By Christine Duhaime, B.A., J.D., Gaming Attorney & Certified Anti-Money Laundering Specialist
Bit by Bit(Coin)
Recent headlines on the digital currency phenomenon, bitcoin, haven’t been entirely positive, with news of regulatory clampdowns, the hacking of exchanges and the arrest of key market players over alleged money laundering.
Despite recent negative publicity, bitcoin is being accepted by an increasing number of merchants around the world. That includes two Las Vegas casinos – D Las Vegas Casino Hotel and the Golden Gate Hotel & Casino – that recently said their hotel and gift shops would accept the currency, although not for gambling. The online gambling, or iGaming industry, is no different. More and more online gambling websites are investing in technological changes to accept bitcoin bets. And it’s easy to see why.
According to the American Gaming Association, the iGaming industry worldwide is worth $30 billion annually. Bitcoin offers business advantages to gaming entrepreneurs that they can’t get with any other payment method. Those include payment finality (inability of players to demand chargebacks, whether from fraud, dissatisfaction or error), low to no transactional costs, ease of funds transfers, privacy protection and freedom from prohibitively expensive Know Your Customer rules.
On the other hand, gambling with bitcoin raises unique legal issues – it provides little consumer protection to players and, like cash, is susceptible to risks of money laundering and terrorist financing. It also has no mechanism to prevent underage gambling and deter problem gambling – issues that are paramount to upholding the integrity of gambling.
These issues create a dilemma for gaming regulators in regulated iGaming jurisdictions that want to facilitate innovation and growth in the iGaming industry but are prevented from doing so because the anonymous nature of bitcoin makes it impossible to supervise financial transactions and identify gamblers.
What is bitcoin?
Bitcoin is a digital currency, i.e., one that exists purely online in cyberspace. It was started in 2009 by a person known only by the pseudonym Satoshi Nakamoto. It is unique in many ways. Unlike traditional currencies that are issued and controlled by central banks, bitcoin has no central monetary authority and is not backed by any authority or government.