Over the last decade, the use of cryptocurrency in gambling has risen considerably. For the main part, this is because it has been publicised as having many player-centric advantages over traditional fiat gambling. The Gambling Commission has, however, made clear its position on the use of digital and virtual currencies when exchanged for real money prizes, cash, or other items of worth, in that, it is gambling and, therefore, sites offering the service to UK players require a Gambling Commission licence, which presents considerable challenges for crypto casinos.
Growth and projection of crypto gambling globally
It’s challenging to produce official crypto casino data, as, for the most part, these sites operate offshore and avoid financial reporting. However, we do know that the popularity of crypto gambling has grown hugely, and “experts predict crypto gambling will reach the value of $93 billion by the end of 2023”. It is comparable with the global gaming industry, which is expected to be worth nearly $280 billion in 2023.
Other stakeholder research has estimated that there were over 304 crypto casinos operating in 2021, with 80% using Know Your Customer (KYC – these include age, name, and address verification/cross reference) checks and over 77% offering provably fair games (crypto games where the outcome can be verified using a unique hash).
Moreover, earlier data that tracked 60 crypto sites in 2017 found that 337 bets per second were wagering and three BTC per minute. Moreover, the same research found that since 2014, “roughly 3.7 million BTC has been wagered, equating to $4.5 billion USD at the time of writing.”
Official statistics might be lacking, but the crypto gambling market is booming. What’s so attractive about cryptocurrency gambling? Well, it’s touted as the ultimate gamble, as the currency can fluctuate as you play, and it has multiple other benefits over traditional currencies, like added security, privacy, and speed features.
Benefits of cryptocurrency gambling
- Speed: Cryptocurrencies offer lightning-fast deposits and withdrawals that are processed and received within 30 minutes. Research has shown that players care about the speed of withdrawals, with high percentages happy to switch gambling sites if withdrawals take over 48 hours.
- Privacy: Crypto casinos do not require your bank data or payment details; instead, to make a payment, you’ll simply scan the crypto key and process your casino deposits or withdrawal without giving away your identity.
- No fees: As crypto cuts out the middleman, it’s fee-free, with the network maintained by users. These low costs apply to operators also, who can redistribute this, offering better player bonuses.
- Tech-forward: Crypto casinos tend to be some of the best gambling sites as they are tech-forward, employing new features, games and bonus ideas regularly.
There are multiple reasons players seek crypto casinos; the main ones are privacy and speed. However, as the popularity of crypto casinos grows, they gain more public attention, and as crypto casinos are considered some of the best online casinos to play with and typically offer over-the-average new player bonus deals, many players, unaware of legal/offshore gambling sites, reach these sites while searching for better bonuses.
There are other, better ways to find high-quality casino bonuses, like prioritising finding a low wagering bonus. As well as getting a better deal, low wagering requirement casinos ensure player safety by stopping the practice of gambling excessive amounts to meet high wagering requirements, and they are offered by UK-licensed casinos that guarantee fair gameplay, security and payouts.
The Gambling Commission’s position
It is free to pay, play and bet virtual currencies, but when the virtual currencies are accompanied by a financial exchange in the form of payouts, redemptions, or withdrawals – as with crypto casinos – the Gambling Commission considers it gambling, which, if offered without a licence is illegal in the UK.
“In our view, the ability to convert any in-game items into cash, or to trade them (for other items of value) means they attain a real world value and become articles of money or money’s worth. Where facilities for gambling are offered using such items a licence is required in exactly the same manner as would be expected in circumstances where somebody uses or receives casino chips as a method of payment for gambling which can later be exchanged for cash.”
“If you want to accept digital currency as a means of payment (either directly or through a payment processor which accepts digital currencies) you must satisfy yourself and us that you can meet your obligations in relation to anti-money laundering and that you are acting in a socially responsible way.”
The biggest challenge for crypto casinos is requiring a Great Britain Gambling Commission licence to operate legally in the territory and accept players. Despite some sites applying, due to the nature of cryptocurrency, the same elements presented as player-centred benefits are the biggest challenges in fulfilling licensing regulations.
Challenges caused by the rise in crypto gambling
Cryptocurrency is a challenger currency designed to unsettle the status quo and current money regulations. However, when it comes to gambling, these regulations are designed and implemented to ensure gambling remains crime-free and fair.
The main challenge for crypto casinos is that cryptocurrency wasn’t designed to be regulated. Thus, bringing it inside a formal regulatory regime goes against its design and will nullify the anonymity benefits but still deliver speed and lower fees.
The rise of crypto gambling increases the pressure on crypto casinos to regulate as their growing presence and popularity remove capital from the formal economy. Becoming a regulated online casino poses multiple issues for crypto casinos, mainly in meeting regulatory standards.
Casinos that receive UKGC licenses adhere to anti-money laundering rules (AML), conducting source of funds (SOF), fraud and responsible gambling checks on player accounts. They provide complete financial transparency to regulators and tax bodies regarding revenue and proof that the necessary checks have been conducted.
One of cryptocurrency’s purposes is trading anonymously, avoiding the need to exchange information regarding transactions, tax or ID. If crypto casinos are to ask players for this information and record transactions, it will be a shake-up to the crypto ecosystem that they will have to adjust for from a platform and tech perspective.
Becoming financially transparent is just the start of the laborious process of applying for/receiving a Gambling Commission licence. Regulated casinos in Great Britain also follow transparency rules for payouts and bonus terms; ensure game fairness, using a certified testing lab, like eCOGRA and iTech Labs; audit their platform and product regularly; offer a formal disputes procedure with ADR; advertise according to the law; encourage, inform and support consumers regarding responsible gambling, offering self-management tools; and lastly, register for and pay business tax in the UK (while crypto may not be considered legal tender, it’s an asset, crypto casinos in the UK still have the same tax obligations as regular online gambling sites).
The second biggest challenge the rise in crypto gambling’s popularity has created is that on top of the regulatory concerns, lawmakers have become more aware of the dangers of many people trading crypto without protections.
Most cryptocurrencies (not stable coins) are susceptible to market volatility. With more people trading it and using it as a commodity, the price of different cryptos can swing widely, increasing or decreasing – it’s how people have got rich trading crypto but also lost everything.
As citizens in many countries have lost money due to the market volatility (and the fact they’re not experienced traders), lawmakers in many countries have begun arguing that it needs to be regulated as a financial asset, making anti-money laundering rules applicable and protections for vulnerable persons – the new EU rules are a case in point, more below.
Moving towards a regulated crypto gambling market
With more people interested in crypto gambling than ever, the market needs to be brought into the formal licensing regime, chiefly because growing popularity means more players engaging in offshore, unprotected gambling. Cryptocurrency regulations are still evolving, so there needs to be a collaboration between industry and regulators that recognises a sector of players may be seeking greater anonymity.
The EU recently created rules for crypto assets, how transactions should be treated, and when tracking should be used (transactions over €1,000) that can provide a roadmap for lawmakers elsewhere. Additionally, as research has indicated, a high percentage of crypto sites conduct KYC checks and provide provably fair games, operators are on side for providing more regulated, fair, and secure crypto gambling. While this won’t stop offshore crypto gambling, it will offer a legitimate path to licensing, which, as noted by the Gambling Commission, is in demand.
Please play responsibly. For more information and advice visit https://www.begambleaware.org