Bitcoin could be the future of online gambling worldwide
For a few years now gambling companies based in the Caribbean, Central America and Kahnawake have been accepting bitcoin as payment, but it was effectively ignored by many other gambling interests worldwide as irrelevant since the companies taking bitcoin were doing so to entice American gamblers who had no other real method to get money in and out of their accounts. In the rest of the world non-American bettors were still using credit cards or e-wallets to fund their accounts as those methods were still available to them. As well many gambling analysts suggested that the lax regulations in many of these jurisdictions is the only reason bitcoin was allowed to be used in the first place, but other more well regarded jurisdictions like the U.K. would never allow it.
But after talking to many of those companies that decided to take bitcoin, like Heritage, 5Dimes and BetAnySports, it was clear that these books believed bitcoin was the future of betting, not only for Americans, but for worldwide gamblers. Aside from the ease of handling transactions compared to fiat currencies many of these bitcoin gambling companies told me that a lot of their clients outside of the U.S. were actually requesting it for reasons of anonymity.
But there have been a lot of concerns about bitcoin.
The big concern at the time was the fluctuation in the virtual currency, but representatives of the bitcoin sites told me it wasn't as big an issue as many believed. The price of bitcoin has more or less stabilized and while it would be down for a bit eventually it would go up and these companies were prepared to hedge or even hold on to the currency until such a time it did stabilize. And as one site operator told me they had less issues with bitcoin's fluctuations that with other currencies.
"We've seen far less fluctuation in bitcoin since we've been offering it than we have with the Canadian dollar, the Euro or even the British Pound and we accept all of those as payments. And because we don't have to deal with the usual fees associated with other currencies in the end we'll end up ahead even if does fluctuate by a few hundred dollars here and there."
And considering the huge drop in price of the Euro and British Pound after Brexit and the freefall of the Canadian dollar after oil prices plummeted, it appears he may be right. That said, bitcoin was still never going to be given complete legitimacy until a site overseas accepted the currency and that happened this week when it was revealed that NetBet decided to accept the currency.
What makes that decision so significant is that the company is licensed by the UK Gaming Commission (UKGC), which is hailed as the most legitimate and stringent regulator for online gambling. While the UKGC never really addressed virtual currencies in its original rules, they updated their license requirements in August of 2016 and put in the following under the category "Cash and cash equivalents, payment methods and services."
Licence condition 5.1.1 Cash and cash equivalents All operating licences except gaming machine technical and gambling software licences 1 Licensees, as part of their internal controls and financial accounting systems, must implement appropriate policies and procedures concerning the usage of cash and cash equivalents (eg bankers drafts, cheques and debit cards and digital currencies) by customers, designed to minimise the risk of crimes such as money laundering, to avoid the giving of illicit credit to customers and to provide assurance that gambling activities are being conducted in a manner which promotes the licensing objectives. 2 Licensees must ensure that such policies and procedures are implemented effectively, kept under review, and revised appropriately to ensure that they remain effective, and take into account any applicable learning or guidelines published by the Gambling Commission from time to time.
These rules come into effect on October 31 and they clearly indicate that the UKGC recognizes digital currencies as a legitimate form of payment, so much so that they want to ensure licensees have financial controls in place to prevent money laundering and also to make sure they pay the appropriate tax to the UK government.
It appears that Bitpay, a bitcoin service provider, contacted NetBet and worked out a way for NetBet to offer bitcoin payment options to their customers. Bitpay suggested that NetBet opted to offer bitcoin to its customers who were afraid of fraud or who wanted to be more anonymous with their payments. But NetBet is still a relatively small company and the real question is whether any of the larger UK gambling companies like Bet365, William Hill or Paddy Power-Betfair would be willing to allow bitcoin payments in the future.
I spoke with a colleague who works at one of the larger companies with a UKGC license and asked that exact question and he agreed to talk to me provided I didn't use his name or mention the company he worked for since he doesn't work in their payment department and more importantly because he isn't the official spokesperson for that company.
"We're watching all companies that take bitcoin closely and if it proves to be viable of course we'll consider it. We have some clients asking for the ability to use bitcoin as well as dogecoin because they don't want to use credit cards, PayPal or e-wallet solutions like Neteller or Click and Pay. The United States is well known for its efforts in blocking payments to companies over this way but there are other countries that are also trying to stop customers from playing by making it difficult for them to fund their accounts and some of thosecountries, unlike the United States, we still offer our services to. Naturally if we could provide them a solution to them that is anonymous, bypasses the banking system in their country yet still allows an audit trail that satisfies the UKGC, and which we can still make money on, of course we'd be interested. That said, we would need to ensure it's worth our while. Implementing payment solutions is always cumbersome and expensive so we'd want to make sure it's to our benefit and we would need to ensure that it is all legal and in no way violates our license with the UKGC or breaks any rules in the bettor's country in question."
As much as companies in the UK are watching NetBet and bitcoin's progress in gambling closely, one can almost guarantee that companies in the Caribbean, Kahnawake and Central America are probably watching closely as well. After all, if bitcoin proves to be a viable option there may be some operators that have cut off U.S. customers in the past that may want back in the game. The U.S. market is still a hot commodity and while fiat payments may have convinced a lot of these companies to get out of the U.S. in the past, if they can find a way to take action without the U.S. government even knowing, they may have to consider it. In fact, a newspaper article in this week's Antiguan newspaper The Daily Observer, suggests that Calvin Ayre, the former CEO of Bodog, has urged investors to follow his lead in making Antigua a hub for business output processing by using virtual currencies such as bitcoin. And as we know Antigua still hasn't given up hope of luring business from American gamblers.
The country's banking system has been deemed a rogue entity by U.S. banks as a result of the rules of the UIGEA which forces the banks to block all transactions that they think are gambling related as well as the Stanford bank scandal and as a result few banks in the U.S. will take any transactions from Antiguan banks. And the Antiguan government seems reluctant to use the award given to them by the WTO which includes $21 million per year in unlicensed downloads of copyright and trademarked products because they are afraid of retaliation by the United States, not to mention the award hardly covers their costs to date. But bitcoin offers a way for Antiguan companies to take action from U.S. players that completely avoids the U.S. and Antiguan banking systems and leaves no real way for the U.S. government to identify transactions that are gambling related. After all payments with bitcoin are simply digital codes that are transferred between people with a bitcoin account. And while the U.S. government could try to identify and block transactions it's probably not worth the money and time it would take to do so, considering the U.S. is already expanding gambling in their own country. And a legislator in the U.S. told me in the past that if that is the direction Antigua or any other country chooses to go there's really nothing the U.S. can do about it. Unlike Silk Road which the U.S. government felt had to be blocked since they were dealing drugs, guns and other contraband, gambling just doesn't have the same necessity attached to it. And unlike Silk Road which sent heroin, cocaine and illegal guns through the U.S. postal system, which is how they eventually were caught, there is no physical exchange of products in this case, which will make prosecution virtually impossible.
So this is an exciting time for U.S. gamblers. A lot of bettors including myself have been skeptical about the virtual currency and about its use in gambling, but we seem to be proven wrong. It seems bitcoin is here to stay and as a result of the anonymity and ease of funding associated with it, bitcoin could indeed be the future of gambling worldwide and particularly for Americans.