Remember a few years ago when everyone was thinking that Bitcoin gambling was going to change the face of online gambling? It has in some countries, but in the U.S. not so much. While individual gamblers haven’t had much to worry about, U.S. Bitcoin casino operators have been hit hard, so hard that many off-shore casinos now geoblock any IP address that’s linked to the U.S. just so they don’t get caught in the crossfire. Even Bitcoin bingo sites aren’t immune. What will need to change?
Online gambling in the U.S.
Bitcoin gambling is tied up closely with the laws with online gambling as a whole. The thirsty desire of the U.S. Federal and State governments for tax revenue, sometimes coupled with moralistic views about gambling, is what makes it so hard to gamble online in the U.S. The main law covering online gambling is the Unlawful Internet Gambling Enforcement Act of 2006. This law targets any business that takes online payment for gambling purposes. Many lawmakers were worried that online gambling sites outside of the reach of government oversight could be a way to launder money. With the worries about terrorism at the time, the law passed pretty easily.
The law doesn’t specifically target digital currencies nor does it target individual gamblers. So, technically, there’s nothing stopping a U.S. citizen from going to a Bitcoin casino and playing away, but there is a huge risk for the operators. The law made it illegal for banks to process transactions for online gambling businesses, effectively shutting off the flow of dollars to the sites.
At first, it wasn’t enforced while the gaming sites decided what to do next. The government showed that the law wasn’t an empty threat when it shut down Full Tilt Poker and Pokerstars. They seized the assets and the government is still holding them, in the process destroying the lives of many professional poker players who used those sites.
Since then, despite the huge popularity of poker, online poker as a whole has been stuck in limbo. But there appears to be light at the end of the tunnel. Pokerstars is now operating again legally in New Jersey, although you have to be a New Jersey resident to play for money. But for people who aren’t in New Jersey, their options for fully-legal online gaming are few.
Bitcoin as a solution
Legitimate Bitcoin casino operators and players have worked out arrangements between themselves for fair gaming. There are standards for provably fair games. The blockchain reinforces transaction fairness while allowing immediate deposits and, importantly, withdrawals. And, above all, the whole process is anonymous.
Plus, there is a second ruling that protects players, specifically players of online poker. In 2012, poker was declared a game of skill, not of luck. This took poker out of the realm of gambling in a technical sense. This mean only the parts of the law regarding banks and handling transactions to gambling businesses applied to operators who only offered bingo games.
But Bitcoin doesn’t rely on the traditional banking system. If an operator could run the entirety of their business via Bitcoin, does it make it legal? And does the use of Bitcoin open the gates for other kinds of gambling as well? Many Bitcoin casino operators are offering games beyond poker, from as simple as bingo to complex games like craps, roulette, and baccarat. It’s a gray area, at least for now.
There are still few Bitcoin casino operators willing to operate openly in the U.S., forcing players who want to play to find operators licensed in other countries, but gambling licensing laws in different countries vary widely. Some of the most trusted Bitcoin casinos use geoblocking just so they can cover their legal backside, but that’s not stopping some people from using VPN software compatible with Bitcoin to play on sites that are geoblocked.
If the New Jersey experiment is successful and online gaming with fiat money becomes legal, that will make it much easier for Bitcoin casino operators to work in the U.S. Until then, you’re playing at your own risk. There’s nothing to stop the U.S. government from seizing a Bitcoin casino just like they’ve done with black market Bitcoin operations like The Silk Road. Be careful out there!