DraftKings has dismissed concerns that an outlet’s decision to sell DraftKings gift cards with Bitcoin or Ethereum could raise anti-money laundering (AML) or know your customer (KYC) concerns, but has asked the supplier to withdraw the option.
For almost a year, the sports betting and daily fantasy sports company has been selling prepaid gift cards at retail outlets such as 7-Eleven, Dollar General and Speedway, redeemable on the company’s gambling websites.
But a Canadian company that sells game and gift cards, PC Game Supply, was offering the option of buying DraftKings cards with Bitcoin or Ethereum in increments ranging from $5 to $250.
That facility was touted by at least one affiliate, Betting USA, as “the simplest way for users to convert cryptocurrency into online betting funds”.
PC Game Supply did not respond to a request for comment, but a DraftKings spokesman said the company requested it to remove the option for cryptocurrency payments, even though he said it would not pose a problem for identification, given the betting company’s own identity checks.
The anonymity of gift card purchases can be a concern because they are not considered high-risk purchases requiring proper customer identification to the extent gambling deposits are, one payments executive said.
In general, the chance of an anonymous transaction provides “a window of opportunity for potential illicit activities” and cryptocurrencies supply an extra area of uncertainty, said Anna Zotova, chief risk officer of xpate, a London- and Singapore-based payments platform.
“One might say that the customer is being checked by the crypto-wallet/exchanger while purchasing crypto, however, there still are plenty of wallets/exchangers that conduct vague, if any, customer identification at all,” she said.
Another executive said combining cryptocurrency, gift cards and gambling “adds increasingly complicated layers to the KYC and AML compliance issues that will need to be managed”.
“Operators will need to be sure they’re doing due diligence at each step, ensuring that they’re not creating loopholes for criminals to exploit,” said Garient Evans, senior vice president of identity solutions at Trulioo.
A DraftKings spokesman contends that its gift card policies meet all AML, KYC and even safer gambling responsibilities.
Nevertheless, the spokesman said DraftKings had not given PC Game Supply permission to accept Bitcoin or Ethereum for gift card purchasing and, by Wednesday (November 24), that company seemed to have entirely removed DraftKings gift cards from its website.
Using cryptocurrency to buy a DraftKings gift card “does not, in any way, alter the redemption process”, the spokesman said.
“You cannot redeem the gift card without a registered DraftKings account, which means that anyone who is redeeming a DraftKings gift card has gone through our normal account registration process, and all our standard AML, compliance and KYC rules apply,” the spokesman said.
The gift cards can only be used with mobile accounts and are not allowed at retail sportsbooks, he said.
The convenience store purchase site is not a vulnerability, even if the stores are not adequately checking ages, the spokesman contended.
For example, a 16-year-old could buy a restaurant gift card, even though the restaurant might serve alcohol, as it is the restaurant’s responsibility to bar purchase of alcohol by a minor, he said.
An even younger teen could buy a Bass Pro Shops gift card, even though they would be ineligible to buy a gun at that retailer, he said.
DraftKings checks identification and addresses submitted by customers through multiple databases, the spokesman said.
Further, if a player who has typically deposited only $50 every few months through their bank account suddenly tried to deposit 100 $250 gift cards, that would raise the same red flags as if the player made the same deposit through their bank account, he said.
The UK Gambling Commission, watchdog for what is still the world’s largest regulated online gambling market, does not forbid use of cryptocurrency in gambling transactions, but requires licensees to account for increased risks and it has fined operators for inadequate risk assessments.
According to one attorney, gift cards can be attractive to some players for reasons including if they are applying for a mortgage, as gambling deposits may not look good if the bank reviews their debit accounts.
Online gambling companies “will normally have assessed this higher risk associated with use of pre-paid cards or wallets”, said Richard Williams, a lawyer with Keystone Law.