Players are turning to bitcoin and cryptocurrencies for gambling online

As Bitcoin hovers near $100,000 USD in value, crypto-based sportsbooks and casinos have been thriving. In fact, Nigel Eccles and Rob Jones, two of the founders of FanDuel have started a new crypto only book called BetHog, which is licensed on the Caribbean island of Curacao. BetHog will only accept wagers from places where there are no set regulatory restrictions, so bettors in the U.S., Canada or even the UK to can not currently play at BetHog, but the owners of the company have stated that if and when the time is right they will move into other markets, so long as those markets don’t create regulations that will conflict with their product and business model. I was curious why crypto sportsbooks and casinos are becoming so popular, aside from the soaring price of crypto, and what advantage if any there is to betting with crypto based gambling companies. So I spoke with a few crypto-only gambling sites and each pointed out numerous reasons why cryptocurrency will be a major factor going forward.

Quick and easy payments

Most people have little issue getting money to legal and regulated gambling companies but trying to send fiat to unregulated companies is far more complicated. Credit cards, money transfers and even e-wallets are often blocked by banks for gambling, not just for U.S. citizens, but also in Canada and parts of Europe. And even in states where gambling is legal, Citi and Bank of America will not process credit card payments for any gambling transactions, saying the risk of doing so is too high, citing former lawsuits. With cryptocurrency, however, payments are seamless, transparent and irreversible.

A player simply has to send a payment to the crypto wallet listed on the gambling site and it is processed almost immediately. Similarly, to receive a withdrawal, the bettor indicates how much they want to withdraw and the crypto is sent back to them, often within minutes. It is important to note that some there is a difference between a traditional book that accepts cryptocurrency for payments such as BetOnline or Bet Any Sports but still deals in fiat, and a crypto only company like NitroBetting that will not deal with fiat currency at all.

With BetOnline, for example, any crypto payment sent in as a deposit is converted to the going rate of the cryptocurrency on a site like Coinbase into USD to play on the site and any withdrawals are similarly processed back at the going rate and sent to the player in the cryptocurrency they deposited with. Crypto-only sites do not deal with fiat at all. Consequently all bets are made with the cryptocurrency they deposited with, so if you bet say 0.01 BTC on a golfer to win at 20/1 odds they will receive back 0.2 BTC. The value of the currency vs. fiat at the time of deposit or withdrawal is irrelevant. And any withdrawals are in crypto, so if a player withdraws 1 BTC that is what will go in their BTC wallet, even if they deposited when 1 BTC was valued at $80,000 and withdraws when its value is $100,000. Some slot games will only allow betting with a safe cryptocurrency like Tether, but it’s still not played with a fiat currency.

Anonymity and less risk of identity theft

All gambling companies will still ask for personal information such as name, phone/mobile number, email address, etc., so there’s no such thing as complete anonymity with crypto books or casinos, but they will never ask for bank account information, credit card information, social security numbers or any information that can leave one open to identity theft. All crypto transactions are recorded on the blockchain making them transparent and irreversible and they are immutable meaning they cannot be tampered with, an issue that arose with some shady operations in the early days of online gambling. The only identifying characteristic is the blockchain account number, amount and bet information although as stated, while everyone on the blockchain can see the transaction, they can’t put a name or other identifying characteristics to the transaction and in this day and age that is paramount for many people.

Taxes

Most countries do not require bettors to pay taxes on gambling winnings, but some jurisdictions do, the United States being one of those. All bettors from sites like BetMGM, FanDuel, etc., will be required to submit SSN information so the betting companies can send a W2-G or similar form to both the bettor and IRS or tax organization to show gains or losses from gambling. And because the tax organizations get the forms, they know if a person has positive gambling income. The risk isn’t the same when payments are made by crypto, since tax organizations don’t have the ability to identify payments on the blockchain since there is no name attached to the transaction. So, most crypto-only companies feel no obligation to cooperate with tax authorities and will most often just tell bettors that it is up to them to declare gambling income, should they decide to. Companies can provide profit and loss reports upon request. It should be noted that if any companies like BetMGM, PokerStars or DraftKings decide to start accepting cryptocurrency as payments, they will almost certainly send information to tax authorities regardless of what payments were used to make the bets.

Transparency to ensure fairness

With many gambling companies there’s always some concern whether a game is fair, particularly when it comes to slots that seem to pay out far less than advertised, or poker games where it appears there could be some collusion. There is also some concern that a sportsbook may not pay winning bets and will face no consequence for not doing so. While the Return to Player (RTP) listed on slots is said to be accurate based on a random million spins or however it is defined, it can’t be verified. With crypto bets players can see for themselves whether the games are actually producing the RTP listed since the bet and return on each spin can be viewed by everyone on the blockchain. And if the RTP isn't as advertised or if a sportsbook decides not to pay the correct amount for a wager, bettors can call the crypto sportsbook out on it and if they face enough complaints, the sportsbook will lose credibility and customers. Also, if the sportsbook disputes a claim that the winnings aren’t paid properly, the proof is right there on the blockchain since the amount, type of bet, odds and all other information is clearly available for anyone to see on the ledger. So effectively, experts using data from the blockchain become the judge and jury.

Investment opportunity

There was a Simpsons episode where Homer decided to keep Lisa’s college fund in a poker room. The ridiculous logic was that it’s safer than a bank and the money would always be there, whereas in a bank, the balance would dwindle due to bank fees. While that may seem silly, there are people who convert fiat into cryptocurrency and deposit that at crypto sportsbooks because it has the chance to grow and they won’t be tempted to use it for impulsive purchases. If the money is in the bank in USD it will be spent, but if its sitting as crypto at the casino it’s safe and always available to be cashed out when the value reaches an amount the player wants to sell at.

In fact, one of the first traditional gambling companies to accept Bitcoin as payment was Switch Poker and they tell the story that when one player won they asked Switch Poker to pay him in BTC rather than U.S. dollars, even though that’s what he used to deposit, because he felt BTC would grow in value, whereas USD was what it was. Rumor had it he withdrew his winnings in BTC in 2014 when it was trading at about $200 and sold the BTC in 2016 when it reached $2,000 netting a 1,000% profit. Had he withdrawn it in U.S. dollars, as most bettors do, he would not have recognized the gain and probably would have just spent the money elsewhere. And there are some experts who are convinced that BTC will reach as high as $600,000 by the end of Trump’s second term in 2028.

One crypto enthusiast, Cathy Wood, who is often cited as an expert, believes that as companies start investing in BTC, that one BTC will reach as high as $3.8 million each in 2030. Even if the worst case scenario she paints is true, she believes the value will be close to 8 times what it is today which will far outpace the present value of fiat. And other currencies including DOGE ($DOGE) and Cardano ($ADA), are expected to grow even faster.

Cardano which is currently at just over $1 each and was trading as low as 30 cents earlier this year is projected by some Crypto experts to reach $100 each by 2028 since its founder Charles Hoskinson is expected to have a pivotal role in Trump’s push to be “the crypto president” and Hoskinson believes Ethereum and its offshoots like Cardano and Ripple present a better model than Bitcoin due to the ability to create smart contracts, something that goes way beyond this article. If this proves true at all, then trading fiat for crypto and the possibility to multiply it from betting is indeed a great investment opportunity.

Lower fees that allow for bettor bonuses

There are small fees for crypto processing since any payments must go through traders who take a very small commission, but bank fees are very high for credit card deposits, some e-wallet transactions and especially money transfer services like Western Union. Keeping costs down is pivotal for gambling companies, since margins are thin, and most will try and pass on savings from payment processing to customers in terms of bonuses, incentives and in some cases even rebates on losses. One of the crypto-only company managers who spoke to me said he worked with a traditional online casino site before and bonuses in his new company were triple what the traditional book could offer, due to the lower fees.

No reliance on fiat value fluctuations

One of the biggest headaches that gambling companies who cater to bettors worldwide have is processing multiple fiat currencies. Regulated books and casinos operating in the United States process all transactions in U.S. dollars and all Ontario regulated gambling companies must process all transactions in Canadian dollars. But books that operate worldwide like William Hill, Bet365, PokerStars, etc., that have operations everywhere, accept payments in U.S. dollars, Canadian dollars, British Pounds, Euros, etc., but they generally use the U.S. dollar or GBP as the base, with USD the most common base. So if a bettor deposits say 100 Euros when it’s worth $1.05 vs. the U.S. dollar and places a bet for that amount on a team to win at 10/1 and that team indeed wins later in the year when the Euro is now worth $1.20 vs. the U.S. dollar, the site doesn’t lose 1,000 Euros or $1,005 U.S. dollars to the bettor as it has budgeted for in its line setting. Instead it loses $1,200 U.S. dollars to the bettor and if there are enough of these types of losses it could impact the sportsbook greatly. With crypto only books, however, there is never this concern since, for the sportsbooks, the value of the cryptocurrency today vs. 5 months ago is irrelevant, any more than for a person in Germany who is paid in Euros and buys everything in Euros - the value of a Euro today vs. 5 months ago vs. the U.S. dollar is irrelevant to them.

Sense of Community

One of the last things that one crypto sportsbook told me is that there is more of a sense of community with their site than with traditional sportsbooks. I asked what he meant by that and he said that with traditional casinos and sportsbooks there’s an us vs. them mentality. Bettors view the gambling companies as their enemy who is trying to take advantage, while many traditional gambling companies view bettors as necessary, but also people who are looking to take advantage of every situation by past posting, complaining about the fairness of the games, looking for bonuses that allows them to bet without risking anything etc. But with crypto companies, because every transaction is on the blockchain there is none of the us vs. them mentality. Instead, it’s treated more like a bet between friends where you want to win, but if you lose there is no animosity, no fear of not being paid and no belief that your friend is ripping you off. In fact, some crypto sites even have forums for bettors to talk amongst themselves and discuss good betting opportunities, big wins that can be viewed on the blockchain and more, that would never occur with traditional betting companies. The end result is more of a sense of community.

So, crypto seems to definitely be the future of the industry and with talk that owning even one Bitcoin can make you rich in 5 years there is an anxiousness by many to be involved. Whether sites like BetHog, Nitrobetting or Stake.US can ever really compete with FanDuel or DraftKings is doubtful, but they really don’t have to. Traditional gambling sites will always be the go to for most, but for those who don’t trust traditional companies or are looking for an investment opportunity, it’s nice to know there is an option for betting where every bet can be viewed anonymously by others on the blockchain, so they know their bets are transparent and immutable.

Read insights from Hartley Henderson every week here at OSGA and check out Hartley's RUMOR MILL!