Chinese betting website VPGame was raided by police in January under the suspicion of illegal gambling activities, according to multiple sources. More than 20 board members have been arrested or held for questioning as the police are investigating whether VPGame’s business is in violation of China’s very strict anti-gambling laws. The company’s bank accounts have also been frozen and numerous employees of VPGame’s various verticals are still waiting for their salaries.

What is VPGame and how does it work?

VPGame, which is owned and operated by Chinese esports club LGD Gaming, allows users to bet on the outcome of esports games by using virtual currency. In the early years since its establishment in 2014, VPGame worked with in-game items or skins, which are an attractive trading commodity especially in games like Dota 2 and CS:GO. With no real currency involved, VPGame’s business was considered legal by Chinese law. 

Only a couple of years later, however, as item betting became more and more popular worldwide — and therefore unethically abused — a number of entities, including government ones, took a stand against the practice and worked towards its abolishing. In 2016, Valve sent cease and desist letters to over 20 websites involved in CS:GO skin gambling. Twitch also took action that year, and started banning the promotion of CS:GO skin gambling and the personalities involved in it, the most prominent of which being James “PhantomL0rd” Varga.

With Valve tightening the grip around skin and item gambling, VPGame’s business faced a serious hindrance. And in 2020, it became even harder when Valve imposed further restrictions on item trading. An item received from a transaction has to stay in the person’s inventory for seven days. This means it would take two weeks between Person A depositing the item to VPGame’s inventory and Person B potentially winning it on a bet. 

In addition, since Item prices are notoriously unstable, a 14-day transaction period can seriously change the value of the bet. They become a very unreliable, fluctuating currency which gamblers would prefer to avoid. 

Balancing on the edge of legal: Why VPGame is under investigation

Gamblers in China who want to make a real profit are in a difficult position. On one hand, even while item betting was less persecuted by Valve and other authorities, its volatility and the withdrawal time limits made it undesirable. On the other hand, the platforms that are attractive to gamblers — those where you can bet real money and be paid out the very same day — are illegal in China. With the Chinese government cracking down even more on internet gambling, those real gamblers now had nowhere to go.

This is why VPGame changed their business to allow betting with virtual points (VPGame calls them P-Coins), which by itself is perfectly fine in China. Where points betting is in danger of crossing the thin line between legal and illegal, however, is when these virtual points can be exchanged for real currency, which is what VPGame is being investigated for. In short, the police suspect that the platform is involved in one or both of:

• Direct participation in repurchasing points from users — creating an illegal gambling chain in the process — or aiding such points merchants in doing their business
• Providing tools that make points merchants’ job easier. In VPGame’s case, that would be the site’s system that allows users to gift each other points or items — a system that makes monetizing points possible, and therefore illegal

After the raid: Consequences and actions

According to sources, VPGame is still under investigation, but the control of information around the story has been very tight. Little is known not just to foreign, but to Chinese media as well, as LGD Gaming/VPGame and the police are working to keep developments on the down-low. 

VPGame’s bank accounts have also been frozen, which has made pay-out of salaries to some company employees impossible for the time being. The reporters for VPEsports — VPGame’s western esports coverage vertical — are owed two months of salaries as a result, multiple sources confirmed to Inven. The websites officially closed on Feb. 26 in the wake of the police investigation.  

While there have been reports that LGD Gaming owner and CEO Pan “RuRu” Jie being arrested on suspicion of illegal activities, Inven has not been able to confirm this information.