While Nevada is known for being on the cutting edge of technology when it comes to the gaming industry, a leader in innovation and how it translates to customer experience, what does the future hold for the use of cryptocurrency on the Las Vegas Strip?
The topic has been kicked around by experts during recent casino industry gatherings in Las Vegas.
“The reality is most people are still watching and waiting,” said Ryan Rubio, a principal at Zero Labs. “When I was working on the Strip at MGM and Caesars, we were interested in two categories: the intact payment structure and maybe a more speculative world around NFTs and digital assets. The reality is that operational challenges and regulatory uncertainty remain much higher than the technical complexity.”
Rubio said operators in Las Vegas continue to experiment and educate themselves, but as yet, nothing major has been implemented in a public-facing way on the Strip or elsewhere in the city.
There are opportunities going forward, according to Brian Carson, chief accounting officer for CleanSpark. He said more people are placing their assets in digital currency, such as Bitcoin, and described it as being secure and verifiable for gaming and other transactions. He maintains that artificial intelligence will aid in the evolution of crypto in gaming.
There continue to be challenges, however, said Bill Kaiser, a tax partner with RubinBrown. He noted the biggest misconception about digital currency is that it’s just like using a credit card or cash. But digital assets are property rather than cash and every transaction is taxable.
“From an operator perspective, when you’re receiving crypto, what are you doing with it?” Kaiser said. “Are the players playing in crypto or fiat currency? If they’re playing in fiat, where’s the exchange? Is the operator accepting the crypto and changing it out for fiat? Then are they holding the crypto or exchanging it themselves? A lot of questions need to be answered. Using digital assets in daily operations will increase tax and reporting complexities compared to cash or cards, but I think it will happen at some point.”
John Lasbusky, deputy chief of the technology division for the Nevada Gaming Control Board, said digital assets are low on the list when it comes to regulatory authority, because most of the concepts reviewed in the last decade can be done under the existing regulatory structure.
“You might have seen quite a few products out there in the field,” Lasbusky said. “For example, Station Casinos launched an NFT product a few years back that functioned like video game skins. They were cosmetic enhancements that you could use to make your game-play experience a little more engaging. We’ve seen concepts where people are looking to do conversion of fiat on behalf of a licensee to make it easier for players to bring money into the casino. Some will partner with a third-party exchange to do deposits at the cage. A cashless-wagering kiosk product on the market right now lets you scan in your wallet, do a conversion with a third-party exchange, and receive cash out of the kiosk as you would an ATM.”
As for future regulations, Lasbusky said regulators would look to collaborate with the industry, given the pace of change in the space. It doesn’t make sense to unilaterally prescribe something that may not fit the state-of-art when someone looks to take a product to market, he added.
“The question we look at is can this actually work on a broader scale within Nevada’s regulatory framework?” said Ryan Whitman, a partner at RubinBrown. “Nevada is not just another market. It’s one of the most highly regulated gaming jurisdictions in the world. The people look to us as a standard setter and if we miss it, everybody knows about it.”
Lasbusky said the regulatory concerns about digital are the same as for other funding sources: anti-money laundering and know-your-customer. The good news is there are innovative solutions to deal with that concern with transaction monitoring and know-your-customer technology used for crypto.
“One of the biggest general risks with crypto is anonymity,” Lasbusky said. “I don’t think you have that with the existing regulatory structure here in Nevada. If you open up an account with a casino, we’re going to verify your identity. Once you do that, we put a name to your wallet, know exactly who you are, and start to unwind that wallet using technology. We can see when every single stack in that wallet was minted, when you got it, and trace everywhere it’s been in between. You can do that in an automated fashion, whether it uses proceeds from a ransomware intrusion, a romance scam, or straight-up theft. Software allows you to monitor and detect it and casinos can get an alert knowing that the money is dirty and will notify the authorities.”
Lasbusky said that’s not the case when it comes to cash or foreign bank accounts.
Whitman agreed, saying the nature of the blockchain is the verification of Bitcoin and the tools to verify that it’s legitimate through tracing. “The myth about the unknown source becomes broken,” Whitman said.
While the path for gaming operators in Nevada remains narrow, it’s more robust than it was in 2021, Rubio said. He recalls executives at MGM not being excited about having a wallet, and that it’s important to make crypto perform like something that’s familiar to the organization. That enhances its chances of success.
“That means today focusing on some of these settlement transactions and payment infrastructure versus experimenting with something like NFT-based ticketing, which has a whole bunch of not just new user experience elements to it. It also invites new Treasury and regulatory questions and puts you head-to-head with Ticketmaster, which is never a fun thing to do. Yes, there’s a path, but the more you can keep the solution in a shape that feels familiar that works inside where we are at today that’s more robust than four to five years ago, the more likely you are to be successful.”
Carson, who cited the ongoing debate in Congress about the Clarity Act dealing with cryptocurrency regulation, said the opportunity for the gaming industry is to use custodians, where operators aren’t accepting Bitcoin directly, but custodians lend off that.
Rubio said in 2021, crypto users were desperate to use their wealth for gaming purposes as a double-gaming aspect, but while infrastructure has built up, there’s not as much interest on the consumer end. However, he expects consumers to gain more interest in the next two to five years.
Since crypto is a new source of wealth, especially for high-end gaming customers, there’s a lot of the work that’s ongoing to help casino marketing teams understand how to value that, Rubio said. “I think there’s an opportunity to make important incremental improvements in some of these core business functions, especially at the high end, while we wait for the generalized digital assets to mature a little more.”
Rubio said there’s simplicity in crypto being turned into cash before it hits the cage, slot machine, or table, but to go beyond that raises challenges for operators on identifying the return on investment.
The Nevada Gaming Control Board doesn’t accept crypto for tax payments, Lasbusky said. If some operator were a crypto casino where it took payments and paid in crypto, the question would come up: How could regulators even calculate a fair tax rate? If someone took wagers at the beginning of the month and Bitcoin has fallen, how would you handle payments?
“I’m sure there will be some enterprising licensees out there that want to write the depreciation off and deduct it from their gaming revenue,” Lasbusky said. “I think there is more than one way to do it. Do you take wagers in fiat and pay in crypto or vice versa or give people the option of getting crypto as payment as you might see with a jackpots where you can take merchandise in lieu of cash payment? That’s the hardest problem for us, because that’s where you’re really moving closer to within that regulatory umbrella than what we’ve traditionally seen – where we’re not regulating the products themselves because they happen outside of the areas where we start our accounting process.”
