Cryptocurrency decline isn’t a concern for most gambling companies

Hartley examines the effects of the huge fluctuation in cyrptocurrency prices on online gambling companies.

What effect will the massive decline in the value of cryptocurrencies have on gambling companies?

While Bitcoin gambling companies have existed since the cryptocurrency was created, it was only in the last few years that the product has really expanded. Companies like Bitstarz, FortuneJack, Nitrogen Sports and Betcoin allow players to play with bitcoins and many companies including the prior four mentioned now allow betting with Ethereum, Litecoin and Bitcoin Cash.  Moreover, traditional betting companies like Ignition Casino, Pinnacle Sports, 5Dimes, BetOnline and Bookmaker accept cryptocurrency as payment as well. The big difference between the mainstream betting sites and the crypto only sites is that the traditional sites convert the cryptocurrency at the current rate into a fiat currency (usually U.S. Dollars or Euros) and any withdrawals are made back to the player’s wallet in the cryptocurrency they deposited with, at the current rate of exchange.

bitcoin for gambling

Using cryptocurrency at a gambling site made perfect sense to me when the cryptocurrency was fairly stable, when mining fees were low and when it appeared that cryptocurrency was the way of the future. But the last two years has seen all cryptocurrencies go on a roller coaster ride for various reasons and one is uncertain where it will land. Some are suggesting Bitcoin could return to the days when it was virtually worthless while others are still expecting them to sell for a million dollars each. BTC has dropped by over 60% in the last 8 months and Ethereum is trading at less than $300, when only a few months ago it was trading at over $1,000 USD per ETH. And of course, all cryptocurrencies have followed Bitcoin’s slide. The question that was asked of me was what this massive decline in the price means to companies that accept Bitcoin and how it will impact their businesses. I spoke to John at one of the crypto only sites who said he’d prefer to keep the company name out of the article since the owner who usually provides media comments is on vacation, although he was happy to give his personal thoughts. I also spoke to Mike, the sportsbook manager at Heritage Sports and I spoke to a representative at a mainstream sportsbook who asked that neither he nor the company be named, the reasons which will be apparent later on.

Here were the exact questions I asked John from the crypto-only casino.

Has the roller coaster ride of crypto impacted your company in terms of amount being played and if not, why does the trading price vs. fiat have no impact?

"It has had virtually no effect. We did notice that when Bitcoin was at its height the amount per bet was a bit lower, but all-in-all there has been no change in the relative amounts bet. Think of it in terms of a regular casino. If you are an American wanting to play $500 USD for the day, you will obviously adjust that to say £350 if you are in the UK or to $600 CAD if you are in Canada and when you win you deposit the winnings in your bank account at the current exchange rate for USD. It’s really no different with crypto except everything is done in BTC, BCH, ETH, LTC or XMR. Because evereything is done in fiat there is no risk to us or the bettor in terms of price fluctuations. All winning or losing bets are immediately posted on the ledger and wins are immediately credited to the bettor’s crypto wallet. What the bettor does with their crypto wallet after that point is their decision."

You obviously would pay overhead and salaries with fiat currency, so again does the price of Bitcoin have any impact in that way?

"We don’t have a lot of staff, but the ones we do are paid with BCH to their wallets at the amount that was agreed to in our local currency. It was terms of employment they were ok with. Most exchange their BCH for fiat on Bitpay immediately although some have held BCH in their wallets in hopes of better returns. Naturally those who did so when BCH was trading at $13,000 are happy and those who did so when BCH was $2,000 aren’t. But that’s their decision, they are all adults. As for overhead we do have a fiat account for companies that won’t take BCH. We sell crypto on the day we make the payments for the exact amount owed so there is virtually no exchange cost to us."

bitcoin fluctuationYou offer games from other companies like Mega Moolah. I'm not sure if that can be wagered on using Bitcoin, but if it can, how are the bets adjusted to account for the changing price of Bitcoin?

“Most of our games were designed on the blockchain and are provably fair and those games are the preference for the majority of our customers. But for games that are run by other companies, eg. Microgaming, they are played in USD. We emphasize that in our rules, but we also provide an area to convert crypto to USD at the current rate on Bitpay in order to play those machines and any winnings are credited back to their crypto wallets. Thus far it hasn’t caused any concern."

Carl also stated he hasn’t seen any players get spooked by the big decline and he believes many may now come aboard since they are accepting more crypto options where bettors won’t wager in fractions of a coin which he admits has caused some confusion with novice players using Bitcoin.

My question to Mike at Heritage Sports was as follows:

You told me once before that you confirm deposits in crypto, convert it to USD and withdrawals are made back in crypto at the current market rate, but you don't hold the crypto. So can you tell me whether this huge fluctuation is having any impact and if so if it's good or bad for you or the bettors?

"It has had little impact. Keep in mind, much of our back office operations is in currencies other than USD. Whether its credit card payments, payroll or electric bills, we’ve been operating with currency conversions for years. We were one of the first to accept crypto and established our own exchange to help facilitate the introduction of crypto early on. More and more customers are gravitating to crypto irrespective of rise and fall of pricing."

So, it basically only affects gambling companies that decided to hold it as speculation?

"Yes, and few had the stomach to hold large balances or the desire to operate an asset management program."

 One company did decide to hold currency and although a spokesperson there did admit they likely made a mistake the company had had no regrets. "Steve", from the sportsbook who asked that neither he nor the book be named since the vast majority of their business is still U.S. facing, explained.

"Bitcoin has been a blessing to us. With most payment options shut off we had no real option but to offer Bitcoin to keep operating. And it has worked. Customers love it, we love it and it’s almost like the days of Neteller for ease of moving money around. All payments are converted to USD and withdrawals are sent back to the customer in BTC. Even those who deposit by the other methods we have can request a BTC withdrawal. We use Coinbase for the exchange rates.

One mistake we did make was holding BTC when the price was rising steadily. We did so for speculation, but it was an error. We decided to always have 100 BTC in our wallet starting when it was trading at about $7,000 per BTC. We decided we would sell half of it when it reached $25,000, which all analysts agreed was a guarantee. Obviously, it didn’t and it was only when it came back down to $10,000 we decided to empty our wallet.  We still made almost $300,000 on the sale, but we could have made a million had we sold at the height. Had we continued to hold it until now we would have lost money. Nevertheless, it was all speculative and customers’ money was never at risk. We made sure that any potential payouts for future bets were covered in our USD accounts and if they hit we would simply send back the BTC equivalent to their wallets."

I asked Steve what he does for salaries and overhead and his reply was that much of their payments are still done via credit card, Moneygram and eWallets for non-U.S. customers and the revenue from those streams is more than enough to cover their costs.

So, it is clear that the massive drop in the price of crypto has not affected the gambling industry. Unlike traditional books that hold funds and use banks for payments and withdrawals which could take days to clear, crypto only companies credit wins and post losses to wallets immediately to avoid concerns of fiat fluctuations. And traditional sportsbooks convert everything to USD and then send back wins at the present value of the exchange to alleviate concerns about fluctuation. As Steve so casually put it

“If someone had bet 0.2 BTC at 25/1 to win the Super Bowl when BTC was worth $5,000 and won we would have been frustrated that we have to pay out 5 BTC at say $15,000 per coin. So we said early on it only makes sense to convert the 0.2 BTC to $1,000 and if he lucked out we deposit 1.66 BTC in his account at $15,000 per coin. I know some still do everything in BTC only but I don’t know how they stay in operation and I’m sure managers at those places suffer from ulcers.”

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