Will Casinos Eventually Adopt Bitcoin?
In the past few years, the casino industry has witnessed rapid growth in terms of the kinds of products and services offered, the marketing strategies and payment approaches they use, and their general levels of innovation. Parallelly, the FinTech industry – blockchain technologies and crypto markets – are being increasingly adopted by more and more customers and drastically changing the financial sector landscape. Cryptocurrencies offer several benefits to businesses and their customers, including faster transaction times, reduced costs, and greater security. With such benefits, the casino industry is considering incorporating cryptocurrencies into its business models. The adoption of cryptocurrencies by casinos would also allow them to expand their market and reach tech-savvy customers (mostly millennials and Gen-Z) who are increasingly using cryptocurrencies as an alternative mode of payment.
The mainstream adoption of cryptocurrencies will involve more than just the interest of casinos. A tighter regulatory framework is required to support crypto transactions in the US casino industry. Other regulatory bodies like the Malta Gaming Authority have shown considerable interest in adopting cryptocurrencies by gaming licenses. With the US becoming one of the biggest crypto trading destinations and the US government looking to announce its own digital dollar, the popularity of cryptocurrencies is growing each day in the US. This might be a good time for the State Gaming Authorities in the US to frame laws about using cryptocurrencies for gambling. For example, Nevada Gaming Authority passed eight amendments in 2020 to make gaming cashless – considering the COVID-19 situation. This opened a huge opportunity for the crypto industry, which is cashless by nature. The new amendments allow gamblers to transfer money from their digital wallet to a gaming device. After this, several crypto companies are looking at introducing crypto payments for gambling.
Online Gaming and Crypto
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In the online gaming industry – online casinos- Bitcoin is quite a popular option worldwide, especially in Europe. People can just sign up for a crypto wallet and use that currency as a deposit in their online gaming account. Cryptocurrencies promote cashless banking and thus cashless gaming. With the world moving towards digitalization, cashless transactions are becoming the way forward. Cryptocurrencies also offer reduced transaction costs as compared to fiat currencies. The cost involved in crypto transactions is negligible as compared to fiat transactions. Unlike fiat currency, the transaction cost for crypto remains the same regardless of the deposit amount. The use of cryptocurrencies in online casinos offers better incentives and rewards and reduces the risk of loss. Cryptocurrency casinos offer deposit incentives that save players from losses. Such incentives are much better than fiat-only online casinos. One of the most important advantages of cryptocurrencies in the gaming industry is that they offer quick withdrawal. If you win fiat currency in gaming, it will take quite a lot of time for the money to reflect into account (as it is channeled through Central Banks). Still, with the decentralized nature of crypto, the movement of currency is fast and secure.
Only the states New Jersey, Nevada, and Delaware, allow their people to use Bitcoin in American online casinos in the US. If you live in any other state, you cannot use Bitcoin for betting in online casinos. This is mostly because of the lack of a regulatory framework related to cryptocurrency and blockchain technology. Still, as they are getting popular, there is speculation that the state gaming authorities will find a way to regulate them and allow their use.
Regulations in Place
Casinos are considered “financial institutions” under the Bank Secrecy Act, which mandates them to employ robust anti-money laundering compliance programs (AML) to prevent illegal transactions especially involving the proceeds of terrorist activities or transactions designed to support these activities. Under this regulation, casinos are required to track the source of their player’s funds and file a suspicious activities report (SAR) if the funds are gained from illegal or terrorist activity. There are also many Bitcoin ATMs in the areas around casinos and other gaming institutions. Here, a player can go and convert their cryptocurrency into cash and vice-versa. Funds obtained from this conversion have to undergo similar SAR tracking and monitoring. However, it is quite a challenge for casinos because cryptocurrency transactions are not subject to SAR monitoring. To incorporate cryptocurrency, the current BSA regulations have to be readjusted to include detailed procedures about customer onboarding and know-your-customer requirements. The casinos have to comply with additional compliance regulations to consider the source of funds, especially from third-party payments.
One of the other challenges of incorporating cryptocurrencies is tax calculation. Bitcoins and other forms of crypto transactions are taxable under the IRS regulation. Casinos using crypto will have to keep extensive records of the “basis” of cryptocurrencies – as the market fluctuates, the basis for each cryptocurrency would be different depending on the market price at the time of transaction.
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In January 2021, International Game Technology Plc, a London-based maker of slot machines, obtained a patent to transfer cryptocurrency from gamers’ crypto wallets to their gaming account. This will allow gamers to move their Bitcoin from their wallet into the virtual wallet in slot machines to play games like Megabucks and Wheel of Fortune. This move will allow casinos to attract younger customers who are interested in Bitcoin and other cryptocurrencies. The COVID-19 pandemic has definitely increased the interest of the younger generation in buying Bitcoin. According to a Tokenist survey, 44% of millennials want to buy cryptocurrencies in the next five years. Quite recently, Resorts World Las Vegas, a Malaysian corporation registered with the Nevada Gaming Commission, announced that it would accept cryptocurrency for select services. Partnering with a cryptocurrency platform, the Resorts World Las Vegas Hotel will allow customers to use cryptocurrencies “across all areas of the integrated resort experience” except the gaming floor. This is because of the lack of state regulations related to cryptocurrencies on the gaming floor.
Several other hotels and casinos are looking to offer selected services to their customers. However, the adoption of cryptocurrencies like Bitcoin for gambling purposes will depend on state regulatory authorities. To learn more about regulations concerning cryptocurrency, read our blog.