The Risks of Online Gambling with Cryptocurrency
Many jurisdictions all over the world have stringent laws banning online gambling. However, gambling sites are beginning to leverage the complete lack of regulation when it comes to cryptocurrency to sidestep those bans.
So, online crypto gambling is thriving.
It is fun, exciting, and extremely easy: sometimes you need as little as an email to register on an online platform to gamble using cryptocurrency. But it poses serious risks for gamblers that are often overlooked.
This article will briefly analyze the concept of cryptocurrency and its appeal and will then dive into the risks of using this type of currency to gamble online.
What are cryptocurrencies?
Simply put, cryptocurrency is decentralized digital money secured by cryptography and based on blockchain technology —that is, a distributed digital ledger that keeps a secure, transparent, and decentralized record of transactions.
On the bright side, cryptocurrency is almost impossible to counterfeit or double-spend, so it might prove valuable to online gambling sites looking to become more secure and transparent.
However, their decentralized structure allows crypto to exist outside the control of governments and central authorities. Therefore, this new form of value is extremely unregulated.
The risks of online crypto gambling
1. Lack of legal framework
One of the main risks of online crypto gambling is the lack of regulation or a proper legal framework to govern this type of currency.
At the moment, the crypto space is a largely unregulated and decentralized landscape. Unlike fiat money, cryptocurrencies are not issued or backed by any government or monetary entity —either public or private— from which they can derive their authority as means of transaction.
Despite the fact that many governments are trying to come to terms with cryptocurrencies, there is still very little guidance on how to deal with this form of value from a legal point of view. Most approaches are based on a lot of guesswork.
Given that the legal standing of crypto is not clear in most jurisdictions around the world, their use in daily transactions, trading, and even gambling can have serious implications.
Cryptocurrency’s uncertain legal status, coupled with its use to bypass gambling bans, leaves online crypto gamblers unprotected from fraudulent practices. Most courts would have a hard time settling a dispute if they cannot accurately ascertain the legal framework governing these digital assets.
2. Volatility
All assets have a certain measure of volatility. However, cryptocurrency is probably one of the most volatile assets available in the market.
This can pose a massive disadvantage in terms of online gambling: players are constantly exposed to the risk of seeing the value of their coins drop significantly at any given moment. Of course, they can rise too, but this level of unpredictability can be pretty problematic.
Some gamblers might be able to capitalize on crypto's inherent volatility to increase their potential winnings in the long term. However, this requires a thorough understanding of the market, which many inexperienced gamblers may not have.
Also, the volatility factor does not favor responsible gambling, as it might play into the patterns that lead to addiction.
However, it is worth noting that not all cryptocurrencies experience the same volatility levels. Stablecoins —cryptocurrencies whose value is pegged to another currency, commodity, or financial instrument— present themselves as a safer option. They allow players to gamble online with a lesser risk of losing one’s earnings due to a drop in the crypto market.
Nonetheless, stablecoins are not bullet-proof. For instance, a well-known stablecoin called UST recently crashed. Although the coin was pegged to the value of the U.S. dollar, it went down to zero in a matter of hours.
3. Hacking concerns
Although the blockchain boasts a high level of security when it comes to transactions, online crypto gambling sites are not exempt from hackers trying to get their hands on coins.
To gamble online with cryptocurrencies, most websites require players to connect their wallets to the platform and transfer funds. Those funds are then stored on the blockchain that powers the platform and, as such, they are always at risk of being seized by skilled hackers.
And it has happened before. Hackers have stolen millions from blockchains powering play-to-earn games and even managed to breach some of the most renowned crypto exchanges.
Therefore, while the blockchain provides a significant layer of security to online crypto gambling, players should still be aware that they are exposed to potential attacks and breaches.
4. Prevention of problem gambling
One often overlooked but equally relevant risk of online crypto gambling is that there are usually no measures in place to prevent the development of problem-gambling behaviors in players. Crypto casinos can prove harmful for people with gambling addictions.
As mentioned above, given their unregulated nature, online crypto gambling platforms offer little to no consumer protection. That translates into poor or nonexistent measures to prevent gamblers from problematic patterns.
Websites, unlike casinos, have no safeguards in place to stop gambling addicts from placing bets. In fact, taking these measures in the digital world is a massive challenge, which is only exacerbated by the lack of regulation around crypto. Some online crypto casinos request as little as an email address to begin gambling, and it is no secret that a person can create as many email addresses as they want.
There have been cases of recovered gambling addicts who had registered and self-banned from physical casinos but ended up relapsing due to crypto online gambling. So, while appealing, this online crypto casino model might prove risky for problem gamblers.
Final thoughts
Cryptocurrency is an exciting, technology-powered form of value that promises to change many aspects of people’s lives —including their gambling habits.
However, while promising, this technology is still riddled with loopholes and issues that need to be addressed to protect consumers and the gambling industry as a whole.
So, apart from focusing on all the benefits of digital currencies, those who decide to engage in crypto online gambling should be aware of its potential risks and do their best to mitigate them.