Bitcoin and Online Casinos: What the Rules Require

Why This Page Makes No Forecast

This page began life as a prediction about where cryptocurrency gambling was heading. A forecast is not a fact, nothing here is written as one, and the protocol's own documentation says why: Bitcoin's developers state that "Be prepared for problems and consult a technical expert before making any major investments, but keep in mind that nobody can predict Bitcoin's future." What follows is what is documented and dated instead - what the protocol does, how tax and financial authorities classify it, and what a licensed gambling operator has to do if it accepts it.

Two Facts From the Protocol's Own Documentation

The first is irreversibility. Bitcoin's own site states that "A Bitcoin transaction cannot be reversed, it can only be refunded by the person receiving the funds." and, in its FAQ, that "Bitcoin transactions are irreversible: once confirmed, they can only be refunded by the person receiving the funds." That matters to a gambler because it is the opposite of a card payment: there is no scheme to ask for the money back from, and a return depends on the recipient choosing to send one. The same page notes that irreversibility is not instant either - "Transactions do not become irreversible immediately."

The second is volatility. "The price of a bitcoin can unpredictably increase or decrease over a short period of time due to its economy, evolving adoption, and sometimes illiquid markets." The site's own conclusion from that is blunt: "Bitcoin should be treated as a high-risk asset, and you should never store money that you cannot afford to lose in bitcoin." Its FAQ puts the same point as "This leads to volatility where owners of bitcoins can unpredictably make or lose money." A balance held in bitcoin can therefore change in value between a deposit and a withdrawal, in either direction, without anything happening in the game.

It Is Not Anonymous, and It Is Not an Official Currency

Bitcoin.org is explicit on the first point: "However, Bitcoin is not anonymous and cannot offer the same level of privacy as cash." The mechanism is published too - "All Bitcoin transactions are stored publicly and permanently on the network, which means anyone can see the balance and transactions of any Bitcoin address." On the second point the same site says "Bitcoin is not an official currency."

Public authorities classify it the same way. The United States Internal Revenue Service states that "For U.S. tax purposes, digital assets are considered property, not currency." and defines the category this page is about: "A digital asset that has an equivalent value in real currency, or acts as a substitute for real currency, is referred to as convertible virtual currency, for example, a cryptocurrency. It can be:" The Gambling Commission records that the United Kingdom's Treasury Committee reached the same conclusion - "The Treasury Committee published a Crypto-assets report (PDF) in which it concluded that cryptocurrencies are more accurately referred to as crypto-assets as they are not performing the functions generally associated with a currency."

Virtual Currency Has Been Inside Anti-Money-Laundering Rules Since 2013

The Financial Crimes Enforcement Network published guidance on 18 March 2013, on a page dated "March 18, 2013", stating that "Convertible virtual currencies either have an equivalent value in real currency or act as a substitute for real currency." and that "FinCEN's rules define certain businesses or individuals as money services businesses (MSBs) depending on the nature of their financial activities. MSBs have registration requirements and a range of anti-money laundering, recordkeeping, and reporting responsibilities under FinCEN's regulations." The same page joins the two: "The guidance considers the use of virtual currencies from the perspective of several categories within FinCEN's definition of MSBs."

In Great Britain, the Gambling Commission published a news item dated "31 December 2019" recording that "The Financial Conduct Authority (FCA) has announced an amendment to the current Money Laundering Regulations." and advising that "The Gambling Commission advises its licensed operators to verify whether any business activities (including where cryptoasset money service business facilities are offered to consumers) fall within the scope of the Regulations and are therefore subject to supervision by the FCA."

What a Licensed Operator Has to Do

The Commission's licence conditions treat digital currency as a cash equivalent and attach controls to it. Condition 5.1.1 requires that "Licensees, as part of their internal controls and financial accounting systems, must implement appropriate policies and procedures concerning the usage of cash and cash equivalents (for example, bankers drafts, cheques and debit cards and digital currencies) by customers, designed to minimise the risk of crimes such as money laundering, to avoid the giving of illicit credit to customers and to provide assurance that gambling activities are being conducted in a manner which promotes the licensing objectives."

Its guidance for licensees, on a page stating "Last updated: 5 July 2021", sets the gate higher than a technical integration: "If you want to accept digital currency as a means of payment (either directly or through a payment processor which accepts digital currencies) you must satisfy yourself and us that you can meet your obligations in relation to anti-money laundering and that you are acting in a socially responsible way." The same page lists what the regulator sees as the risk: "There is no central authority that supports the value of digital currency, for example, Bitcoin has a history of large price fluctuations", "The degree of anonymity associated with digital currencies may be attractive to individuals who want to conceal their identity and, or as well as, the source of their funds" and "There is a history of hacking, theft and other criminal activity associated with digital currencies."

A second guidance page, stating "Last updated: 28 March 2023", states that "Crypto-assets present additional risks compared with fiat currency (government backed currencies such as £ sterling), such as fluctuations against fiat values and challenges around customer identification." It makes accepting them a reportable change - "Licensees are required to inform the Commission about any change in their arrangements as to the methods by which, and/or the payment processors through which, the licensee accepts payment from customers using their gambling facilities." - and among the things the Commission expects to be told is "what information has been provided to consumers to ensure they are aware of the risks associated with using crypto-assets as a payment method?" On funding a gambling business with crypto-assets it records that "The anonymity afforded by some crypto-assets, along with any weaknesses in the process of obtaining them, have consistently caused problems for applicants, as in our experience they are unable to provide complete and satisfactory evidence to answer the questions we ask to determine applications."

The Payment Route Itself Is Now Conditioned

Licence condition 5.1.2 carries the heading "Effective from 31 January 2024:" and then requires that "Licensees must only accept payment from customers using their gambling facilities in Great Britain by a method which involves the provision of payment services as defined in Schedule 1 Part 1 of the Payment Services Regulations 2017 (SI 2017 No 752)1 if the provider of those services is a 'payment service provider' within the definition of that term in regulation 2 of those Regulations2 (or the equivalent requirements of any UK Statutory Instrument by which those regulations are amended or superseded)." That is a condition about who stands between the customer and the operator, and it applies whatever the customer's funds started out as.

None of this makes any coin better or worse to gamble with, and nothing on this page says it does. The two facts a reader can act on are the ones the protocol itself publishes: a confirmed payment cannot be recalled, and the amount it is worth can move without warning.