I got this from Magits, so thank him. Im just making this thread so more people see it.
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So here's how i managed to fix it. I've seen this posted before but would love to help my fellow Steam peoples.
1)Quit Steam
2) log out of spiral knights website (if you are logged in with steam)
3)go to http://www.spiralknights.com/play.xhtml - this will allow you to install the non steam (standalone) client. once this launches click the log in by facebook button in spiral knights.
4) this will bring you to a website where there's a log in with facebook button, but also a log in with steam button, Log in with steam user ID & pass. browser pops you back into SK without having steam open and you win!
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ENJOY
No need to download anything new, all you need is the "Play Spiral Knights" shortcut and the command line within