Yeah I never got the impression that Dota 2 Lounge was a shady million dollar/ fraud site but then again I didn't even know of the CS:GO/ youtube shenanigans until now.
Yeah that's how they hold your skins. They get you to turn trade your skins into the website (a steam account). They then gamble and if you win you get more skins on that account until you take them out. Or they trade from that account to the account that won.
There isn't a really a TF2 gambling scene and yet there are TF2 items worth hundreds and thousands of dollars. The market valve of CSGO skins isn't going to go down, they weren't valuable because of the gambling, people were gambling with them because they were valuable.
Also I doubt this will put any sort of dent into the CSGO player base, there was probably only a very tiny percentage of CSGO players that did any sort of gambling.
Let it die and bury it 100 feet deep then. If people actually weren't watching the game because it's interesting to watch, If people weren't playing the game because it was fun to play, then it should die like any other game in the market that doesn't succeed in those categories. That being said, the game itself must be fun to play and fun to watch on some level otherwise, those items wouldn't hold any value whatsoever on their own. Because who gives a shit about items in a game no one likes?