Why You Won't See Bitcoin in a Casino Anytime Soon
Bitcoins and gambling go together like pedals on a bike, but the use of cryptocurrencies in the highly regulated US is still at the conceptual stage.
As evidenced by a Google search for 'bitcoin casino', bitcoins and gambling go together like two pedals on the same bike.
Bitcoin’s appeal as a cheap, efficient and low-key means of transmitting money has made it a hit among both online bettors and operators seeking reduced fees, lower chargeback risk and a way around legacy payment systems.
But as of now, these benefits mainly apply to online casinos operating in jurisdictions with little or no regulatory oversight.
While there has been some movement in Curacao, the UK and Malta recently, the use of cryptocurrencies in a legal and strongly-regulated gambling environment like the US still remains largely at the conceptual stage.
Because of heavy regulation and a desire among the gaming industry and its regulators to protect the industry's slowly improving public image, bitcoin appears to be years away from earning approval for use in either physical or online casinos in the US.
"We have looked at digital currencies and do not find them appropriate for use in casino gaming at this time," AG Burnett, chairman of the Nevada Gaming Control Board, told CoinDesk.
As Nevada is by far the country's largest gambling market, its regulators have an outsize influence on policymaking nationwide.
Asked why he maintains this position, Burnett stressed that the US dollar remains the backbone of Nevada's regulatory apparatus, and that any rethink of that must meet a high standard of merit.
"Our regulations and statutes are all based on monetary units that are standard, such as the US dollar," he said. "In fact, I think most of our regulatory foundation, from audit to enforcement and accounting standards, are all based upon normal US currency being used in a gaming operation."
Burnett added that too much ambiguity surrounds bitcoin and its contemporaries, while questions of consumer demand still remain.
"There are multiple types of digital currencies, whereas there is only one US dollar," he said.
But none of this is to say that there isn’t enormous opportunity for the use of bitcoin in a legal and regulated gaming context.
"It's a billion-dollar question," said Stu Hoegner, a cryptocurrency attorney with Gaming Counsel in Toronto. "The potential is huge."
For the land-based industry, bitcoin offers a potential remedy to casinos that are simultaneously seeking new ways of appealing to more tech-savvy young players, while reducing the amount of cash that shuffles around gaming floors.
Much like other industries, gaming is bending head-over-foot to attract millennial patrons to replenish its customer base. But younger players who grew up in the world of Xboxes and iPhones have a much higher threshold for being thrilled than do players in their 50s and 60s, many of whom are perfectly fine in front of a slot machine.
Slots remain the key revenue drivers for the industry, so figuring out how to replace or augment any declines is a critical task.
To this end, Burnett explained that the NGCB allows its licensees to operate bitcoin kiosks on their properties as long as the funds are used for non-gaming purposes.
At least two Las Vegas properties have embraced this opportunity. The D Las Vegas Casino and Hotel and the Golden Gate Casino and Hotel made a splash in early 2014 by announcing a move to accept bitcoin payments for hotel rooms, restaurants and other on-site vendors.
While this can be construed to some extent as a marketing gimmick, it is worth noting that Las Vegas has significantly diversified away from slot machines and table games towards hospitality and entertainment more broadly.
Non-gaming revenues now comprise roughly two-thirds of revenue generated at Las Vegas Strip properties, and this revenue stream is a core component to any property’s business model.
The other major issue facing casinos that digital currencies could potentially remedy is that they are heavily dependent on cash compared to other industries. Some experts estimate as much as 95% of casino floor transactions are conducted in cash.
This has become problematic in recent years as federal law enforcement agencies, led by the Financial Crimes Enforcement Network (FinCEN), have begun putting pressure on casinos – which offer banking-type services like lines of credit and are regulated under the Bank Secrecy Act – to tighten up their anti-money laundering efforts.
This has spawned a mini-wave of innovation within the space with regards to how payments are accepted, with companies like Sightline, Vantiv and others jostling for pole position in the race to rescue casinos from an overdependence on cash.
At the 2016 Global Gaming Expo, the industry’s premier trade show in Las Vegas, one of the prevailing themes of the breakout sessions and vendor exhibits was the amount of work that remains to be done in this realm.
But the strict regulatory framework in which US casinos operate again comes into play. The industry claims that it is the most heavily-regulated industry in the world.
While casinos sometimes wear this as a badge of honor, the practical implication is that they often need regulatory approval for even the smallest of changes – such as moving a slot machine 10 feet on the gaming floor in some jurisdictions – with the end result being a throttling effect on outside-the-box innovation.
Sara Slane, senior vice president of public affairs at the American Gaming Association – the trade body that represents casinos – said that the industry is still probably five years behind where it would like to be with regards to non-cash payments.
Putting it all together, industry observers are confident that the US won’t be doing much trailblazing at the intersection of bitcoin and gambling in the coming years.
"It could be another way they'll evolve with moving currency around,” said David G Schwartz, director of the Centre for Gaming Research at the University of Nevada-Las Vegas.
Others reckon that regulators in the US will likely take a follow-the-leader approach of their own and look for other countries to set the bar before deciding to dive in themselves.
"The leadership of a place like the Isle of Man might be constructive. Maybe an outfit like Malta pushing it forward," he said, concluding:
Casino image via Shutterstock
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.
Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.