You might think it’s funny to treat Steve like a child and for example scold him for doing something wrong, but doing that is neither funny or appropriate. If you have real concerns about Steve’s behavior, please take him aside and mention it in private. If you feel you have a strong enough relationship and work in an overly friendly environment, great! But this kind of teasing can still leave room for hurt feelings.
How would you feel if Steve did that to you, even in the context of a fun gathering? It would feel very demeaning. It would probably make you feel about three feet tall, even in context. Did you mean it that way? Probably not. It would have been better to err on the side of caution in this instance.
You would never cut down your supervisor, so even if you are best friends with one of your coworkers, it is always best to extend a basic level of professionalism to every single person you work with from the janitor to the CEO.