Malta: Blockchain Gambling: Stepping Up The Game

Last Updated: 1 November 2017
Article by Alistair Facciol

The technology underpinning Bitcoin – the blockchain – has already been described as the technology which could be even more disruptive than Amazon was two decades ago.1 Simply put, blockchain is a decentralised ledger which records transactions. These transactions are then shared amongst the network of users of the same database, who verify the accuracy of such transactions. New transactions are added in new blocks and connected to the previous blocks on the chain, meaning that a blockchain grows over time and contains a detailed history of all the transactions that have taken place. When new blocks are created, they are "timestamped" which allows the viewers of the ledger to ascertain the order in which the transactions have occurred. This, amongst other features, ensures the security of the data contained in that block and makes it unchangeable.

Cryptocurrencies, like Bitcoin, are just one use of blockchain. The technology is being considered across various sectors, including gambling. The Malta Gaming Authority's (MGA) executive chairman Joseph Cuschieri, has reportedly stated that "cryptocurrencies and blockchain technologies are emerging innovations which need analysis and an assessment of the risks and opportunities for potential adoption in the gaming sector".2 The MGA, in its 'White Paper to Future Proof Malta's Gaming Legal Framework' states that the "Authority is cognizant that the rise of cryptocurrencies is inevitable. Conscious of the need to remain at the forefront of innovation and to keep up with new developments in technology and the industry [...] the Authority is committed to allow the use of cryptocurrencies by its licensees in the immediate future".

A wider spectrum exists for the use of blockchain technology within the gambling industry, in particular, relating to the operation and recording of gambling transactions. Smart contracts could be a potential way in which to increase transparency in relation to player winnings and the randomness or fairness of a result. As it stands, players have little or no means of verifying that winnings in a lottery are adequately distributed. This can also be said of the randomness or fairness of a result. Both these elements bring to the fore the importance of trust in the relationship between a player and the gambling service provider. This is where blockchain technology may alleviate some concerns and provide a possible solution to the situation.

Seeing as blockchain technology is based on a decentralised model, the alteration of the results is nearly impossible, with some proposing the term "immutable". The verification of transactions throughout the network will result in a situation where no one player would possess any sort of advantage throughout the whole process involved in gambling. This situation, in turn, will avoid having instances of manipulation of records contained in the chain. Effectively, gambling transactions on the blockchain are transparent to the other parties forming part of the same network, meaning that such transactions may be verified. This principle of transparency may be extended to the distribution of winnings  within a betting exchange, for example. Through the use of smart contracts, the rules of the game, the recording of bets in addition to the payout of winnings may be catered for, potentially also meaning that players may then receive their winnings within a very short period of time.

Without any doubt, the use of blockchain technology within the realm of gambling will give rise to various regulatory challenges, such as the issue pertaining to the location of the remote gambling equipment. If blockchain technology is used, certain essential elements such as the random number generator and recording of transactions will be taking place in a decentralised fashion – this implies that various hardware will be held in different jurisdictions, which could potentially lead to a situation where more than one regulatory authority might attempt to impose its regulatory regime. Another element which might give rise to regulatory challenges is access to regulatory authorities. The situation today is one where regulatory authorities reserve the right to request access to a licensee's remote gambling equipment. If one were to consider the numerous hardware elements present within a blockchain network as remote gambling equipment, having a decentralised model will certainly be a challenge for any regulatory authority requesting access.

Even though blockchain technology might seem to be challenging, certain regulatory authorities such as the Malta Gaming Authority are still keen on embracing it. Certainly, blockchain technology has generated a large amount of interest across various communities. What seems to be clear is the fact that blockchain technology will revolutionise all industries, including gambling.

Footnotes

1 Frank Holmes, 'Blockchain technology could be even more disruptive than Amazon was 2 decades ago', Business Insider, 19 September 2017;

https://www.coindesk.com/immediate-future-malta-gearing-greenlight-bitcoin-gambling/

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Alistair Facciol
 
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