In brief
The Department for Culture, Media & Sport (DCMS) has published a rapid evidence review of 'skins gambling', namely the use of virtual items obtained in online video games as stakes in gambling. The report will be of particular interest to game developers and publishers who produce games with in-game purchases and/or user-to-user trading functionality. The report exemplifies the recent trend of global regulators and governments moving closer to tightening the oversight of in-game economies and player-to-player marketplaces on the grounds of consumer protection.
The report can be summarised as follows:
- According to the review, over 50 skins gambling websites accessible from the UK operate illegally (without a licence), with the UK comprising 3.93% of global skins gambling traffic.
- Research reveals significant youth engagement patterns, with 11-14 year olds more than twice as likely to participate in skins gambling as 22-24 year olds. None of the audited skins gambling websites conducted meaningful age verification.
- The report's conclusion recommends the explicit classification of skins gambling "as a distinct form of gambling, ensuring it falls under appropriate regulatory oversight". However, the report does not define this proposed classification in detail and it is not clear how such a classification would differ from existing statutory definitions of gambling.
- Further key recommendations include more robust enforcement of compliance requirements, such as operating licences and the implementation of robust age verification systems, as well as the launch of national awareness campaigns to target parents and young people.
What is 'skins gambling?'
Video games have become one of the world's leading forms of mainstream entertainment in recent years, with global revenues exceeding those of traditional media like music and film. An increasingly significant source of revenue has been in-game monetisation, particularly the offering of cosmetic in-game "skins" for purchase. Skins are virtual items that alter a character's or weapon's appearance, for example, without necessarily affecting gameplay. Skins have become something of a form of self-expression and social currency among many players, especially given the rise of ancillary sectors like livestreaming and esports.
But with the development of skins and other in-game purchases, there has also come an unanticipated by-product: skins gambling. Using platforms outside the games themselves, players began to wager skins - which are often tradable between user accounts on game platforms - on the outcomes of esports matches or games of chance, with the potential to win rarer items, or convert them into fiat currency. What began as a community-driven practice has since rapidly scaled into a multi-billion-dollar industry.
There is no universal model for how skins gambling websites operate. Some sites facilitate a direct exchange of skins won for fiat currency following the conclusion of a bet, whereas others require users to transact with the site's proprietary virtual currency before winnings can be 'cashed out'. Some sites offer traditional games of chance and single-player casino activities, such as slots and roulette. Other sites act akin to a betting exchange, whereby users can transfer their skins to an escrow account operated by the skins gambling website, to be used as a stake in a head-to-head matchup within the underlying video game.
Principally, skins gambling sites facilitate some form of regulated activity – gaming, betting or a lottery, each defined under the Gambling Act 2005 - with the skin being used as a stake and/or a prize. The Gambling Commission is aware of the practice, having previously published a position paper on the issue and taken enforcement action against unlicensed operators. In addition, the Terms of Service and/or End User Licence Agreement of most popular online video games explicitly prohibit any unauthorised commercial practices involving skins and in-game currency, irrespective of whether the practice constitutes gambling. For example, most developers' and publishers' terms prohibit third-party sites from selling skins and in-game currencies in any form (other than by authorised storefronts and distribution partners, such as Sony's PlayStation and Microsoft's Xbox).
Background to the report
Despite restrictions imposed by regulators and developers/publishers, over 50 unlicensed skins gambling websites were identified in audits prior to the report's publication as being accessible from the UK. UK users constituted 3.93% of global skins gambling traffic from 6.9 million unique visits to skins gambling websites recorded globally for February 2025. DCMS' publication of "A rapid evidence review of skins gambling" is an indication that this practice, in the Government's view, has the potential to expose significant regulatory gaps as an emerging form of digital gambling that particularly targets young people. The report is underpinned by "a systematic audit of skins gambling websites, a systematic review of the academic literature, and an international scoping review of regulation" to develop "a layered and data-driven picture of the current skins gambling ecosystem".
Youth demographics
The report's research found that individuals aged 11-14 years were more than twice as likely to engage in skins gambling as those aged 22-24 years, with almost twice as many 11-14 year olds having taken part in skins betting (a subset of skins gambling) in the previous week (14%) than 22-24 year olds (7%).
The anonymity afforded by many skins gambling websites, lack of compliance with licensing requirements and the absence of age assurance at the point of use means that skins gambling sites are easily accessible to individuals - particularly children and young people - regardless of laws and regulations in specific jurisdictions. The audit revealed that none of the 20 websites reviewed conducted age verification checks at the point of use beyond relying on a Steam user's self-declared age (which stipulates a minimum age of 13 years), with 60% of sites relying exclusively on this self-declared age with no further checks. Presumably, this audit was undertaken before the Online Safety Act's obligations came into force for most user-to-user service providers as of 25 July 2025. Since then, Steam has required UK users to verify their age in order to access mature content and associated community hubs, by requiring users to have a valid credit card stored as a payment method on their account.
The report also suggests that, across the research literature, skins gambling is associated with traditional real-money gambling behaviours and elevated problem gambling severity. The majority of the report's supporting evidence also suggests that the relationship between skins gambling and problem gambling severity persists even when controlling for involvement in other forms of gambling – though much of the academic literature surrounding this issue is still nascent and open to debate.
Enforcement challenges and international regulatory fragmentation
In Great Britain, most commonplace forms of skins gambling are likely to meet the legal definition of gambling and therefore be subject to regulation by the Gambling Commission. However, many of these platforms operate without licences and often outside the jurisdictional reach of national regulators, and are therefore functioning illegally.
Additionally, the report states that the international regulatory landscape for skins gambling remains fragmented and inconsistent. In many jurisdictions, the laws that govern the provision of gambling services significantly pre-date the existence of modern game platforms that facilitate user-to-user trading, let alone the popularisation of skins in games. As a result, it is rare for gambling regulatory frameworks to govern or define skins gambling (or associated practices) expressly with bespoke, statutory provisions or guidance. The report identifies some notable exceptions, which include:
- Australia: where a federal parliamentary inquiry recommended classifying skins betting as gambling and called for a national awareness campaign;
- Denmark: which applies a functional definition of gambling based on value, chance, and the opportunity to win, using web crawlers to block unauthorised sites;
- Sweden: where regulatory enforcement actions have been taken against skins betting platforms operating without a licence; and
- France: which has highlighted the need to protect minors from gambling-like mechanics embedded in video games in statutory frameworks (such as Articles 40 and 41 of the "SREN Act", which adapted the requirements of the Digital Services Act, Digital Markets Act and Data Governance Act).
Finally, the report identifies design features that mirror traditional gambling platforms. Many games featured on skins gambling sites closely resemble those found on contemporary gambling platforms, incorporating several known gambling industry practices such as deposit bonuses, affiliate programmes, and promotional events with video game terminology and cultural references (the latter of which has been a subject of interest for the UK's advertiser regulator, in the context of its "strong appeal test").
Policy implications and recommendations
The key recommendations from this report call for legislative clarity and reform. The intention is that these measures will collectively achieve "robust consumer protection", "support for innovation", "clarity and consistency" and "flexible legislation".
The report recommends that the UK Government, alongside international regulatory bodies, recognises skins gambling "as a distinct form of gambling, ensuring it falls under appropriate regulatory oversight and enforcement". However, the report does not suggest what this classification could look like and how it would be different from the existing statutory definitions of gambling (gaming, betting, lotteries) that are set out in the Gambling Act 2005. Indeed, the report even expressly acknowledges that the Gambling Commission "does consider skins gambling as gambling due to the fact that skins can often be converted and withdrawn as currency…on skin sites or third party sites".
Separately, the report also recognises that "regulatory enforcement actions have been taken against skins betting platforms operating without a licence" and that more effective enforcement measures may address some of the report's findings. For example, the report calls on the Gambling Commission to curb illegal gambling activities by raising compliance rates for skins gambling sites in obtaining operating licences – which would in turn require such sites to comply with responsible gambling and social responsibility requirements under the Licence Conditions and Codes of Practice.
The report further recommends launching national awareness campaigns to educate parents and young people about the risks of unlicensed skins gambling sites, including recognising signs of problem gambling and available support resources.
Finally, the report calls for greater accountability for game developers and publishers concerning "the gambling-like systems embedded in their games" and related functionalities that allegedly enable illegal gambling, such as loot boxes, tradeable items, (misuse of) inventory management/marketplace APIs and third-party misuse of in-game items. However, again the report fails to appropriately consider how far existing consumer protection, gambling, and digital regulation frameworks already capture these practices, or what practical regulatory levers could realistically (and proportionally) be applied to developers and publishers in the UK. In focusing on high-level recommendations, the report stops short of engaging with more nuanced questions: whether bespoke statutory reform is genuinely needed in lieu of more enforcement; how globally consistent obligations on game developers and publishers could be designed; and how to balance the innovation of commercial practices regarding in-game economies with the prevention of gambling-related harm stemming from their misuse.
Conclusion
In attempting to clarify the application of traditional gambling frameworks to novel product offerings, there is a real risk of regulatory overreach, where non-gambling practices and analogues (for example, any consumer products or games with random rewards) could be inadvertently captured by reform. While the report recognises these boundary issues, it does not strongly emphasise the need for meaningful consultation with the games industry or deeply consider the practical risks associated with this approach. For both video games and gambling companies, this report underlines the importance of proactively engaging with policymakers. This approach will not only anticipate the implications of emerging proposals and the evidence base behind them, but also ensure that regulation evolves in a way that addresses genuine consumer harms and lack of clarity in policy and regulation in a proportionate manner - without stifling creative or commercial practices that sit firmly outside the regulatory sphere.
Our Interactive Entertainment team, with specialists in both the Betting and Gaming and Video Games sectors, are well placed to assist with any queries that you may have in connection with this development.