Valve Corporation announced it will contest a lawsuit filed by New York Attorney General Letitia James that accuses the gaming company of operating illegal gambling through in-game loot boxes.

The lawsuit, filed last month, alleges that Valve promotes illegal gambling activities through loot boxes featured in its popular games Counter-Strike 2, Dota 2, and Team Fortress 2. Loot boxes are virtual containers that players can purchase or earn, containing randomized in-game items of varying rarity and value.

Valve communicated its position directly to affected players through an email sent to Counter-Strike 2, Dota 2, and Team Fortress 2 users in New York. In the message, the company expressed disappointment with the legal action and confirmed its intention to fight the charges rather than settle.

According to Valve's legal team, the company believes settling the case would be easier but would establish a problematic legal precedent. The gaming company appears to be taking a principled stance on the matter, suggesting the lawsuit could have broader implications for the gaming industry's use of randomized reward systems.

The case represents part of a growing legal and regulatory scrutiny of loot box mechanics in video games, with various jurisdictions worldwide examining whether such systems constitute forms of gambling that should be subject to additional oversight and regulation.