Game items worth real money are used as chips on outside gambling sites.
Cosmetic items with real resale value became chips for unregulated gambling sites, some promoted by influencers who owned them.
Chances, not items: sites accept game skins as stakes and pay out in skins, which can be turned into cash. The game itself is just the source of the chips.
Once cosmetics can be traded and resold, they behave like a currency, and unregulated currencies attract gambling operators. Counter-Strike's 2013 skins update created a real trading economy; by 2016 sites were taking bets in skins. The harm is outside the game, which makes it hard for parents to see. It is the biggest risk of the cosmetic-only model: items that are worth real money invite real gambling.
Never for children. The sites sit outside the game and outside the usual protections.
CS:GO's Arms Deal update (13 August 2013) introduced tradeable weapon skins through paid-key loot cases, and the resulting economy is widely credited with pushing the game's player count past every earlier Counter-Strike release. In 2016 YouTubers Trevor 'TmarTn' Martin and Tom 'Syndicate' Cassell promoted their own CSGO Lotto skin-gambling site to subscribers without disclosing they owned it; the FTC settled with them in September 2017, requiring future disclosure of such financial ties.
In September 2017 the FTC settled with YouTubers Trevor 'TmarTn' Martin and Tom 'Syndicate' Cassell, requiring them to disclose financial ties when promoting a skin-gambling site.
Historical prices and revenues are in US dollars at the time unless marked A$.
CS:GO's Arms Deal update (13 August 2013) introduced tradeable weapon skins via paid-key loot cases.
In 2016, YouTubers TmarTn and Syndicate promoted their own CSGO Lotto skin-gambling site without disclosing they owned it; the FTC settled with them in September 2017.
Find games without skin betting and third-party gambling sites
Covered in Video Games & Money: Ep 20 · F2p west.