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State gaming regulators are going to be left behind unless they prepare for the inevitable surge in cryptocurrency and other forms of digital payments, according to Colorado’s director of gaming.
“All of these things are on the very short, very close horizon,” Dan Hartman said during a panel discussion on Saturday (July 9) at the summer meeting of the National Council of Legislators from Gaming States (NCLGS) in Boston.
Democratic Governor Jared Polis led Colorado’s effort to become the first state to accept crypto payments for taxes and fees.
In June, gaming regulators in Colorado, as well as Virginia, approved Barstool Sportsbook to accept deposits converted from popular cryptocurrencies via a crypto exchange platform.
Hartman said regulators should challenge their staff to find ways to navigate around archaic rules which could stymie the gaming industry’s transition to cryptocurrency.
“You don’t have to change the rules [to effectively regulate cryptocurrency],” he said.
Jed Nosal, a partner at the Boston law firm of Womble Bond Dickinson who concentrates on state regulatory oversight, agreed.
“The ability to have regulations that have — I don’t want to use the word flexibility — but at least have optionality that can be updated without having to do complete rewrites … is a key way,” Nosal said.
To preserve their authority to regulate digital payments in the future, Nosal said, regulators should not prohibit cryptocurrency.
Anticipating impending regulation by federal authorities, cryptocurrency companies have sharply increased spending on lobbying in recent years, according to Howard Glaser, global head of government affairs for Light & Wonder.
“In the 2020 election cycle, the crypto industry paid $500,000 in federal contributions. In the 2022 cycle through April, it’s $26m,” he said.
Although casino gaming is one of the most highly regulated industries in the world, cryptocurrency is virtually unregulated, creating what Glaser describes as “a fundamental clash.”
“The casino gaming industry has spent decades trying to build trust with the regulators, with the public, with consumers and players and with lawmakers. And that trust has been hard won,” he said.
“Crypto is kind of the opposite. It’s associated with volatility … with money laundering quite frankly; nobody understands it.”
Until there is more public acceptance of cryptocurrency, the gaming industry is going to be “rightly cautious about getting in the same room,” Glaser said.
First, the U.S. gaming industry should focus on transitioning to cashless payments and expanding internet gambling before turning to cryptocurrency, according to Glaser who spends much of his time lobbying state legislatures to legalize online casino gaming.
“Let’s get that under our belt first. Let the cryptocurrency regulatory environment catch up a little bit,” he said.
“Let’s see what Washington is going to do. [The U.S. Department] of Treasury is involved now. We need some consistent rules across states. Let that system mature.”
Hartman, the Colorado regulator, agreed it will take time to meld cryptocurrency into gaming in the right way.
“It’s walking before we run,” he said.
