The number of casinos accepting bitcoin as a payment is increasing all the time. At the time of writing, just by checking https://netent.net/new/ there are already dozens of bitcoin casinos set up around the world which will accept bitcoin deposits.
Of course, the legal status of some of these sites can be uncertain to say the least. For players, one of the major attractions of using bitcoin to fund their casino play is the increased level of privacy and confidentiality it provides. Anonymity carries some great advantages, but there are some unwelcome disadvantages too: if we are going to be playing games online, we also would like to know that we are handing over our valuable bitcoin to a legal and trusted site.
So, how can we take advantage of the benefits of playing anonymously, but also gain protection from unscrupulous casinos taking our money unfairly or fraudulently? It’s two sides of the same bitcoin really, but one way to try to enjoy the best of both worlds is to play at a UK Gambling Commission (UKGC) regulated casino. Few bitcoin only casinos are registered this way, but several do accept bitcoin as an additional payment option alongside regular “real” currency payments. They usually do this by receiving bitcoin payments via e-wallets like Neteller.
Playing on these regulated yet also bitcoin friendly sites gives you a kind of half-way house solution. You will need to provide some basic personal details, but on the other hand you can use your bitcoin to fund your gaming safe in the knowledge that the casino is legitimate and abides by the United Kingdom’s gambling regulations, as set out by the UKGC.
What is the Legal Status of Gambling in the United Kingdom?
For players based within the UK, it is the job of the UK Government’s Gambling Commission to regulate the market. In comparison with many other countries like the United States and Australia, the laws related to gambling are relatively liberal in the UK. However, despite this “light touch” approach there are rules, and gambling in the UK is largely covered by the Gambling Act 2005.
The functioning of the 2005 Act has three main purposes:
- To ensure that gambling is prevented from becoming a source of crime or disorder, or from being used to support criminal activities, for example by being used as a way of laundering funds derived from illegal activities
- To ensure that gambling is carried out in a fair and transparent way
- To protect children and vulnerable adults from being harmed or exploited by exposure to gambling
Bitcoin, by the very nature of its confidentiality and untraceability, presents a problem for the authorities. Potential criminals will clearly be attracted by this characteristic of any virtual currency, but it also affects the second purpose: that gambling must be transparent.
This is a particular issue with regard to sports betting. Irregularities in betting on sporting events is often spotted by tracing suspicious flows of money before particularly unexpected or unusual results, or massive cumulative bets on an arcane and seemingly unimportant event. For example, if millions or pounds are correctly placed on there being four yellow cards before half time in the Yeovil Town v Forest Green match, this would be immediately noticed. It was just this sort of unusual “spot betting” activity which led to the successful prosecution of a trio of Pakistani test cricketers for bowling a previously arranged number of no balls in a Test Match Vs England in 2010.
Because the use of bitcoin makes tracing such suspicious activity very difficult, if not impossible, this does present an additional problem for both sports administrators and also government authorities attempting to regulate the industry.
What is the UK Gambling Commission doing about this?
Figure 1. The most recent campaign by the UKGC “When The Fun Stops, Stop.”
To attempt to control maintain control and ensure compliance with the original purpose of the 2005 Gambling Act, the UK Gambling Commission has stated clearly that any operator providing gambling services to UK consumers must have a license regardless of their location or the currency being used. By firing this shot across the bows, the UKGC has made it publicly known to all prospective and current casino operators who wish to accept bitcoin that they too must adhere to the country’s gambling laws.
With regard to sports betting, from the sports authorities’ and the government’s point of view at least there is some leverage when investigating any irregularities, since gambling operators will be keen to retain their licence to trade in the UK gambling market.
So, if you are looking for that extra bit of reassurance when using your bitcoin, look for the UK Gambling Commission logo (usually found at the foot of the landing page) before deciding to play on your chosen casino.
It should also be noted that spread betting does not fall under the jurisdiction of the UKGC. This specialised form of betting is instead regulated by the Financial Conduct Authority (FCA).
Overseas, many countries have enacted new regulations or legislation requiring casinos who wish to accept bitcoin payments to demand players prove their identities before being allowed to join. This is similar to the way people are required to produce proof of identity before opening a bank account in the United Kingdom.
In many ways, these extra regulations are impractical. Bitcoin is, by its very nature and intent, an anonymous form of payment, and there is little in practice that any Government can do about this. On the other hand, legitimate casino operators are keen to operate within the law, because they fear much stricter regulations being imposed on them should things get out of control.
Tax Implications of using Bitcoin
In many countries, gambling revenues are taxed, which makes using bitcoin a possible way of attempting to avoid or evade payment. In the United Kingdom, things are a little different. Gambling revenues are taxed, but the players themselves are not responsible for paying it. Instead, the gambling companies pay at source. This means that there are not really any practical tax implications for United Kingdom based players when using bitcoin to fund their gaming.
Recent times have seen a change in the legislative atmosphere around gambling in the United Kingdom. Both the Government and the opposition have made a lot of warning noises regarding some of the practices of the gambling industry. The focus of attention has so far been on Fixed Odds Betting Terminal (FOBTs) in betting shops. At the time of writing, legislation proposing limiting single bets to £2 has been proposed and this is likely to be enforced soon after a further consultation period.
What has this got to do with online gaming? Well the mood music emanating from many government sources, whipped up by the current media storm, means that further moves to tighten the regulations surrounding gambling seem likely. FOBTs look like they are the first to feel this change in the regulatory weather. To use a gambling analogy, the smart money is that online gambling is next in the firing line.
How much of today’s gaming is funded by Bitcoin?
Measuring size of the market is extremely difficult because of the obvious fact that its use is intended to be confidential. It seems logical that it is far more likely to be used in territories where the laws and regulations surrounding gambling are strict. In the United States for example, where gambling is illegal in most states (although it is possible this will change in the foreseeable future) the use of bitcoin is thought to be high.
In the United Kingdom, the attitude to gambling is relatively permissive, so there is no particular need to hide transactions from the authorities for this reason. On the other hand, the possibility of disguising transactions from inquisitive partners, or to avoid financial charges (for example currency exchange fees) does make the use of bitcoin attractive for other reasons.
Putting actual figures on the market is also impossible for other reasons, such as how to measure the value of a cryptocurrency against “real” money. The value of bitcoin fluctuates wildly against established fiat currencies like the pound or US dollar. This means that any figure quoted today could be meaningless a year, or even a few days, later.
Fundamentally, a cryptocurrency is designed to work as an alternative, or at least in parallel, rather than in conjunction with state run or central bank issued money. So talk of an official “exchange rate” is dependent on trade between the two being transparent and carried out on the open financial market. This is rarely the case.
However, some guide to the size of the market, or at least its rate of growth, can be estimated from the rise in the number of casinos accepting the cryptocurrency. Casinos would not be accepting bitcoin, especially when the risks involved are considered, if they did not see the prospect of making increased profits by doing so.
Given that more and more casinos are becoming bitcoin friendly, it is safe to assume that the use of bitcoin is rising. This situation is likely to continue for the foreseeable future.
Bitcoin is becoming increasingly popular across the world as a means of funding online gambling. Whether it is for you is dependent upon many factors. Your own level of expertise will inevitably be a factor. Your level of confidence in bitcoin and cryptocurrencies in general will also be important. The famous investor Warren Buffet suggests that owning bitcoin itself is a big gamble. But then supporters of the new money may well reply “he would say that wouldn’t he”. Buffet is after all, fully invested in the world of the traditional government issued currency.
Ultimately, it’s all about your attitude to risk. Warren Buffet is right in the sense that bitcoin is a gamble. But then all currency is a gamble. The value of the pound rises and falls against the euro and the dollar every day. You merely have to be a tourist abroad to see this. Then again, if you weren’t happy to risk gambling, you wouldn’t be thinking of making deposits to an online casino in the first place!
Are you happy to increase the risk you take by playing games at a casino by also making your deposits via bitcoin? Some would say it’s less of a risk than using pounds or dollars. Others would say the value of bitcoin is rising so fast you can win twice over. In the end, everything’s a gamble, isn’t it?
This article is written as a commentary on recent events and trends. It is anticipated that it will be read for the purposes of information and discussion. I am not a lawyer. Nothing here is intended to be given or received as expert financial or legal advice. Please consider consulting a qualified financial and / or legal advisor before taking any action as a result of reading this piece.