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Why US Online Casinos Don’t Accept Cryptocurrency

Since its inception, Bitcoin has provided a way to make secure, anonymous, frictionless online transactions. While many online merchants now accept Bitcoin as a payment method, the regulated US online casino industry does not. There are several good reasons why not, with anonymity probably being one of the main ones. In a strongly regulated industry, anonymity allows users to break various rules.    

Gambling is strongly regulated in the US

Bitcoin may be a hit with online bettors and operators wanting to reduce fees, lower chargeback risks, and find a way around legacy payment systems, but this is only possible in jurisdictions where there is little regulatory oversight. In the US, the gambling environment is strongly regulated. Regulation is important to ensure that casinos provide a safe and fair environment for gamblers.   

Pennsylvania, New Jersey, Nevada, Delaware and potentially many other US states are required to have verifiable information about their patrons. There are, therefore, obvious reasons why many states are reluctant to allow anonymous registrations at online casinos for those who want to play gambling games.  

It’s difficult to vet player identity

Crypto-wallets are not associated with names and this makes it hard for regulated online casinos to fully vet players. When it comes to storing cryptocurrencies, some owners even divide their crypto funds into parts and store them in different wallets to diversify their funds. Some casinos other than those in the US do accept cryptocurrency directly and this eliminates the need for a player to create an account and verify identity. Gambling winnings are transferred directed into electronic wallets where it’s easy to convert them to cash or make other transactions.  

Many states legally require operators to identify players as well as record and report them. There is a broad consensus among states that meticulous logs should be kept of all player profiles. Players usually have to produce a valid government-issued ID, a driver’s license or a passport, in addition to an accepted method of depositing and withdrawing money and a utility bill.  

It’s hard to prove legal age

Not allowing underage gambling is a major factor in granting an operator a license. Responsible operators do not allow underage gambling but the anonymous nature of cryptocurrencies makes it hard to prove the age of the creator of an account. 

The younger generation is very digitally savvy and they can take advantage of the anonymity of cryptocurrencies to get around the age restrictions for playing at online casinos. Operators that don’t prevent such underage players from playing could face harsh consequences and even risk losing their licenses.   

They may tarnish the casinos’ public image

The chairman of the Nevada Gambling Control Board, AG Burnett, stated that they have looked at digital currencies and believe they are not appropriate for use in casino gambling at this time. There is too much ambiguity that surrounds cryptocurrencies. They have a reputation for being very volatile and fluctuating greatly in value. 

Larger operators are choosing to stay away from them right now as the risks they pose to business are too high. There are some casinos that have Bitcoin ATMs and accept cryptocurrency for non-gaming transactions, like hotel expenses, but that’s as far as it goes.   

They can create money laundering issues

Online casino operators fear that money laundering may take place in their casinos. When users are anonymous, this can be a problem. Gamblers can gamble with money they’ve acquired by illegal means and gradually transform it into “clean” money. The anonymity means that casinos cannot trace fraudulent usage back to the source as there is no bank account in the player’s name. Even the ID a player submits could be a fake. 

The IRS taxes gambling winnings

Players must provide their social security number, tax ID number (EIN), and other information to make reporting winnings possible. Cryptocurrencies offer users anonymity in payment processing and that means they can get around tax authorities when transacting online. 

Tax reporting, particularly with regard to cryptocurrencies, is a major concern for the regulated online gaming industry in the US. The recent crypto boom comes at the same time as the US could pass far-reaching cryptocurrency tax reporting legislation. 

Conclusion

Cryptocurrency was born out of disillusionment with central banks, governments and established financial systems. It provides a way to make anonymous and secure online payments but the regulated US online casino industry in the US does not accept this payment method for the reasons listed above. Industry observers in the US believe that the intersection of cryptocurrency and gambling won’t be happening for some time. Before agreeing to cryptocurrency use in casinos, regulators will want to see reassurances that casinos can identify gamblers and the source of funds.  

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