Tottenham Update: The Hidden Market
The end of last month saw a resurgence of interest in crypto gambling, spurred by a Financial Times report which referenced Yield Sec data indicating that cryptocurrency wagering surged fivefold since 2022, raking in $81.4bn (£61bn) in gross gaming revenue (GGR) last year.
In comparison, the global online GGR from conventional licensed online casinos is estimated to have ranged between $78.66bn and $95.5bn last year, with Europe accounting for approximately 40% of that total at €47.9bn.
These numbers clearly indicate the rise of a shadow industry, which appears to parallel the scale of traditional gambling, but often operates outside regulatory oversight, and in some cases, deep within the black market.
While this may not be surprising, as crypto is not a new concept and its applicability in the gambling sector has been apparent since the beginning, the rapid growth of this shadow market seems to have proceeded largely unchecked.
Moreover, the pace of expansion has been remarkable. The FT article quoted Yield Sec founder Ismail Vali describing the crypto gambling sector’s growth as “explosive,” and there’s little evidence to suggest that momentum will slow anytime soon.
The notable lack of regulation in this field undeniably contributes to its rapid growth trajectory. This, combined with the anonymity and cross-border usability of cryptocurrencies, makes it extremely appealing to a significant segment of gamblers. For some, the ongoing reputation of crypto as a somewhat illicit shadow economy could also be enticing.
Additionally, prominent figures like President Donald Trump and Elon Musk openly endorsing crypto—whether their own coins or more established ones—has restored a degree of credibility among crypto enthusiasts that may have waned during high-profile failures of exchanges like FTX, BlockFi, and Genesis Global Capital in late 2022.
Bitcoin surged to $97,000 on Wednesday morning amid discussions of a US/China trade deal, significantly exceeding its previous peak of $68,789 on November 10, 2021, roughly a year before the FTX crash brought it down to $15,900. Since then, it has experienced a remarkable recovery, reaching a new high of $109,026 on January 20 this year.
What do these developments indicate? Crypto has not proven to be a passing trend, nor has it failed due to a lack of utility, and it has certainly not disappeared following the missteps of a few bad actors in 2022.
For crypto casinos to become regulated—some stakeholders advocate for this, while many others prefer to remain unregulated—it’s essential to devise methods of applying regulatory measures to the crypto space. This increasingly seems to be a technological challenge rather than a matter of willingness.
Currently, crypto gambling is not explicitly illegal in the UK, but the Gambling Commission has yet to approve it, as no operator has successfully demonstrated compliance with the regulator’s anti-money laundering (AML) and know-your-customer (KYC) standards.
In Europe, the new Markets in Crypto-Assets (MiCA) regulation aims to standardize the approach to crypto regulation across member states and could provide a framework for other regions moving forward. If the regulations assure confidence in crypto usage, it might pave the way for increased integration of crypto into licensed casinos in the future.
This may result in restrictions on certain cryptocurrencies; for example, European regulators have flagged the widely used stablecoin Tether (USDT) as non-compliant under MiCA, citing its lack of transparency, inadequate reserve tracking, and its issuance by an organization located outside the EU.
While MiCA does not establish a direct route to legalized crypto gambling in the UK or Europe, it is fostering clarity on how crypto could potentially be regulated. However, it does not address the considerable amount of data monitoring necessary for casinos to adequately comply with AML and KYC regulations.
Crypto advocates might argue that all relevant information lies on the blockchain, asserting that cryptocurrencies offer greater transparency than fiat currency transactions. Nevertheless, accessing and effectively utilizing that data remains a considerable challenge.
For unregulated casinos, this is not an obstacle, and for now, they will continue to thrive in the shadows. However, for those wishing to operate within the world’s largest regulated markets, harnessing blockchain data and using it to assure regulators may be the only means of reconciling these two parallel industries.
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