Adam S. Tracy Talks Cryptocurrency & Gambling Related Venutres
Cryptocurrency lawyer Adam S. Tracy explains the legal regulation surrounding online gambling and sports betting and its implication for cryptocurrency and bitcoin casinos.
Adam S. Tracy:
The question came across my desk regarding the legality and the efficacy of starting a cryptocurrency-based casino or sportsbook, sports wagering platform. The simple answer to all of that is that it is illegal absent a license within the United States. The Wire Act, which is originally created to prevent wagering by phone, was grandfathered or reinterpreted to include wagering via online. You have a series of offshore casinos and sportsbooks, such as like a bovada.com and things of that nature, which technically to place a bet using the internet is a violation of the Wire Act. So, it’s inherently illegal, and if you’re going to bet with or wager with cryptocurrency, it’s the same thing. Any sort of property that’s used to bet in the absence or in violation of Wire Act or in the absence of some sort of license is obviously prohibited.
Adam S. Tracy:
There’s been some changes or there’s some challenges ongoing really at this point with the state of New Jersey that wants to offer its online gaming nationwide, and then some various challenges and some pressure to change the Wire Act to allow for domestically-based U.S. online casinos and sports wagering facilities. You see this a lot with horse racing, which is already sort of legal across the country, but the push into sports betting is still happening. So as it relates to anyone wanting to create cryptocurrency-based casino or sportsbook, I’d be very careful with it because you don’t carry the required licensure, and even if you have an offshore platform or book and you reside in the United States, it can be imparted to you as being the promoter of the illegal gambling operation. So, something to definitely consider if you’re going in that direction, you best be living in a jurisdiction where it’s already legal and remain there if you’re going to offer your services to citizens and residents in the United States.
Adam S. Tracy:
At the same time, cryptocurrency is actually a really interesting concept in the gaming arena because what you have is a de facto token or a de facto chip like you have in casinos, and for a long time, casinos have been plagued with AML and KYC issues because you have these sort of untraceable morphous chips, whereas like a token, a digitized chip, if you want to call it, would be a great alternative in a sense. It’s fraught with issues in a sense. If you are inclined to just start some sort of Bitcoin gaming, what happens, for instance, if you’re going to bet on the Super Bowl?
Adam S. Tracy:
Super Bowl is a five-hour event. The volatility of Bitcoin is 6 to 8% per month. So in any given four hours, you can see 1%, 2% changes versus the dollar, which on average the volatility is less than one-half of 1%. So in that five-hour period from kickoff to the end of the game when you find out the outcome of your wager, the dollar isn’t going to change. The value of that dollar is unlikely to change, but the value of your Bitcoin could go up or go down an appreciable amount. And the question becomes, especially in terms of what the takeout is, what the casino’s portion is, who benefits from that appreciation? For instance, if I bet one Bitcoin, it goes up $200 by the end of the game, I win the bet. Who gets that money? The casino was holding onto my Bitcoin waiting for the outcome of the game, and now my one Bitcoin bet is one Bitcoin and an extra $200. Who gets to keep that?
Adam S. Tracy:
So there’s a lot of issues that are unresolved with it, which make it a really unique thing, but the blockchain itself is well suited for any sort of gaming because what you have is a series, you have a juxtaposition of yes/no propositions, right? I bet Notre Dame to win or I bet, or they lose, right? So, it’s either a yes/no proposition, and so it would conceivably work very, very well. There are some cryptocurrency-based sports books and casinos out there, and I haven’t seen it well done really across the board, especially when you’re talking about the fluctuation in Bitcoin price and who benefits or who takes the loss if that amount of money decreases over time and how that affects the payout and how that, how that’s effectively won or lost.
Adam S. Tracy:
It’s an interesting concept. It’s a great applicability, but to answer the question that so many of you have had, it’s illegal. I mean, whether you’re betting with cryptocurrency or the dollar, it just doesn’t make any sense, and the reality is, casinos, all of them they have AML and KYC policies. I don’t see those really actively being followed. The reality is at this stage of the game if, given what the transaction costs are for simply sending Bitcoin versus what it would do to charge a plastic card, a debit card, you would almost always, right, there’d be no sound financial reasoning to bet with Bitcoin unless you were seeking to avoid some sort of detection or like the casino that only accepted some kind of cryptocurrency. You would always, always choose fiat currency at this point in the absence of improvements or using like a Ripple or some type of other, where there’s a faster blockchain where you could do it.
Adam S. Tracy:
So, really the advantages of the offshore casinos that accept Bitcoin and other cryptocurrencies aren’t great. They are technically illegal just like the fiat currency ones are. That may change, obviously, and if it’s opened up in the United States, that if New Jersey is successful with their Supreme Court challenge, you could see a scenario where there’d be a great deal of offshore… or I’m sorry, domestic online casinos that could accept Bitcoin and conceivably other cryptocurrencies, which would make sense. But until that occurs, I would caution you against catering or soliciting U.S. players and soliciting to them as well. So, check me out, check out my YouTube page and also check out bitcoin-lawyer.org. I’m Adam Tracy. I’ll talk [inaudible 00:06:47]
— –
A former competitive rugby player, serial entrepreneur and, trader attorney, Adam S. Tracy offers over 17 years of progressive legal and compliance experience in the areas of corporate, commodities, cryptocurrency, litigation, payments and securities law. Adam’s experience ranges from commodities trader for oil giant BP, initial public offerings, M&A, to initial coin offerings, having represented both startups to NASDAQ-listed entities. As an early Bitcoin adapter, Adam has promoted growth of cryptocurrency and offers a unique approach to representing crypto-clients. Based in Chicago, IL, Adam graduated from the University of Notre Dame with dual degrees in Finance and Computer Applications and would later obtain his J.D. and M.B.A. from DePaul University. Adam lives outside Chicago with his six animals, which is illegal where he lives.
Primary website: http://www.tracyfirm.com
Twitter: https://twitter.com/TracyFirm
Youtube: http://www.youtube.com/c/AdamSTracy
Linkedin: https://www.linkedin.com/in/adamtracy/
Facebook: https://www.facebook.com/thetracyfirm/
Instagram: @adamtracyattorney
Telegram: @adam_tracy
Skype: @adamtracyesq
Email me: at@tracyfirm.com
