The Biden administration’s March 9 order directing federal agencies to coordinate efforts to regulate digital currencies has been welcomed by those in the gaming industry who believe regulators need a federal framework to feel comfortable with cryptocurrencies as a form of payment.
“The risk you run with any type of federal regulation is that the regulations inhibit rather than encourage innovation,” said Jonathan Michaels, senior vice president of strategic development and government affairs with Sightline Payments.
“We hope these regulations will help create a more robust ecosystem of domestic crypto companies which will follow U.S. banking laws unlike many of the companies in the space today,” Michaels told VIXIO GamblingCompliance.
The more transparency that exists in the ecosystem, Michaels said, the better it will be for the gaming industry to get more actively involved in the space.
Currently, multiple federal agencies, including the U.S. Department of the Treasury and Department of Commerce, are studying cryptocurrency laws to make sure they align with those of U.S. allies. The federal Financial Stability Oversight Council is also investigating any concerns over illicit financing.
Additionally, the Treasury Department and Federal Reserve are studying the future of payments and money, including the issuance of a central banking digital currency (CBDC). Policy recommendations are expected to be announced within the next six months.
As things stand, U.S. gaming operators, state regulators and lawmakers, except for those in Wyoming, have kept their distance from digital currencies even as they focus on regulating and rolling out cashless wagering on casino floors.
Wyoming last year became the first state to expressly regulate the use of cryptocurrency for wagering. A state law passed in April 2021 allows online sports-betting operators to accept “digital, crypto and virtual currencies” as funding methods for accounts.
Even though it is allowed by law and through regulations, Wyoming officials are not yet seeing cryptocurrencies being used to wager on sports.
When asked if gamblers were using exchange kiosks to convert their cryptocurrency for cash to wager on sports, David Carpenter, project manager online sports wagering/skill games with the Wyoming Gaming Commission, said they have not seen or heard of any such activity.
“In the future, as operators begin to explore the concept, I envision we permit them as payment processors, which would allow us to exchange data more efficiently,” Carpenter told VIXIO.
Several casinos in downtown Las Vegas, including Circa and The D, host third-party exchange kiosks, similar to an ATM, allowing patrons to convert digital currency to cash or vice versa. Cryptocurrencies cannot be used for gaming, however.
Despite their potential benefits, most U.S. gaming regulators are not close to considering new or updating existing regulations to govern the use of blockchain technology or digital currencies, such as Bitcoin or Ethereum.
“The use of blockchain has the potential to ease many of the challenges the industry faces — particularly in areas like responsible gaming and licensing, in addition to the movement of money,” Michaels said.
“This blockchain based infrastructure is often referred to as 'Web3' — essentially decentralizing the web to provide greater benefits to the individual. We are actively looking into Web3 opportunities to bring into the regulated U.S. gaming market because of the potential benefits.”
As for cryptocurrency, the Quinnipiac University released a poll last week that found 50 percent of Americans under the age of 50 believe cryptocurrencies will become a dominant economic force in the long term.
“Similar to digital payments, we need to ensure that the gaming industry has the ability to engage with emerging opportunities like crypto and the start of that adoption begins with education,” Michaels said.
Among the larger gaming markets of Nevada, Pennsylvania and New Jersey there are no regulations governing the use of cyrptocurrencies on casino floors, and direct use of digital currencies to play slot machines or wager on sports and table games is not permitted.
“Crypto is not accepted at Pennsylvania casinos,” said Doug Harbach, communications director with the Pennsylvania Gaming Control Board.
“While we are closely following the crypto market and its acceptability as a currency, the [control board] is currently not drafting any regulations pertaining to it,” Harbach said.
Steven Barnes, a spokesman with the New Jersey attorney general’s office, simply said: “Cryptocurrency is not authorized for the receipt of wagers or payout of winnings.”
Jessica Franks, a spokeswoman with the Ohio Casino Control Commission, said it is a similar story in Ohio.
“The commission has not yet been approached by any of our operators regarding cryptocurrencies,” said Franks, whose agency is currently in the process of developing regulations for sports betting.
“Should the issue come to us in the future, we would of course evaluate any proposal to ensure it does not impact the integrity of gaming in Ohio.”
Supporters of digital currencies within the gaming industry believe regulations are needed but worry they will be as stringent as those rules regulating banks and financial institutions.
“At the end of the day for crypto to be successful, it needs to move beyond a speculative asset class and towards utility as a payment instrument,” Michaels said.
“The legislation that has been introduced in the [U.S.] House [of Representatives] around stablecoins is the perfect example of how to provide a framework for this technology, but ensures the regulations aren’t so prescriptive they don’t stifle innovation.”