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While deposits converted from cryptocurrencies were recently approved for online sports betting in Colorado and Virginia, New Jersey’s chief regulator has no plans to follow suit and continues to advise caution on the intersection between crypto and gaming in the U.S. market.
Earlier this month, Penn National’s Barstool Sportsbook became the first U.S. operator to offer cryptocurrencies as a payment method for customers exclusively in the states of Colorado and Virginia.
Barstool specifically allows deposits in those two states to be made from Bitcoin, Bitcoin Cash, Ethereum, Litecoin and DASH, although player accounts are exclusively held in U.S. dollars and the cryptocurrencies are first converted to dollars through a partnering crypto-exchange platform approved as a vendor by gaming regulators in both states.
The potential integration of crypto payments into the regulated online gambling industry remains a topic of intense debate and was a key theme of this week’s International Association of Gaming Advisors (IAGA) International Gaming Summit in Boston.
Wyoming remains the only state that expressly recognizes crypto, digital, or virtual currencies as an approved payment method for online sports betting, but rules in Colorado and Virginia, among other states, grant state gaming regulators the authority to permit payment methods beyond credit and debit cards or ACH payments.
The Virginia Lottery Board was ultimately comfortable that Barstool and owner Penn Interactive had strong internal controls to govern deposits converted from cryptocurrencies, said Virginia Lottery deputy general counsel Bob Fontaine, noting how crypto payments have also become more commonplace in other sectors.
“Actually, it was not as hard a discussion as we thought it would be,” Fontaine told IAGA summit delegates.
Among other controls, Barstool requires customers seeking to deposit using cryptocurrencies to undertake a second know your customer (KYC) check and resubmit a government ID for review.
Colorado and Virginia customers are only able to deposit and cannot withdraw funds using crypto.
In a statement, a spokesperson for the Colorado Division of Gaming noted Democratic Governor Jared Polis had taken various other steps to adopt crypto-friendly policies in the state, including hiring a chief blockchain architect in the state government.
The exchange of crypto deposits for sports betting also "occurs at the transactional layer" and all risk is borne by the operator and its exchange partner.
"The Division is comfortable with deposits of cryptocurrency into operator’s operating practices as it aligns with the governor’s initiatives and it was approved after review by the Division that this type of transaction complies with rules and regulations regarding transactions and internal control procedures," the spokesperson told VIXIO GamblingCompliance in an email.
Still, not all U.S. regulators are ready to greenlight deposits via a crypto exchange and it appears that digital currencies will not be coming to two of North America’s largest online gambling markets anytime soon.
Speaking at IAGA, New Jersey Division of Gaming Enforcement director David Rebuck noted the recent collapse in valuation of cryptocurrencies, proliferating consumer protection concerns and investigations into the area on the part of authorities in New Jersey and elsewhere.
“I think, in the gambling world, it’s probably best in the United States to sit on the sidelines and wait this one out,” Rebuck said.
It is a similar situation in Ontario, where standards for internet gaming expressly state that cryptocurrency deposits cannot be accepted as it is not legal tender in Canada.
The Alcohol and Gaming Commission of Ontario (AGCO) has received some approaches around digital currencies, said Lizzie Yeigh, AGCO’s chief strategy officer.
“I think at this point in time, it’s not something we will be permitting,” Yeigh said.
There have been no such inquiries from land-based casinos in Massachusetts, where statutes neither permit nor prohibit crypto for gaming, said Cathy Judd-Stein, chair of the Massachusetts Gaming Commission.
Judd-Stein said that Massachusetts regulators would ultimately look for guidance from the state’s attorney general before taking a position.
Similarly, the use of crypto has not yet been brought up by casinos or sports-betting license applicants in Ohio, said Andromeda Morrison, general counsel for the Ohio Casino Control Commission.
Like Colorado and Virginia, draft regulations for sports wagering in Ohio would grant the commission’s executive director authority to approve new account deposit methods.
But any consideration of crypto would be likely to require detailed information from the companies involved, as well as careful evaluation of various issues including anti-money laundering considerations, “that would require a pretty deep dive,” Morrison said.
