Adam Tracy on Cryptocurrency & Gambling Update — Part 1

The bitcoin lawyer Adam S. Tracy fields questions concerning cryptocurrency and gambling in the wake of the U.S. supreme court’s decision striking down the federal ban on sports wagering.

Adam:
So gambling is still illegal, okay? Just because the supreme court struck down the federal prohibition on sports wagering does not mean that it’s legal. So don’t take your crypto gambling operation and open it up in the US unless you want to get in trouble. All the supreme court’s decision did was based on a suit filed by the state of New Jersey that wanted to implement sports betting, okay, and federal law had prohibited sports betting outside of Nevada where it’s obviously quite prevalent. So all the supreme court said was that the federal prohibition was too broad and illegal, leaving it up to the states, each individual state to determine whether or not sports betting should be legal or not. So as of today, May 21st, none of that is still legal. It could be legal if the state that you’re in declares it to be legal. So that’s point one.

Adam:
Point two is there’s a lot of questions that I feel concerning what is gambling, right? And how that relates to things like daily fantasy, right? And there’s something called the Unlawful Internet Gambling Enforcement Act, okay, and this was passed in like 2005, and this was the law that said that payments using payment processes and the like made between United States citizens and offshore sports folks and casinos were illegal. So if you remember the poker craze with Full Tilt Poker, Poker Stars, all those, all those guys went to prison because they violated the on Lawful Internet Gambling Act.

Adam:
What was significant about that is that act carved out an exception for fantasy sports, right? So like your Draft Kings, if you’re familiar. And the reason why they did is that it is effectively a game of skill. Now, one would argue that sports betting is a game of skill because you’re conceivably betting on the best team, but that’s just not how it works. But fantasy sports are deemed not to be subject to the general prohibition on gambling by statute. And that’s derived from the fact that it’s based on knowledge and skill.

Adam:
So one would argue that obviously Crypto Base, Daily Fantasy would also be legal, Crypto Base, things that are dependent upon financial outcomes, right, like parimutuel wagering, that’s predicated upon the outcome of let’s say, the price of Bitcoin in theory, in theory, would also fall under that exception, right? Similarly, you see a lot of prop betting, a lot like binary options if you’re familiar with the concept but not selling a commodity but selling an actual financial outcome, right, where people would be able to pool bets against one another in a parimutuel setting.

Adam:
So that arguably would also fall under the exception to gambling. So that I think is wide open. I think that’s something that you could pursue for crypto-related … I mean, it’s not gambling, but a crypto-related wagering type operation right away without any sort of regulation or need to obtain a license. If you want to pursue anything related to a traditional casino or sports betting and it’s crypto related, you would need obviously a license and if you’re offshore, you’re still going to be subject to the Unlawful Internet Gambling Act, which prohibits the transmissions. The actual wordage in the statute is the wires, the use of the wires of the United States, which is a catchall for anything that’s electronically sent.

Adam:
So conceivably, that would include blockchain because it’s based on internet or mobile communications. So if you are offshore and you have a book and it may be licensed in, say, Costa Rica, which is a great place to have an offshore license, I wouldn’t necessarily solicit US customers unless you don’t intend to return to the United States, right? Obviously there’s plenty that do, Bovada and et cetera, but if you look where Calvin Ayre lives, it’s not here. He doesn’t come back here often for probably very good reason. And that’s because of the Unlawful Internet Gambling Act.

Adam:
So again, gambling is not all of a sudden legal. It may be legal in your state at some point in time in the near future, or if you have a tribal land and then tribal lands, which obviously have always been sort of a meccas for casinos and things like that, they’re also able to promote sports gambling in their particular tribal areas depending on their own vote. So it’s a positive development and it’s a good development. It doesn’t change anything from the crypto perspective, but I think there’s also some misunderstanding from the crypto community about what is already legal in the daily fantasy sense, right, and how that can be used to operate a crypto related wagering operation, and then what you can do if you want to just simply run a crypto based casino or sports betting operation and how that can be problematic if you are a resident or a citizen of the United States.

Adam:
So if you have any questions, check us out. We’ve done a lot of offshore licensing and other tribal related licensing issues. Love to answer any questions you have. My info is below. I’m Adam Tracy. I’ll check you out later. Bye.

— –
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