Cryptocurrencies are being used in a growing number of industries and gambling is no exception. In this article, we explain the current regulatory framework for crypto gambling in different countries, so that your business can be prepared.
The gambling market is highly regulated across the world. Despite this, the industry is constantly developing new ways to make the lives of its users easier, while still complying with regulations. One of the latest additions to the market are crypto payment mechanisms. Users who prefer virtual assets instead of traditional currencies can now easily use them in many countries for gambling purposes.
Gambling companies accepting virtual currencies need to ensure they comply with all the requirements of the countries they operate in. To help with this task, Sumsub has prepared this article to discuss crypto gambling regulations in the US, UK, and Canada, with examples from several countries.
Crypto gambling is a type of online gambling that uses virtual currencies as a means of payment. The benefits of this method include the additional security offered by blockchain technology, and the ability for players to instantly withdraw money from their accounts, unlike in traditional online casinos.
Crypto casinos can be separated into two categories:
As of yet, there’s no such thing as crypto gambling regulation. As a rule, crypto gambling can be considered legal if the following conditions met:
For example, some forms of online gambling are prohibited in the US on a state level. Therefore, if a player wants to conduct online gambling from such a state, they’ll likely be banned.
When it comes to crypto in general, most countries have already regulated the sector. However there are places that have banned or restricted the use of cryptocurrencies (e.g., Iraq, Qatar, Algeria, Bahrain, Bangladesh).
In short, crypto gambling is neither prohibited nor allowed in many countries at the moment. However, the situation may change over the next several years. Therefore, gambling companies should ensure that they stay up to date with any relevant regulations.
It’s time to discuss the regulations on a country level. As mentioned in the section above, the US law doesn’t ban or regulate crypto gambling on a federal level.
FinCEN, a US government institution in charge of financial regulations, issued regulatory Guidance certain business models involving convertible virtual currencies. According to it, online casinos performing Convertible Virtual Currency (CVC) money transmission—or any person engaged in the business of gambling that is not covered by the regulatory definition of casino, gambling casino, or card club, but accepts and transmits value denominated in CVC—may be regulated under the Bank Secrecy Act (BSA) as a money transmitter.
Each US state can introduce its own regulations regarding the usage of crypto currencies and gambling services. Most states prefer to ban or limit the use of online gambling websites, with only Connecticut, Delaware, Michigan, Nevada, New Jersey, Pennsylvania, and West Virginia explicitly allowing online casinos to operate in their states. Therefore, if online gambling is legal in a certain state, the online casino should get a license in case it wants to operate legally.
Online gambling companies based outside of the US have to get a corresponding license for providing services on a state level, where applicable, if they want to onboard users. At the same time, they must ensure that users from US states where online gambling is prohibited don’t use their services. To do this, online casinos employ identity verification providers, which also conduct checks to prevent fraud and money laundering activities, as well as comply with necessary regulations.
The UK Gambling Act doesn’t contain any provisions regarding crypto gambling.
The United Kingdom Gambling Commission (UKGC) is the governmental body responsible for regulating all forms of gambling activities, including online. In 2017, UKGC issued a position paper, which considered the use of virtual currencies in gambling industry. The paper states that “the ability to convert any in-game items into cash, or to trade them (for other items of value) means they attain a real world value and become articles of money or money’s worth. Where facilities for gambling are offered using such items a licence is required in exactly the same manner as would be expected in circumstances where somebody uses or receives casino chips as a method of payment for gambling which can later be exchanged for cash.”
The Commission also requires to notify any change in the methods and/or payment processors through which online gambling platforms accept payment from users
If an online gambling business wants to accept virtual currency as a means of payment (either directly or through a payment processor which accepts digital currencies), it must satisfy that it can meet AML obligations and is acting in a socially responsible way. This means that casinos accepting crypto currencies need to employ proper verification providers to keep their licenses.
You can learn more about KYC/AML in UK from our guide.
Canada is in a peculiar position when it comes to online gambling, as its regulations are harsh on domestic casinos. In Canada, each province has the right to conduct and manage gambling services on their territory.
Online gambling is prohibited in most provinces, however gamblers are free to use foreign websites for any kind of gaming activity. Also, cryptocurrencies are permitted for use in Canada.
The situation may change in the near future. In 2022 a new online gambling market, iGaming, began operating in Ontario. Other provinces may want to follow in Ontario’s footsteps, but so far there have been no such announcements.
If you want to learn more about these recent developments, read our guide to gambling in Canada.
Companies operating in countries where online gambling isn’t prohibited, should ensure that they follow all crypto and gambling regulations and stay up to date with any new laws. Regardless of whether cryptocurrency is used in gambling services or not, companies should comply with the AML/CFT regulations, including employing different verification solutions, such as Know Your Customer (KYC).
