Crypto betting has emerged as a favored recreational activity among investors, and the global market size for crypto gambling is projected to surpass $90 billion by 2024. From wagering on the Super Bowl with digital currencies to leisurely indulging in crypto wagering, there are numerous Bitcoin casinos available to choose from.
However, similar to other crypto-related endeavors, gambling entails risks and tax implications. This comprehensive guide delves into all the necessary details pertaining to gambling with cryptos, such as potential hazards, strategies to locate reputable gambling platforms, the legality of crypto and gambling, the potential taxation ramifications of winnings, and more.
Cryptocurrency Gambling 101
Similar to traditional casinos where you can wager your hard-earned cash, you can also gamble your cryptocurrencies at online Bitcoin casinos. In fact, a handful of Vegas-based casinos such as the D in Las Vegas have also started accepting Bitcoin.
The concept of crypto online gambling is not entirely novel and works just like gambling with fiat currencies such as dollars or pounds – you place your bet and either win or lose. As early as 2012, SatoshiDice, one of the initial Bitcoin gambling platforms, was launched, with hundreds of thousands of Bitcoins gambled away, despite their then insignificant value.
The popularity of using crypto for gambling continues to soar even a decade later, as evidenced by rapper Drake’s $1.2 million Bitcoin win on his Super Bowl LVII bet on the Kansas City Chiefs. As of now, cryptocurrency gambling has become a thriving industry, with the global market anticipated to exceed $90 billion by 2024.
With a plethora of Bitcoin casinos to choose from, as well as other crypto casinos that acknowledge prominent altcoins like ETH, XRP, DOGE, and more, the market is abundant with options. However, investors must exercise extreme caution in this market, as it is flooded with scams, ranging from fraudulent gaming websites that impede winnings withdrawals to phishing scams aimed at obtaining sensitive information.
Finding the Best Crypto Casino
A cursory Google search will yield a plethora of 2023 round-ups enumerating the best crypto and Bitcoin gambling sites, such as:
Nonetheless, just because a website appears in a list doesn’t mean it’s safe to use. In reality, numerous lists overlook the many hazards of crypto online casinos and might have been financially incentivized to include certain sites in the rankings.
Consequently, it’s crucial to conduct your own research to identify secure and reputable crypto casino and betting platforms. We advise you to undertake the following as a minimum while researching the best betting and casino sites:
- Check for any restricted countries. Several users create accounts on an online gambling site without completing KYC, only to discover later that they are unable to withdraw their crypto because they reside in a restricted country according to the platform. Always check whether your chosen gambling site operates in your country and complete KYC procedures early to avoid any withdrawal issues.
- Verify their license. Many crypto casino sites lack proper licenses to operate, particularly in certain states in the US. These sites may be compelled to withdraw their services or promptly freeze funds.
- Seek recommendations from other players. Considering suggestions from trusted individuals is worthwhile.
- Determine whether they have a responsive customer support team. Numerous complaints regarding online casino with crypto platforms pertain to poor customer service, with slow or no responses to issues. Check if there’s an active customer support team before depositing any crypto.
- Check community-led platforms such as Trustpilot and Reddit. If you’re unable to obtain a recommendation from someone you know and trust, perusing reviews on Trustpilot or searching for recommendations on Reddit might help you identify crypto gambling sites with less-than-stellar reputations. However, keep in mind that even these platforms are susceptible to fake reviews or astroturfing.
Advantage of playing in a Crypto Casino
In recent years, the online gambling industry has witnessed considerable growth, partly attributed to the advantages of cryptocurrency transactions in online gambling, which include:
- Faster processing of deposits and withdrawals compared to traditional payment methods
- Support for multiple payment methods, wallets, and currencies
- Stronger security practices based on blockchain technology
- Decentralized platforms that are open-source in nature
- Transactions that can be verified on a public ledger.
Risks of playing in a Crypto Casino
Like all things related to cryptocurrency, gambling with crypto carries certain risks, such as:
- A higher probability of fraudulent activity in an unregulated market
- Limited availability of reputable and reliable platforms
- Attractiveness to hackers and scammers who target crypto transactions
- Reports of some crypt casino sites refusing to release winnings to users
- Misleading or false advertising, particularly through questionable marketing practices used by online streamers who promote specific gambling sites
- Confusing licensing policies that may result in users being denied access to their accounts
- Insufficient protection due to minimal regulation.
Legality of Crypto Gambling
Whether crypto, gambling or both are legal or not depends on the country you are in. In some countries such as the UK, Australia, and Canada, both are legal and has not been regulated yet. However, in countries where cryptocurrency is illegal, such as China, Egypt, and Qatar, crypto gambling would also be considered illegal.
The US has a complex stance on this topic. There is no specific federal legislation governing crypto and gambling. However, online gambling, in general, is subject to state legislation, which varies across states. Some states, including Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, and West Virginia, have legalized online gambling completely.
Other states have specific regulations regarding online sports betting, such as Oregon and Indiana, while others prohibit online gambling altogether.
Therefore, the use of crypto in gambling exists in a legal gray area, where it is not strictly regulated, nor is it entirely legal. Nevertheless, reputable crypto sites have a privacy policy and terms of service that can help clarify any concerns regarding their services.
Gambling and Twitch
The context is important – Twitch has not issued a blanket ban on crypto gambling. Its popularity grew partly due to the advertising practices used to promote specific gambling platforms. Throughout 2022, many well-known Twitch streamers were sponsored to play and promote various crypto casino sites.
While Twitch generally permits gambling streams, these streams failed to disclose sponsorship, age-restrict to an appropriate audience, and even encouraged practices like using VPNs to access sites that were not operational in the US.
In September, Twitch announced an update to its policies after a high-profile campaign from other Twitch streamers who sought better advertising practices on the platform. The changes include prohibiting gambling sites that are not licensed in the US or other jurisdictions that provide sufficient consumer protection.
As a result, some gambling sites such as Stakes.com, Rollbit.com, Duelbits.com, and Roobert.com are now banned from Twitch, which is undoubtedly a blow to the industry. Nevertheless, Twitch has not implemented a complete ban on streaming gambling.
Crypto, Gambling and Taxes
Whether or not you’ll face a tax bill on your crypto gambling winnings depends on the tax laws in your country. While there’s no official tax guidance yet on cryptocurrency used in gambling, there are established guidelines on crypto taxation in general and gambling tax. In terms of gambling taxes, there are three types of transactions to consider: betting with crypto, winning crypto, and selling your winnings for fiat currency.
Betting with crypto is a grey area and subject to interpretation. It could potentially be seen as a capital gain or loss, but it’s not entirely clear.
When it comes to winning crypto, the tax implications vary by country. In the US, gambling winnings are subject to both federal and state income tax, whereas in countries such as the UK, Australia, and Canada, gambling winnings are tax-free.
If you decide to sell your crypto winnings for fiat currency, you’ll be subject to capital gains tax on any profit you make. However, determining your cost basis (the amount you spent on acquiring your crypto) can be tricky. In the case of gambling winnings, your cost basis may be considered zero, meaning that your entire winnings may be subject to capital gains tax in countries like Canada that use the adjusted cost basis method.
About the Author:
