Opinion: Can bitcoin be the future of egaming payments?
Stuart Hoegner, an attorney with Gaming Counsel P.C., discusses the prospects for the use of bitcoins in US gaming
Bitcoin continues to be in the news. Bitcoin is a completely decentralised and virtual currency, as well as a global payment system. You can obtain bitcoins by extracting or ‘mining’ them, by buying them on an exchange, or by receiving them as a gift or in exchange for goods and services.
Bitcoin is possibly the most important development in money since money itself was invented. It allows one to hold and transmit value anywhere, to any one, at any time, and very privately. Transactions in the bitcoin protocol are irreversible. Bitcoins can be transferred very quickly at zero or no cost and with little or no counterparty risk.
No other currency has quite this mixture of speed, flexibility, low cost, security, and privacy which, taken together, makes bitcoin truly revolutionary. At the time of writing, the market price of bitcoin is approximately US$126/BTC. With almost 11.67m bitcoins in circulation, that makes for almost US$1.5bn of value in the currency alone. Bitcoin is salutary and disruptive technology that has myriad commercial applications that many have not even begun to consider. However, in the American gaming sector, the outlook for bitcoin at present is murky.
The case for bitcoin’s value in the internet gaming space is cogent: low (or zero) transaction costs, which benefits both online operators and players; immediate deposits and speedy withdrawals; and, irreversible transactions. One bitcoin visionary calls the business case for the virtual currency in online gaming “irrefutable” and adds that it will be hard to find internet casinos in three years’ time that don’t accept it as a payment option.
Bitcoin could also find a place in a land-based casino environment where players exchange currency for chips. For one thing, it could still act as a unit of account accepted by the casino for chips and a unit into which chips can be cashed out. For another, I can foresee an exciting land-based casino environment where bitcoins become the chips themselves, with wagers placed directly from e-wallets at gaming tables scanning QR codes, obviating the need for different, physical chips in different casinos.
While the technology is paradigm-shifting, there are barriers to adoption of bitcoin by gaming operators in an environment overseen by US regulators. No gaming or betting operator, whether online or bricks and mortar, will accept bitcoin for chips or cash out to bitcoin without the express approval of state gaming regulators.
To do so would be to put some of its most valuable assets “ its US state gaming licenses “ at risk. Federal anti-money laundering regulators already take the position that many bitcoin transactions are subject to the Bank Secrecy Act, and a US magistrate judge in Texas recently opined that bitcoin “is a currency or form of money”. State gaming regulators can be counted on to satisfy themselves that bitcoin fits within their rules before allowing operators to deal in it.
Unfortunately, at present, US state gaming regulators in Nevada and New Jersey, for example, do not seem to have even started to seriously contemplate the use of bitcoin in any kind of wagering that those states regulate. While state regulators can limit licensure to those not transacting in bitcoin and discipline those licensees who do, they cannot stop the spread of bitcoin gambling. While different actors in the bitcoin market can clearly be regulated (licensed gaming and betting operators), the bitcoin protocol as a whole abhors regulation.
Operators can and may simply vote with their feet and gravitate to regulated markets that will allow bitcoin transactions or to non- or under-regulated markets. A lack of engagement by gaming regulators to timely respond to market demand may be unfortunate for US consumers and taxpayers. Regulators may refuse to deal with bitcoin and may even ban it, but it won’t stop the expanded use of bitcoin in international gaming and betting.
Stuart Hoegner is a gaming attorney and accountant in Toronto, Canada. He writes a regular blog on gaming and bitcoin law and has been widely published in international tax and gaming journals.