29 April 2024

Bit-By-Bet: Cryptocurrency As Real-Money Game Stakes And Rewards (Video)

Gamma Law


Gamma Law is a specialty law firm providing premium support to select clients in cutting-edge media/tech industry sectors. We have deep expertise in video games and esports, VR/AR/XR, digital media and entertainment, cryptocurrencies and blockchain. Our clients range from founders of emerging businesses to multinational enterprises.
Cryptocurrencies and blockchain technology are revolutionizing the gaming industry.
United States Technology
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Cryptocurrencies and blockchain technology are revolutionizing the gaming industry. These groundbreaking technologies are unlocking new gaming experiences that center around true digital asset ownership, the creation of decentralized virtual economies, and the potential to earn real-world value. This revolutionary shift is not only transforming how we play games but also how we perceive value within these digital landscapes.

Cryptocurrency-based games offer players unprecedented ownership over in-game assets such as skins, in-game resources, and NFTs through blockchain technology. Unlike traditional gaming platforms where the game developer controls assets, crypto games allow players to truly own these assets, granting them the freedom to trade freely on open markets and exchange for cryptocurrency or fiat currencies. This paradigm shift alters the way gamers interact with their games, creating a new level of engagement and investment.

Real-money gaming operators can glean valuable insights from blockchain-based gaming when integrating cryptocurrencies into their platforms. Key lessons include ensuring transparent ownership of all crypto assets, establishing a clear and verifiable ledger tracking transactions, incentivizing participation through token rewards programs, and optimizing user experience for crypto novices. Operators should focus on giving users true control of funds while adhering to straightforward terms and conditions around deposits, wagers, withdrawals, and interchangeability between cryptocurrencies and fiat currencies. The success of blockchain economies depends heavily on accessibility, guidelines, and meaningful value propositions. By emphasizing ownership, transparency, incentives, and ease of use, operators can responsibly capitalize on the promise of cryptocurrency to attract new demographics and build operator-user trust.

Bitcoin Benefits

For developers, the benefits of integrating cryptocurrencies and blockchain technology into their platforms are plentiful and potentially transformative:

  • Faster, Cheaper Transactions and Payouts: Cryptocurrencies enable faster and more cost-effective transactions compared to traditional banking methods. This means quicker payouts for players and reduced overhead costs for gaming platforms.
  • New Revenue Streams Through NFTs and Tokenized Assets: By tokenizing in-game assets, developers can create new revenue streams. Players can buy, sell, and trade these assets, generating additional income for both parties.
  • Improved Data Transparency via Blockchain: Blockchain technology provides a transparent and immutable record of all transactions. This transparency can enhance trust and security, fostering a healthier gaming ecosystem.
  • Access to a Rapidly Growing User Base: The popularity of cryptocurrencies is surging, particularly among younger demographics. Developers can tap into this rapidly expanding user base by integrating crypto into their platforms.

No Sure Thing: Minimizing Risk

Only Wyoming and Colorado allow sports wagers using pure cryptocurrencies. But even in these jurisdictions and given crypto's potential contribution to revenue growth, many sportsbooks are understandably hesitant due to the potential liability the operators must assume.

  • Third-Party Exchanges: The solution to this problem may lie in regulators streamlining the use of third-party solutions. Legal cryptocurrency exchanges could allow bettors to deposit their cryptocurrency to fund a sportsbook account. The exchanges would assume responsibility for AML and KYC compliance, giving betting parlor operators an extra layer of security. Under this scheme, operators offload monetary standards for pegging valuations and controlling fluctuations in cryptocurrency pricing This not only reduces the risk for the sportsbook but also helps keep overhead costs down by preventing the need to hire additional employees to manage these aspects of business operations. Easing the engagement process would reduce transaction costs, making third-party outsourcing economically viable.
  • Host Coins: Sportsbooks and other real-money gaming operators could create proprietary tokens or host coins to convert player accounts at set values. This would aid in AML and KYC compliance regulations while stabilizing cryptocurrency pricing. This approach offers end-users a clear understanding of how their assets will be created and the future worth of these assets. By creating tokens, gaming sites assume greater control over their platform. Sites would still have to solve issues surrounding the payment of winning bets. Would payouts be made in dollars or cryptocurrency? If the latter, tax implications need to be considered. The classification of cryptocurrency — as a security or otherwise — is still undecided, posing a significant hurdle to its widespread adoption in the sports betting industry.
  • Regulatory Clarity: The lack of clear cryptocurrency regulation poses a major risk for real-money gaming operators considering adopting digital currencies. Without proper oversight and legal frameworks, cryptocurrency gambling exists in a decentralized gray area. Most jurisdictions have yet to establish definitive guidance on the legality of crypto transactions. This legal uncertainty leaves operators and players vulnerable to potential fraud. To encourage mainstream adoption in gaming, cryptocurrencies require increased regulation at both federal and state levels. The federal government needs to clarify cryptocurrency's classification and develop oversight policies. President Biden's recent executive order directing agencies to form crypto regulations is a step in the right direction. However, Congress should also pass legislation codifying digital currency rules to promote market stability. Similarly, states must create their own regulatory frameworks governing cryptocurrency payments, payouts, and compacts with other states for interjurisdictional wagering. Well-defined state laws would incentivize bettors to use in-state crypto gambling options, increasing potential tax revenues. Allowing interstate transmission of wagers between jurisdictions where sports betting is legal could further boost adoption.

Raising the Stakes

When real-money gaming operators decide to incorporate cryptocurrency into their platforms, they take their operations to a new level. They also increase the number of variables and open additional areas where things could go wrong. As a result, they need to incorporate several safeguards to protect themselves and their players. An attorney well-versed in Web3 and gaming law can guide operators through the maze of challenges that come with crypto integration and help capitalize on the immense opportunities.

Jurisdictional Compliance

One of the biggest challenges cryptocurrency gaming presents is the complex patchwork of regulations across different jurisdictions. Requirements related to licensing, reporting, responsible gaming, and more can vary widely depending on location. Gaming operators must understand the relevant compliance obligations to avoid painful legal penalties. Legal experts can review the platform and operational structure for any weaknesses and offer guidance on adapting to meet regulations.

Terms of Service

For platforms that facilitate player-to-player transactions, crafting legally sound terms of service is especially crucial. The nature of digital currencies can create ambiguities around ownership, trading, and real-money value that open the door to disputes and liability risks. A real-money gaming attorney can draft customized terms of service that set clear rules of governance over assets while appropriately limiting the operator's responsibility. This provides the legal and ethical clarity and legal protection needed in an evolving ecosystem.

Player Protection

Wherever there is money to be won, the temptation exists to get it through illegal means. The ability to win money through skill-based gaming also invites fraud and cheating. Keeping players on the right side of the law and providing provably fair games is even more difficult when cryptocurrencies are involved. Traditional regulations do not neatly accommodate new blockchain use cases. Crypto's anonymity also makes some players more susceptible to compulsive gambling, enables underage participation, and gives rise to money-laundering schemes. Legal expertise is essential for setting real-money gaming sites' AML/KYC, compliance, and responsible gaming standards tailored specifically to cryptocurrency-based games. This helps foster ethical ecosystems.

With diligence and foresight, real-money gaming operators can take the plunge into cryptocurrency, keeping compliance and ethical gameplay top of mind. The result will be next-generation gaming experiences that excite players while meeting the highest standards of integrity.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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