Australia offers another reason for online gambling to go crypto
31 October, 2020
Australia is entertaining a bill that could force gambling operators to verify the funds they receive from customers aren't stolen. If the law passes, operators will be held to a standard similar to pawn shop operators who must return stolen property to its rightful owners.
There are already a good number of reasons online gambling operators should begin accepting cryptocurrency payments. Crypto deposits are fast, secure, easy, and convenient. If all that is not enough, lawmakers in Australia are giving gambling operators yet one more reason: a new law that would force them to verify that deposited funds were not obtained via theft.1
The bill is still in the proposal stage at this point, but there seem to be few roadblocks to it becoming law. If and when it does, both land-based and online casino operators will be held to the same standards as pawn shop owners who must return property if it is later determined to have been stolen.
It is unclear how gambling operators could go about verifying the 'cleanliness' of the money flowing into their coffers. Land-based operators accepting cash face the biggest challenge. There is no way to know that a customer is not depositing money stolen from a family member or an employer. Credit card and bank transfer payments would theoretically be easier to trace. Still, operators would have to set up an entirely separate infrastructure for tracking down deposited money or face the possibility of authorities coming back and confiscating funds at a later date.
A law to fight problem gambling
MP Andrew Wilkie recently proposed the bill in Parliament. His thinking is that forcing casinos to forfeit stolen funds will cause them to be more careful about whom they accept deposits from. In turn, this will help cut down on problem gambling. His logic is rooted in a belief that problem gamblers steal to feed their addiction.
While few would argue the likelihood of problem gamblers stealing, all sorts of addicts steal to feed their habits. Not all the money they steal goes to casinos, either. As such, Australia's gambling industry is opposed to the law on the simple grounds that it would single gambling operators out.
Current law dictates that pawn shop owners must return property sold to them if that property is later deemed stolen. That's why pawn shop operators ask questions before they buy merchandise. They do their best to determine whether or not the seller legitimately owns the item in question. Wilkie's gambling law would impose the same type of thing on casino operators.
Imagine a casino operator questioning a customer about where he or she got their cash from. Imagine an online operator sending an email to a customer questioning the validity of the credit card he or she is using. Good intentions, but the law doesn't make any practical sense. There isn't a viable or enforceable way for either land-based or online operators to prevent customers from depositing stolen funds.
If there is any good news, it is an exemption involving credit cards. Deposits made with stolen credit cards would not have to be returned if the owners of those cards failed to report them stolen. How the exemption could be practically applied is unclear given that a gambler can copy a family member's credit card information without physically stealing the card.
Cryptocurrency to the rescue
Wilkie's proposed law brings us back to cryptocurrency as the primary payment for online gambling. Land-based casinos could go all crypto as well, but that is another topic for another post. The point here is that crypto is a lot more difficult to steal and spend compared to cash and credit cards.
Cash is fairly easy for thieves because it is a grab-and-go commodity. Cash is virtually untraceable as well, unless you are meticulous enough to write down the serial numbers on all your bills and mark all of your coins in some way. But no one does that. So once cash is gone, it's gone.
It is not so easy to snatch cryptocurrency tokens. After all, BTC, ETH, et al are digital currencies. There are no physical coins or bills to contend with. In order for a problem gambler to steal a family member's BTC, for example, he would have to gain access to that person's digital wallet. He would also need his own wallet into which he could transfer the funds.
While this is technically possible, it is very difficult to do. The problem gambler would first need to know that his alleged victim owns cryptocurrency. He would then have to know the location of the person's wallet. If the coin is stored online, he would have to obtain the person's username and password as well as the location of the account itself.
Finally, the thief would need to set up his own online account or digital wallet to accept the funds. If he were to choose an online account, it would be easy to track income and outflow. An encrypted ledger would prevent investigators from knowing transaction details, but at least they could see money coming in and going out. That is a lot riskier for the gambler than stealing cash.
No chargebacks with crypto
It is not beyond the realm of possibility that a problem gambler will use stolen credit card information with the understanding that his victim can initiate a chargeback just by protesting the payment. In the thief's eyes, it is a victimless crime. He gets money to go gamble with while the victim gets a chargeback. Unfortunately, there is still a victim here: the casino operator.
The fact that cryptocurrency transactions cannot be reversed protects casino operators from these sorts of things. Simply put, there are no chargebacks with Bitcoin. Online gambling operators have the freedom to grant or deny refunds based on individual circumstances. This puts them at less of a risk when crypto deposits are made.
As a side note, no chargebacks prevent scammers from making deposits, gambling until they win, then withdrawing and protesting charges to their accounts. A crime often perpetrated with credit cards cannot be pulled off with cryptocurrency. That is one of the benefits of having an immutable ledger as the backbone of an operators accounting.
Promoting crypto is a better idea
It is clear that cryptocurrency deposits make it more difficult for problem gamblers to deposit stolen funds. It is just harder to steal crypto than cash or credit cards. So perhaps Australian lawmakers should not put their efforts into forcing gambling operators to do something they cannot reasonably do. Maybe a better way to go is to find ways to encourage more operators to move to cryptocurrency payments.
A first step in that direction would be to recognize cryptocurrencies as 'real money', much the same way U.S. regulators are now proposing. An official acknowledgment by the government of cryptocurrency's legitimacy would go a long way toward encouraging merchants of all types to get on board with it.
Next, they could implement laws that treat day-to-day use of crypto as a monetary system separate from investing in crypto assets. After all, the law doesn't treat daily fiat transactions the same as investments in stocks and shares. The fiat world enjoys a clear distinction between routine commerce and securities and investments. Cryptocurrency should be afforded that same distinction.
Yet another idea is to develop tax breaks that would apply to cryptocurrency profits. For gambling operators, the tax break could be structured based on the percentage of cryptocurrency funds as a portion of total profits. If 30% of a casino's deposits are made in crypto, 30% of its profits would be subject to the tax break.
Tax incentives go a long way toward encouraging businesses to do what you want them to do. If they can save on their taxes by promoting crypto payments, you can bet that casinos will do so. And the more crypto payments gamblers make, the fewer opportunities gamblers will have to gamble with stolen funds.
It will never go away
One final thing to come to terms with is the fact that problem gambling will never go away. No morally or socially acceptable behavior ever will. Such behaviors are part of the human experience. No matter what government does to stamp out problem gambling, there will always be those people who end up being addicted to it.
The global community has tried for decades to stamp out drug addiction. Have we succeeded? No. Nor have we succeeded at stamping out alcoholism, pornography addiction, and so on. It is unreasonable to expect to do so, especially when the tools we use lay the responsibility at the feet of business owners.
A gambling operator is no more responsible for a thief's actions than a grocery store owner. So why force a gambling operator to return stolen funds but not the grocery store? And why are the department store, convenience store, and fuel station let off the hook? Stolen funds are spent just about everywhere. Singling out the gambling industry only makes sense if one has an axe to grind against gambling.
If the proposed law becomes official in Australia, online gambling operators will have yet another reason to embrace cryptocurrency payments. Cash is fairly easy to steal. So are credit and debit cards. Cryptocurrency can be stolen as well, but it is a lot harder to do. You really have to know what you are doing to pull it off. Knowing that, gambling operators can better protect themselves against the new law by encouraging customers to deposit crypto.
1) SMH. Bid to make gambling companies liable for stolen money