Valve have moved to dismiss a New York attorney general lawsuit accusing them of facilitating illegal gambling by way of lootboxes on Steam, after first seeking to try it in the court of public opinion. In a memo filed this week, the company offered a largely familiar defence against the New York AG lawsuit, hinging on the idea that randomised lootbox rewards can't be defined as gambling under state law, because they are bought with virtual currency (which can be used for other purposes) and have no 'real' value as cash or property.

They also position the lawsuit as an attack on free speech, while - to my eye, anyway - skirting around the claim that lootbox design and presentation can be inherently manipulative.

Find the full 42 page memo here, care of Courthouse News. It uses the term "mystery box" throughout, one of many sanitised euphemisms for lootbox. "Players do not stake or risk anything when they open a mystery box or use [Counter-Strike 2] Armory Credits," the authors write. "Rather, they pay a fixed amount of virtual currency to get exactly one skin from a known set of options pursuant to publicly disclosed odds."

The lawyers note Steam's controls on the transaction of lootbox rewards - players can't redeem virtual items for cash on the Steam marketplace, and there's a seven day waiting period before skins can be traded – while pushing back on the NYAG's claim that these items have monetary worth because, in practice, they can be traded on external marketplaces and also, swapped for things you can sell for real cash.

"If 'exchangeable for money or property' encompassed any item that can theoretically be resold, the definition would have no meaning or limiting principle," the lawyers write, pointing to the existence of "robust secondary markets" for randomised packs of baseball cards and other physical collectibles. They also scoff at any suggestion that Valve "should be held criminally liable for third-party websites".

Another part of Valve's case concerns the technicalities of the New York legal system. The memo broadly argues that the attorney general doesn't have to right to initiate enforcement actions; that's for the legislature to handle by passing appropriate laws.

If you've been following the legal arguments around lootboxes, you'll probably find a lot of this old hat. Possibly the most interesting part of the memo for we Regular Folk concerns Valve's arguments for the aesthetic and design value of "mystery boxes", which is part of their claim that such mechanics should be protected as free speech under the US First Amendment.

They downplay the argument that many lootboxes are designed to resemble gambling machines, citing a court finding that "even if mystery boxes 'aesthetically resemble[ ] classic games of chance, the underlying transaction is more akin to purchasing cinema or amusement park tickets'". They argue that skins, specifically, are "purely aesthetic creations and are thus fully protected by the First Amendment". In Valve's view, "criminalizing mystery boxes would unquestionably chill the development of skins, discouraging artists from creating particularly desirable or attractive designs."

Valve's lawyers make the broader point that, "contrary to NYAG’s suggestion, mystery boxes are an integral feature of numerous videogames, which both makes the game more engaging and creates revenue that funds game development and allows for free-to-play games."

They cite a variety of legal precedents to this effect, including a court battle involving Epic that, in Valve's view, clarifies "that even such monetization strategies like the 'near miss,' 'chasing,' 'fear of missing out,' 'exclusivity,' 'entrapment,' and 'sunk cost effect' - which Valve does not use - are 'properly considered video game content' protected under the First Amendment because they are integrated 'elements and features of video games'."

In general, they hold that criminalising loot boxes as a form of gambling "will have an impermissible chilling effect on protected videogame design", creating a risk of liability for people who stream about lootboxes together with people who sell analogous products, like the aforesaid packets of baseball cards.

I do not personally consider that anything in Valve's memo really challenges the core argument that much lootbox design can be manipulative and habit-forming, however mitigated by, for example, stating the odds of getting a rare item. In general, the larger question here is the line big budget commercial videogames walk between "engaging" and "compulsive", particularly where children with fewer inhibitions or ability to self-regulate are concerned. It doesn't have to meet the technical definition of 'gambling' to be damaging.

One difficulty as ever is how the case for lootbox design as gambling may be hijacked in the service of a reactionary moral panic. As Mark wrote in February, the NYAG's suit muddles the picture by referencing "Valve’s promotion of games that glorify violence and guns helps fuel the dangerous epidemic of gun violence."

The New York lawsuit isn't the only bit of legal botheration Valve are fending off right now. There's also a class action suit underway in Washington, USA that calls on the Steam company to repay "billions" earned from "illegal gambling" lootboxes in Counter-Strike, Dota 2 and Team Fortress 2. In that piece, I wrote a little about research into the psychological aspects, together with the recent international history of legal and government challenges to lootbox design.