Is Bitcoin Gambling Legal?

Google Trend for "Bitcoin Casino"
The trend of popularity in the search term ‘bitcoin casino’.

Gambling on the blockchain has created both a litany of concerns and a wealth of opportunities for the market and regulators alike. Thousands of websites of varying repute have provided venues for consumers to gamble their money in the forms of cryptocurrencies stored anonymously on the decentralized transaction ledger known as the blockchain.

The nature of cryptocurrencies means that transactions involving the forms of payment are often hard to track, and even harder to regulate on the part of responsible authorities. For the United States, this has created several issues. From a financial and legal standpoint, it is hard to collect taxes on an income that is, in many ways, fundamentally disconnected from the personal identity of the person making the money.

Introducing gambling to the equation only further complicates the legal web in which the blockchain community is already entangled. Online gambling has a rich history in the United States. Recent debates surrounding gambling on the web with fiat currency has revealed the government’s relative reluctance to allow some forms of online betting.

But a comprehensive governmental policy is nearly impossible to come by. The way that the United States does regulation has not yet yielded a single, unified policy in all fifty states. Unfortunately for gamblers, understanding the rules and regulations surrounding cryptocurrency gambling first requires a knowledge of the particular jurisdiction under which the gambler falls, both in terms of legality and financial reporting expectations for tax purposes.

The States That Have Passed Online Gambling Bills
The States in green have passed online gambling bills. The States in blue had an online gambling bill in 2018.


Gambling Legality: Deference to Traditional Laws

In most U.S. jurisdictions, the legality of Bitcoin gambling comes down to existing legal frameworks regulating online gambling. When a state has already placed a pre-emptive prohibition on online gambling, this applies as much to cryptocurrency gambling as it does to gambling done with traditional forms of currency, such as the United States dollar.

This means that only around nine U.S. states either have legislation granting licenses for online gambling to select businesses or have such bills currently in the works. Though these bills do not specifically respond to the new trend of blockchain gambling, there is a distinct lack of legislation preventing online gambling within these states, which is the current prerequisite for online gambling using cryptocurrencies to be allowed.

Tough Sell for Crypto Companies

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Even in those areas of the country where cryptocurrency gambling may be legal, another major obstacle is the reluctance with which companies, especially those operating outside of the United States, approach allowing U.S. citizens to participate in their website.

The reason for this is firmly rooted in the seriousness with which the United States pursues regulatory compliance issues with the creators of gambling opportunities. Both the traditional, brick and mortar gambling models and the modern form of cryptocurrency and blockchain-based slot machines are held to meticulous compliance standards the moment they open their doors to tax-paying U.S. citizens. In addition to a litany of tax regulations, corporations allowed to deal with United States constituents must comply with a wealth of reporting, fairness, and transparency standards.

For the most relevant information on the legality and popularity of digital currency gambling, consumers should consult with authorities within their own U.S. jurisdiction.

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