Bitcoin, the world’s oldest cryptocurrency, turned 10 on January 3, 2019. This date marked a full decade since the bitcoin blockchain network started operating, and it hasn’t stopped since. In the meantime, many more cryptocurrencies have come about, and today there is a lengthy list of non-national, fully digital currencies that continues to grow.
In spite of this track record, cryptocurrencies continue to fight bitterly for recognition in the public eye. Often, this has been an uphill battle – from misunderstandings on how blockchain technology works, to stereotypical notions like the connection between crypto and the criminal underworld, negative ideas about cryptocurrencies continue to prevail.
Acknowledgment from the mainstream industry, as well as other relevant bodies, like national gambling regulators, are slower to follow suit. Furthermore, some doubt that legalization will ever come, that the tide can even turn the other way. National regulators might decide to close down crypto casinos operating in their jurisdiction. The fallout from this could be immense, seriously hindering online casinos and even impact the wider crypto ecosystem.
Still, some businesses in the industry don’t mind the attention of regulators and believe they can attain not only the necessary licenses and approvals, but also gain acceptance by the mainstream audience. Widespread adoption could make the current niche successes appear microscopic in terms of revenue and profit. These conflicting standpoints, mainly the potential applications of crypto in the online gambling industry and its struggle with its public image only further underline the dilemma: will market regulation turn out to be the death of crypto casinos or will it launch them into new heights? Also, how does the case of one online crypto casino in particular – the Sportsbet.io – fall into all of this?
UK Gambling Regulation and Crypto Casinos
The UK gambling market is a good depiction of the lack of integration between cryptocurrency and other industries on the vast island, and for the rest of the world. During the 2018 fiscal year, the industry generated a total gross gambling yield in the Great Britain territory of £14.5 billion.
Even relatively fringe betting services in the market like the fixed odds betting terminal (FOBT) see a strong userbase, so much that the maximum betting amount had to be slashed from dozens of pounds down to two pounds by regulators. Pressures from the rising problem gambling made sure that this decrease took place.
On the other hand, more well-known betting services such as sports betting has millions of users on a regular basis. Since this kind of market was clearly in the crosshair of crypto casinos, casinos began opening .uk websites and started offering their betting services in exchange for Bitcoin, Ethereum, EOS, and other crypto deposits.
However, the legal status of these businesses is more than ambiguous. Only a handful of online casinos hold a United Kingdom Gambling Commission (UKGC) or a Malta Gaming Authority(MGA) license, and even fewer accept payments in Bitcoin or other crypto.
The same goes for the Isle of Man licenses, which are also rare. Even though very prominent ventures like Unikrn, an esports-focused crypto betting platform, attained their license there, most of crypto casinos are licensed in Curacao, where the registration process is less stringent and cheaper. This is a go-to solution for crypto casinos with larger crypto-betting service providers that use proprietary tech solutions. This territory is a part of the Kingdom of the Netherlands and Curacao has issued many online gambling licenses since 2002 through the Curacao Gaming Control. Today, these licenses can be attained for a sum ranging between $20,000 and $25,000 with a two percent tax rate. Whereas in the UK and many EU countries, the license price varies, and taxes are several times higher, reaching into the double digits. A license from Curacao is simpler and conserves the budget of the casino operators.
Because of this, a Curacao license in the UK carries a far lower value than that of any license issued by the UK government. Lastly, this territory is defined as an OCT (overseas countries and territories) and is not a part of the EU. In this sense, the MGA license, whose regulatory framework is stronger and whose jurisdiction falls under the EU, is more valuable. In all of these cases, the issue at hand is trustworthiness and reliability – simply put, UK casino users will look for a UKGC or MGA license; so will other businesses that want to work with an online casino.
The Case of Sportsbet.io
Sportsbet.io is a Bitcoin sportsbook that was built on top of the Coingaming.io bitcoin gaming platform. The sportsbook began operating in 2016 when it was launched by The Coingaming Group. This in itself does not make it outstanding in any shape or form, but the recent sponsorship deal it has obtained is anything but ordinary. In the middle of 2019 – more precisely, on June 16 – Sportsbet.io became the first crypto-focused betting operator to land a sponsorship deal with an English Premier League club.
The operator struck a deal with Watford, the FA Cup finalist team. Now, the sportsbook name – Sportsbet.io – will be carried as a front-of-shirt sponsor by the Watford team members. It is hard to underline the magnitude of this event – this operator achieved a feat that most crypto-centric gaming companies would not have considered pursuing. The benefits the operator sees from with this are equally significant.
Tim Heath, the CEO of The Coingaming Group stated that the process is all about building a strong brand using very visible sponsorship deals that bring direct and immediate benefits. The popularity of the Premier League among Asian markets is astonishing, and the presence of a Premier League sponsorship is an unmistakable show of reputation, trustworthiness, and strength. Any brand that is represented in this competition has universal recognition by pure association. It is a true “major league.”
The Watford shirt branding will thus compel new customers to enter the Sportsbet.io ecosystem, even if they are new to crypto gaming. However, there is a huge catch to this. The platform in the UK will not allow any of its users to bet with Bitcoin or any other cryptocurrency. This stems from the fact that the UK does not recognize BTC or any cryptocurrency as a legal currency. Instead, the UK sportsbook version transacts in fiat on a white-label platform from TPG (The Gaming Platform) Europe. It holds a license issued from the Isle of Man to operate in the UK. This territory is still a British Crown dependency, giving it more validity in the eyes of the users. But, the entire notion of the crypto-centric betting provider here breaks down – there will be no crypto transactions for any UK punters from Sportsbet.io.
What is even more interesting is the possibility of the UKGC taking a further regulatory interest in the sponsorship deal. It is an open question: will Sportsbet.io stand up to the scrutiny that will undoubtedly come from the regulatory body sooner or later? Lastly, even if Sportsbet.io was allowed to introduce crypto payments and withdrawals in the UK, it could technically do so easily. However, there is no regulatory framework that allows for this option.
The Bitcoin Conundrum
A part of the problem is, like in many other countries, cryptocurrencies are not regulated. In the UK, there are registration requirements crypto exchanges must meet. Crypto gains and losses are subject to the general capital gains tax. However, HM Revenue and Customs state that cryptocurrencies cannot be compared to conventional investments or payments.
The takeaway of this is very plain: in the UK, cryptocurrencies are still not a recognized legal tender. While taxation does apply to cryptocurrencies – the government collects taxes on crypto profits – other crypto-related activity is invalid, according to UK law. This means that Sportsbet.io UK cannot accept crypto bets any more than a local UK barber shop can accept BTC for haircuts. Here lies the basic problem all crypto casinos face. They have the infrastructure to operate in any market across the world, but they utilize a currency that is not recognized by the countries those markets are located in.
That is the conundrum for Sportsbet.io when it comes to regulatory scrutiny – essentially, a sponsorship deal with a well-known football club promoting a betting service that, in its fullest form is technically illegal in the UK. It is not doomsday thinking to perceive that this setup will become strained very quickly. The outcomes would apply to any other similar venture between an established sports team and a novel and semi-legal (or illegal) gambling service that uses a non-currency in consideration of the UK law.
A Possible Resolution to the Dilemma
Does this mean that all crypto casinos and gambling services are running on borrowed time before they get shut down? Will they all stop working for UK and EU citizens as soon as local regulators move to look in their direction, and bring the hammer down? The answers are both yes and no. It is true that these service-providers and operators are at the mercy of regulators, but regulation applies to any gambling entity that intends to operate inside a particular territory and promote its services there.
Can new casinos like the ones found on Gambla influence governments in London or D.C. to speed up or change their regulatory recognition of cryptocurrencies? The collective power crypto casinos could wield is insignificant for any kind of lobbying effort. But, this does not mean they are doomed to shut down, or operate with the smallest footprint possible to avoid any regulatory attention. The way out is for casinos to make a step towards regulatory bodies, not in the sense of pressing to obtain their gambling licenses that will not come, but by making sure they are in compliance with regulatory demands.
Cryptocurrency payment and deposit options are so versatile and advanced compared to banking services that their usefulness speaks for themselves. Like before, the crypto betting user base will grow on its own, attracting people with their low transaction fees, speed, and general effectiveness. Since it has been doing this for the past 10 years – it is safe to suggest that the trend will continue.
By introducing regulatory processes for traditional casinos, including know-your-customer rules, anti-money laundering mechanisms, problem gambler safeguards, and other features, crypto casinos can prove they are willing to grow and comply with policies. They can also show customers that the regulations serve to help them, and not to make life difficult for the operators. This applies to the UK, but also to any other country in the world.
With these elements voluntarily in place, the possibility of a regulatory green light will be much more likely when this possibility presents itself, and perhaps even traditional fiat casinos will rush to get crypto on their list of banking options. Until then, crypto casino users will see that their service providers are following the general rules, even going above and beyond in this aspect to garner trust in this niche sphere. This can in turn lead to customer loyalty and positive interest from the regulating bodies, which contribute to the overall profit and longevity of crypto casinos.