While cryptocurrencies are still a regulatory grey area in most jurisdictions, their incorporation into the igaming industry has been rapid and will likely continue at pace.
Crypto gambling operators are, as yet, kept largely at bay in the UK, but the U.S. is showing signs of greater tolerance towards crypto, even if the financial regulators are yet to fully get a grasp of it.
In Wyoming, for example, it is already legal to place wagers with cryptocurrencies as long as they can be converted to a cash-based currency. The state is particularly crypto-friendly, recently even looking into the possibility of state taxes being paid in crypto.
Meanwhile, the likes of the UK Financial Conduct Authority and the U.S. Securities and Exchange Commission are grappling with the ins and outs of such a volatile market. The UK’s Gambling Review does not see crypto as part of its remit, but the Treasury recently set out its intention to legislate to bring certain cryptoassets under financial promotion regulation later this year.
It is intended to ensure that relevant cryptoasset promotions are held to the same high standards that pertain in the financial services industry. It is a shame that the Gambling Review is not looking more closely at the relative risks of crypto-gambling, and whether it ought to be regulated – after all, we can assume it will occur in black and grey markets, nonetheless.
It is fair to say that fraud and money-laundering involving crypto, and other blockchain-based assets such as non-fungible tokens (NFTs), is widespread. OpenSea, a booming NFT platform, is beset with issues involving shady activity by wily users, who have found loopholes to buy NFTs way below market value while OpenSea itself has said that, “over 80% of the items created with [smart contract] were plagiarized works, fake collections, and spam”.
However, the idea that it is dangerously anonymous may not be entirely fair. The blockchain by virtue of its design tracks every transaction from source. It may not be attached to an individual name and address, but neither is cash.
Criminal activity can, in some cases, be tracked. One crypto tracker recently flagged the movement of $750m worth BTC, which the ledger revealed was misappropriated funds taken during a massive hack of the Bitfinex exchange in 2016.
The thief has not been unmasked yet, but many in the crypto community believe that it would be possible to identify them.
Crypto is yet another new frontier in the ever-expanding wild west of the internet. Igaming operators, of all businesses, should be familiar with the kinds of slurs and scepticism crypto is faced with now; they are after all frequently tarred with similar brushes.
But realistically, the igaming market can only expect to converge swiftly with blockchain and crypto. Video gaming is tipped to be dominated by the emerging play-to-earn model within five years, and games developers are already introducing NFT features, admittedly to varying degrees of success as some gamers are strongly against them.
It seems to me that igaming is already well ahead of this curve, and regulated crypto gambling is the next logical step for jurisdictions that have legalised online gambling and are promoting greater adoption of digital currencies.
The most recent example of convergence was with the mooted merger of Australian sports betting app PlayUp and crypto exchange FTX. While the acquisition talks ended under some controversy, it was announced last week that the exchange agreed to invest $35m in the operator at the end of last year.
The app is currently operational in Colorado and New Jersey for sports betting and has sports betting market access agreements in Indiana, Iowa, and Pennsylvania, with igaming in Iowa, New Jersey and Pennsylvania.
Meanwhile, U.S. officials in some states are so comfortable with cryptocurrency that they are asking for their salaries to be paid in it. The Mayor of New York Eric Adams has been paid in BTC, for example, while Miami Mayor Francis Suarez is also keen to be paid in BTC as he vies to make Miami a crypto hub.
In Arizona, state senator Wendy Rogers is behind three bills designed to encourage crypto adoption and compliance, including enabling taxes to be paid in crypto. With all this in mind, it doesn’t seem a stretch to imagine that gambling with crypto will become increasingly commonplace.
And if there was ever a sub-set of consumers that would take the peaks and troughs of extreme volatility with a pinch of salt, it’s gamblers.
