Blockchain’s advocates believe that its advent has created a thriving new ecosystem of pioneering businesses at the cutting-edge of tech. But for many of those outside of the crypto world, these developments have been met with scepticism and even hostility.
Ethical and environmental concerns have plagued the industry, and the backlash against cryptocurrencies, Non-fungible Tokens (NFTs), and other blockchain-based initiatives has been pronounced and widespread. Crypto-focused start-ups have often, whether fairly or not, been cast as the pirates of global enterprise.
One of the main subjects of this growing concern is iGaming and crypto gambling.
iGaming (or online gambling to the rest of us) is booming. Millions of gamers around the world enjoy the vast array of games available at the click of a button. The gambling industry has long thrived despite significant reputational challenges – and the advent of blockchain has pushed this to another level.
Just a few short years ago, online gambling faced a ton of technical burdens that limited its growth. For example, most online casinos would detect your location through your IP address to determine if you were legally allowed to play in your country or state. For users faking their location through Virtual Private Network (VPN)use, credit card processors and banks would restrict deposits.
But cryptocurrency’s ease of borderless payments changed all of that, and the brakes were taken off an industry that has swept the internet by storm.
Flash forward to today, and the online gambling landscape is completely different – the technologies to evade and anonymize the use of websites has left casinos to effectively self-regulate. The result is something akin to the Wild West – with a slew of characters that span the entire gradient of legal and ethical boundaries.
Critics say these crypto casinos enable (or even encourage) law breaking by their users (by allowing VPNs freely and performing very little due diligence) and should be regulated out of existence. So, what’s the truth? Are they pirates or pioneers? Should we be excited by the new world or fearful of its lack of regulation? Or perhaps it’s not that simple. Cryptocurrency Report decided to investigate.
The advent of the online casino sparked wide-ranging change in the gambling industry, as well as its regulators. The appearance of gambling on the world wide web, with its ability to transcend borders, created a regulatory migraine – how could you enforce geographical and age restrictions in a newly borderless world?
Over the years, innovations like ‘Know Your Customer’ verification systems have made most casinos relatively watertight. It is almost impossible in the United Kingdom (UK), for instance, to gamble without linking your account to a UK bank account and going through a stringent identity verification process.
But cryptocurrencies have changed the game. The in-built privacy and anonymity of crypto has uncoupled identities from sources of funds. Faced with this new challenge, regulators have placed the burden of responsibility on the casinos themselves – meaning they must make reasonable efforts to determine whether their customers are legally able to gamble.
Accelerated during the recent pandemic, one of the biggest players in the iGaming world at this moment is Stake.com. Stake is rumoured to be raking in tens of millions of dollars per day, with a regime of global celebrity ambassadors and franchises including Drake, Watford FC, and the UFC. Most of these celebrities have massive fanbases in geographies where gambling is highly regulated, or altogether illegal, including the United States (US) and UK.
Because these transactions are done over the blockchain, it’s possible to see the sums being made by these companies if you know where to look (and how to interpret what you’re looking at). If you don’t, suffice to say that the figures are staggeringly high.
But with their success has come increased scrutiny, resulting in them coming under fire for what their critics describe as their questionable practices. After a bit of research, I quickly discovered some of these critics may have a very good point.
The majority of Stake users that were spoken to or came across were clearly, and often publicly, operating in countries or states where gambling was against the law. The tool they used to keep themselves beyond the reach of the law’s not-so-long arm? VPNs.
VPNs work by allowing users to ‘mask’ their online identity, by redirecting IP addresses through remote servers. In many cases, VPNs are used for legitimate reasons – increasing online privacy by preventing the constant data collection that is now part and parcel of regular browsing.
But the jump from evading cookies to evading the law is not a difficult one.
VPNs allow users to select the server that their IP address is run through, and in doing so, allow them to pose as a user from another country. This, of course, enables them to skirt geolocation restrictions, and gain access to the websites, including online casinos, that are banned in their country.
To see just how easy it was to gamble online in my state, where gambling is against the law, I decided to give it a go. Now, I’m not going to detail exactly what I did (as I don’t want to encourage others to do the same) but suffice to say it was very easy and I could have gambled freely (but of course I didn’t).
The fact I could do this so easily should be a concern to Stake, to regulators and to the brands who choose to partner with Stake. For example, Stake’s principal front-of-kit sponsorship of Watford FC clearly says “Stake.com.” Although Watford FC has global reach because it participates in the most-watched sports league in the world, technically the majority of Watford FC’s fans should be betting on stake.co.uk in order to comply with the UK’s online betting rules. This does raise ethical questions, should a sports team promote a site to their fans when, to access the site, the majority of these fans would have to breach the law by using a VPN?
There’s no doubt that VPNs are being widely used to access Stake. Countless streamers and social media influencers, (some of whom may have been paid by Stake to promote their sportsbook) that I came across were clearly using VPNs to bet from places like Miami, Chicago, and San Diego. Gambling is banned in all these states. Yet, amazingly, there it is in plain sight, simply by searching “Stake” on popular streaming platforms like Twitch.
These influencers also have huge reach, so not only are they breaking the laws themselves, but it could be argued that they’re encouraging their followers to follow suit. For the largest influencers, Stake appears to have paid them exorbitant sums of money to flee the US and stream to their largely US-based audiences from the safety of Canada, where online gambling is legal.
Although Stake doesn’t actively encourage the usage of VPN to evade legal restrictions, they certainly don’t do anywhere near enough to discourage it. The Stake Terms of Service on their website, for instance, doesn’t mention the use of VPNs at any points. Law enforcement places the burden of responsibility on the backs of casinos to enforce geographic restrictions, but in this case, it would appear that Stake is doing little to no due diligence here, instead promoting Stake.com as “VPN Friendly” as a feature, encouraging users to download popular VPNs, which are freely available.
There are comments in casino forums claiming that Stake.com monitors locations from the background, but with the free use of VPNs and seemingly without using any of the online gambling industry’s most reputable location detection software providers.
This is not the case with all casinos, and not even all crypto casinos. After my experiences with Stake, I tried to access a number of different sites, including Bitstarz, Cloudbet, Roobet, 1xbit, FortuneJack, and a few others through the same means and with varying degrees of success.
While I didn’t resort to more advanced techniques of geolocation manipulation, I was not able to access several of these websites from home – thanks to an apparently greater sense of obligation to self-govern, and quick recognition that I was using a VPN. Recognizing & thwarting VPN-use is not rocket science, and some crypto casinos have joined the majority of well-known sportsbooks & casinos in regulated markets – think DraftKings, William Hill, Caesars, and the like – in using one of a handful of popular geolocation platforms when onboarding new customers.
But as you can imagine, adhering to local laws is bad for business.
There are all sorts of legal, and ethical, questions that this throws up. What motivates a casino in this emerging category to self-govern, when it clearly pays to break the law? What measures can be put in place to ensure a level playing field across the sector so that rule followers don’t lose out on market share to their less scrupulous competitors?
One thing is for certain – regulators and authorities have a number of new challenges on their hands when it comes to gambling, and it seems likely that this is an issue that will continue to grow in relevance. Especially when the world’s most sought after and influential personalities can be so easily bought by those with the deepest pockets.
There’s a lot of money at stake.
