Is Crypto Gambling Legal? Everything You Need to Know…

Is Crypto Gambling Legal? Everything You Need to Know...

Updated: August 1, 2022

Crypto gambling is a new and exciting way to bet in 2022. However, there are no specific laws in place regulating this new form of gambling. This leaves many players wondering if crypto gambling is legal – or whether it can get them in trouble. 

In this article, we will explore the legal landscape of crypto casinos and gambling with cryptocurrency and try to answer the question: is crypto gambling legal?

Of course, there is an important disclaimer here. Laws vary between countries and (in the US) also between states. 

Since a lot of our readers are from the States, this is the country we’ll be focusing on. But, if you’re based in the UK, Canada, or Australia, don’t think we’ll leave you out. We also include information about those countries. 

We will cover the various laws and regulations in place for:

Online gambling – since virtually all crypto-friendly casinos are operated online; andCrypto in general – because virtual currency is still a new and underregulated asset class. At the end of this article, you should have a good understanding of the legal status of gambling with crypto in the US, Canada, UK, and beyond.

The information provided in this article does not, and is not intended to, constitute legal advice; all information, content, and materials available are for general informational purposes only.  

In a time crunch? Here is what you need to know about crypto gambling legislation: 

These laws are about the casinos, not about players. In other words, it’s your country trying to regulate the gambling companies- whether that means collecting taxes or imposing certain limits on the business practices. As a result, governments don’t really go after individual players, they are more interested in pursuing the casinos.  There is no federal-level law to outlaw online betting. Even though there is an act to limit transactions to online gambling sites, there is no federal law to prohibit online gambling. Your state determines if online gambling is allowed. This applies to all types of online casinos, not just crypto casinos.Any legal casino should have a US-recognized license. Overseas casinos like Stake and BC.Game are licensed by the government of Curacao. Unfortunately, this means they can’t operate in the US, since the country doesn’t recognize that license. To avoid getting in trouble with American authorities, they will ask customers to self-exclude. 

And that’s it in a nutshell. But (as with most legal topics), understanding the issue in-depth takes a little more than that. Let’s explore the legality of casinos in more detail. 

Before we get into crypto casinos in particular, let’s explore the general legal landscape of gambling in the United States. 

This will give you a better understanding of the issues at hand and how they might affect you as a player. 

Is Gambling Legal in Your Area?

This is the first question you should ask yourself before gambling online. 

The answer is not always simple, as the legality of gambling depends on the type of gambling, your location, and other factors. 

In general, gambling is legal in the United States at the federal level. 

However, individual states have the authority to regulate or prohibit gambling within their borders. 

This means that the regulations on casinos and betting sites can vary from state to state. Rules vary, but there are very few fully gambling-free states. In fact:

Hawaii and Utah are the only two states that have a complete ban on gambling.

Other states have more permissive laws that allow casinos, horse racing, and lottery games. Brick-and-mortar, casino-style gambling is usually restricted to certain areas. These could be specific cities (like  Atlantic City, New Jersey) or specific areas like Indian reservations or riverboat /beachfront casinos. 

Is casino-style gambling not restricted in any states? As of 2022, Nevada and Louisiana are the only two states that allow casino gambling throughout their state, without limiting it to cities or reservations. 

What About Online Gambling?

The legality of online gambling in the United States is a bit more complicated. 

At the federal level, there is no law that specifically prohibits or regulates online gambling. The more… legally inclined of you might wonder: 

What about the Unlawful Internet Gambling Enforcement Act of 2006. It’s all in the name, right? Shouldn’t it mean that Internet gambling is unlawful? 

Wrong.

While the UIGEA does make it illegal for businesses to knowingly process payments related to online gambling, it does not make online gambling illegal for individual players. 

In other words:

The UIGEA does not make it a crime for you to gamble online.

The UIGEA only affects the businesses that process payments for online gambling sites – mostly banks, and it has been controversial from the get-go. 

When it was first passed, The Economist wrote that the provisions were “hastily tacked onto the end of unrelated legislation” and a number of experts and politicians criticized the bill for being too broad and for not doing enough to address the underlying problem of problem gambling. 

The US also lost a World Trade Organization dispute with Antigua over these online gambling restrictions. 

Finally, let’s look at legal precedent? Has the UIGEA ever been enforced? 

In the United States v. Scheinberg trial of 2011, three of the world’s biggest poker sites – PokerStars, Full Tilt Poker, and Absolute Poker – and their respective CEOs were indicted for violating the UIGEA. 

They were accused of tricking banks into processing payments for online gambling by disguising them as payments for other things like online merchandise and services. 

The DOJ seized the domain names of the sites. All three providers subsequently stopped offering real-money games to US players and the domains were returned. 

But you’re probably not asking about big trials against corporations:

🤔 What about ordinary players?

Has anyone gotten in trouble for playing at an online casino? 

The answer is a resounding no. Since the UIGEA was never targeted at individual players, there has never been a case of an individual being prosecuted for gambling online in the US. 

So, to sum up: online gambling is not illegal in the US at the federal level. There is no law that specifically makes it illegal. And there is no precedent of anyone being prosecuted for gambling online.

What about the state level? 

Many states have laws that prohibit online gambling, but others do not. But it gets more complicated than that: 

Understanding Casino Licensing

To operate legally, a casino must have a valid license – an official document, issued by gaming authorities, and they come with certain conditions and requirements that the casino must meet. This is where it gets tricky for online casinos. 

While no federal law explicitly prohibits US-based players from gambling online, most states aren’t willing to license them, either. In fact, there are only three states where online casinos are explicitly legal: Nevada, New Jersey, and Delaware. 

So, if an online casino is based in the US, it may not have a valid license, which means it’s operating illegally. This does not apply to offshore casinos – for example, Stake is based in Curacao and it works under a Curacao eGaming license, which means it’s completely legal. 

The catch? 

Stake operates legally, but it’s not allowed to accept US players – to do that, it would need a US-recognized license. The Curacao license, unfortunately, is not.

Curacao-licensed casinos are legal – but their licensing doesn’t allow them to take US players.

Once again, however, this is a matter of casino Vs government not a government Vs player. If an unlicensed casino is found to have been operating illegally, it’s the casino that’s in trouble, not the player.

The same goes for licensed casinos – if they’re caught violating the terms of their license, they’re the ones who will suffer the consequences.

To avoid getting in trouble, Curacao-licensed casinos ask US players to self-exclude from their services. Some of them also enforce identity checks – confirming your identity before you cash out. This is done for fraud-prevention purposes, too, as well as to avoid money laundering. 

The Legality of Sports Betting

So far, we covered casinos – both brick-and-mortar and online. But this isn’t all there is to gambling in the United States; we haven’t covered sports betting, yet.

The first thing to know is that sports betting is not currently legal in all states. However, the federal-level prohibition of 1992 was overturned. Following a May 14, 2018 decision of the United States Supreme Court, the entire law was deemed unconstitutional. The decision was 6-3 in favor, with the dissenters believing that the issue should have been left to the states. 

This means that, as of right now:

Each individual state has the power to legalize or ban sports betting within its own borders.

In the aftermath of the Supreme Court ruling, multiple states have already legalized it, and many more are considering doing so. 

The next thing to know is that, even within states where it is legal, there are still restrictions. For example, in Arizona, both online and in-person sports betting are legal, while Delaware only allows in-person betting. 

Finally, as with casinos, there is still licensing and safety to consider. Much like with the casino laws, though, these regulations are aimed at providers and won’t get individual players in trouble.

Ultimately, as long as you bet at a safe Bitcoin sports betting site, chances are it will be okay.

Where rules exist, there also exists a way around them. Gambling enthusiasts have found different methods to avoid the restrictions that the law has imposed. While we don’t condone them, here is what most players can do:

Gambling and VPNs

VPN stands for Virtual Private Network, and it’s one of the most effective ways to bypass restrictions. VPNs can be used for several purposes, but, when it comes to geo-restrictions, they help by changing your virtual location. 

Think of the VPN as a stop along the way of your traffic to the casino. Instead of sending a “give me access” request directly from your browser to the casino site, you first send it to the VPN server, which then sends it on to the gambling. This way, the casino sees the VPN’s location instead of yours. Your original IP is hidden and now you look like a user from Canada, for example, where online crypto casinos are welcome. 

Why would you do this? 

Well, remember the self-exclusion. Because the US doesn’t recognize a Curacao license, casinos can get in trouble for serving US customers. 

To prevent this, some gambling sites will block traffic from the States altogether. 

This is a major problem for US online gamblers. But with VPNs, they can unblock any casino they want. They can even switch locations and try different casinos until they choose the one that works best for them. 

However, here is why that might not be such a good idea after all: 

KYC Checks Put Your Earnings at Risk

Even though individual players haven’t been prosecuted for online casinos before, casinos can definitely suffer consequences. For that reason, they will ask you nicely – “Please, if you’re in the US (or another restricted country), don’t play here”. 

If you provide them with fake information (e.g., by giving a fake address and reinforcing it with a VPN) and they find out, they can ban your account and confiscate your winnings. 

Read the T&C

Crypto casinos reserve the right to withhold your money, if you lied to them about your identity.

Most casinos place Know-Your-Consumer checks at withdrawal time – and not at registration. Imagine getting ready to cash out your big winnings, only to discover that you can’t because you registered the casino with a fake address. 

Another problem is that there are many low-quality VPNs. 

If you use one of them, you can expect lags, connection drops, and other issues that can affect your gambling experience. Not to mention some VPNs have serious problems when it comes to protecting your personal information. 

For those reasons (and more,) we don’t recommend circumventing casino regulations – no matter how tempting it may be. 

So far, we covered the legality of crypto casinos on a federal and state level. But there is one aspect that we have not yet discussed: taxes. When it comes to gambling, both real-world and online, taxes are always a hot topic. 

So, are crypto casinos taxable?

In the US – yes, they are. 

The IRS doesn’t consider cryptocurrency to be an actual currency – for tax purposes, it’s an asset. Whenever you win crypto, you have to pay the 24% federal tax on this “non-monetary” win, just like you would if you won a car on Oprah, for example. 

But it gets even more complicated when you factor in capital gains taxes. If you hold your crypto and later sell if for a profit, you’ll have to pay capital gains taxes on that as well. 

For example, let’s say you buy 1 BTC for $5,000 and later sell it for $8,000. You’ll have to pay capital gains taxes on that $3,000 profit. 

The good news is, if you lose money gambling with crypto, you can deduct losses on your taxes, too. 

We did a full guide on crypto gambling taxes where you can learn more about the topic (and where we cover other countries, too.)

Speaking of other countries:

At the beginning of this article, we promised to cover more than the US. Well, international readers, your time has come. 

Here is what you need to know about gambling with cryptocurrency in different countries.

Canada is a safe haven when it comes to online casinos. The law states that:

Local casinos (as in, based in Canada) can’t offer online gambling to Canadians. Overseas casinos (in other countries), on the other hand, are welcome to do so.

In fact, crypto gambling fits right in with these rules. Cryptocurrencies usually have cheaper transaction fees (compared to sending money abroad via bank wire, for example) and transfers are faster, too. 

Bottom Line:

You can’t gamble with Bitcoin at a Canada-based casino – but overseas casinos are fine.

The only thing you need to be careful about is that the online casino you play at is licensed and regulated. Curacao and Malta are two popular licensing jurisdictions for online casinos – virtually all of the casinos we recommend here at Casinos Blockchain are licensed and reputable. 

The gambling regulator in the UK, the United Kingdom Gambling Commission (UKGC), has been keeping a close eye on online casinos in the past few years. Recent legislation forcing casinos to display total wins and losses for slots and banning credit card payments has been put in place to protect gamblers.

But what about crypto?

In the UK, gambling with cryptocurrency is not explicitly illegal. 

However, casinos that are not licensed by the UKGC cannot legally offer their services to British residents. In fact, they shouldn’t even be advertised to the UK public.

What this means is that if you want to gamble with crypto in the UK, you will have to find a casino that is licensed by the UKGC. And, when it comes to crypto casinos, they have to prove where their crypto funds came from in order to get a license. 

In terms of prosecuting individual gamblers, however, this is once again not done. The UKGC aims to protect players from illegal gambling sites, not to prosecute them.

Australia has a very interesting relationship with gambling. Gambling is incredibly popular in the country, but there are very strict regulations in place for online casinos:

As per The Interactive Gambling Act of 2001, no online casino can offer their services to Australian residents.

That’s it, plain and simple. 

Online gambling is essentially banned in Australia.

But, just like other countries, Australian legislation is focused at gambling sites, not at gamblers. So, Australians will not get in trouble if they gamble at any online casino that accepts players from their country – but, technically, casinos shouldn’t accept them in the first place.

Currently, crypto gambling is somewhat of a legal gray area. Many countries have yet to formulate regulations surrounding cryptocurrency casinos, and as a result, these casinos operate in a bit of a legal limbo. That being said, it seems likely that cryptocurrency casinos will only continue to grow in popularity in the coming years. 

Just take Stake, for example, – it has been conservatively valued at $1 billion. The founder, not even 30 at the time of writing this, recently bought one of Australia’s most exclusive (and expensive) properties. The company has only been in operation for a few years!

Safe to say that crypto gambling is massive and it will only grow from here. 

As more and more people invest in cryptocurrencies, it stands to reason that they will also be looking for ways to spend their money. Gambling is a popular pastime around the world and there is no reason to think that crypto gambling will be any different. In fact, given the anonymity and security that cryptocurrencies offer, it is likely that crypto gambling will become even more popular than traditional online gambling.

So what does the future hold for cryptocurrency casinos? We expect more regulation.

Crypto gambling is a new niche – but governments will soon begin regulating it.

And, while casinos might not be too thrilled about that, it’s actually great news for players. Licensed casinos are safer and customers will have an easier time getting their money back if something goes wrong. 

On the flipside, most of these rules will be difficult to enforce.

Since crypto casinos are usually based outside of the countries where most of their players are, it will be hard for authorities to shut them down or prosecute them. So while we might see more regulation in the future, it still remains to be seen if it will have much of an impact on the actual casinos. 

Final Thoughts

As crypto gambling grows in popularity, governments and regulating bodies are bound to take notice. Right now, online casino legality varies across countries and US states – but there is little crypto-specific legislation an even less when it comes to novel concepts like gambling NFTs.

What we do know (and it applies to virtually all countries) is crypto gambling laws are about the casinos, not the players. Individual gamblers have never been the main concern of regulators. In fact, the reason these laws exist is because countries want to protect their citizens. 

But, you play a big part in protecting yourself from fraudulent providers, too. By making sure you only gamble at reputable casinos and limiting yourself to responsible bets, you can keep the games all fun and no trouble. 

Wondering where to play? 

At Casinos Blockchain, we playtest and review all major crypto casinos. Our current top three crypto casinos are: 

Check them out to find your favorite today!

Author: Benjamin Barnes