earned commissions on Steam Community Market transactions that users ultimately converted to cash. These allegations are designed to undercut a defense based on the existence of Terms and Conditions that arguably demonstrate that the virtual items are not intended or “permitted” to be liquidated into real currency.

In short, where Supercell and the other defendants in prior California cases could point to terms of service that shut down the secondary market (at least as a legal matter), Valve may be unable to credibly make that argument in light of its own internal communications and conduct. The AG’s complaint contends that Valve deliberately cultivated a marketplace that gave its virtual items monetary value — a design choice, not an unfortunate side effect — precisely because that value is what drives loot box sales.

What to Watch

The New York case will test whether a state attorney general action, grounded in constitutional and penal law rather than consumer protection statutes, can succeed where private class action litigation has consistently failed. Several variables will be determinative: how New York courts construe the “something of value” element of the gambling statute in the context of items convertible to cash through a platform the defendant itself fostered; whether Valve’s internal acknowledgment that its virtual items are liquid assets undermines any “closed-loop” defense; and how Valve’s scale of operation — tens of millions of dollars in key sales to New Yorkers alone — affects the analysis under the first-degree promoting gambling statute.

The loot box cases decided to date reflect the law struggling to catch up to a monetization model that game developers have refined over a decade. New York v. Valve Corporation may be the case that finally forces a definitive reckoning — or it may further illustrate how dramatically outcomes turn on the specific statutory framework, the facts about transferability, and the forum in which the challenge is brought. Either way, game developers and gaming counsel should be watching closely.