Volatile pricing fluctuations that can wipe out billions of dollars worth of cryptocurrency values is one of among many reasons why Nevada gaming regulators haven’t allowed Bitcoin or other financial payment methods tied to blockchain technology to be used on the state’s casino floors.
There is also the need to establish a regulatory structure to ensure taxes are collected and payment activities don’t run afoul of federal anti-money laundering laws.
That’s not to say, however, that the Gaming Control Board has shut the door on cryptocurrency.
Chairman Brin Gibson told the Legislature’s Joint Interim Standing Committee on Revenue last week the agency is open to suggestions from gaming companies supporting the use of cryptocurrency.
“We’ve told the industry to please bring your proposals to us,” Gibson said during a two-hour public hearing on the subject, which included a presentation on cryptocurrency trends by two representatives from the Federal Reserve Bank of San Francisco.
“We will vet (the proposals) and if there's something that looks viable, we will move in that direction,” Gibson said.
He added that most of the cryptocurrency interest has come from gaming equipment manufacturers and businesses that handle financial transactions and money services — not from individuals looking to gamble with cryptocurrency. The casino industry in Nevada and nationwide, however, has been more focused in the past 18 months on expanding the use of cashless gaming technology that uses digital wallets and other backend technology.
“I have not been approached by any licensee pushing hard for the use of cryptocurrency on actual gambling transactions,” Gibson said.
A measured response by gaming regulators was embraced by committee chair Sen. Dina Neal (D-Las Vegas), who admitted she was “not a fan” of the relationship between cryptocurrency and gaming.
“I’m looking at some (bill draft requests) in the space,” Neal said without elaborating on the direction she was headed.
Ben Kieckhefer, a former state senator appointed to the Nevada Gaming Commission last year, attempted to alleviate Neal’s concerns. He supported Gibson’s comments that regulators are committed to working with the industry on any cryptocurrency adoption “to move in a direction that is reasonable and necessary.”
Kieckhefer cited legislative efforts going back five years that added a definition of a blockchain and language concerning virtual currencies into Nevada law. He authored legislation in the last session that created an eSports Technical Advisory Committee, where he said additional discussions will arise concerning the use of virtual currencies.
“I think that that's a good place for us to be right now, as cryptocurrency itself continues to evolve and as the gaming industry tries to figure out the right fit,” Kieckhefer said.
Several casinos – three properties owned by downtown gaming operator Derek Stevens and Resorts World Las Vegas – have cryptocurrency exchange kiosks on gaming floors. The devices, which are similar to automated teller machines, allow customers to exchange Bitcoin and other digital currencies for cash that can be used at a table game or slot machine.
Stevens, in a February interview, said most of the kiosk’s transactions in his casinos involve people using the machines to exchange their cash for cryptocurrency.
In the past few months, cryptocurrency valuations have experienced substantial increases and declines with little forewarning.
In late January, a report that the Biden Administration was preparing a comprehensive government strategy on cryptocurrencies prompted a cryptocurrency market meltdown that saw roughly $130 billion of value disappear in one day.
Last month, the New York Times reported the collapse of two cryptocurrencies developed by a South Korean investor took a toll on the entire market. A dramatic drop in the price of Bitcoin and other cryptocurrencies caused a $300 billion crash across the crypto economy.
It’s those types of value fluctuations that concern Jim Barbie, chief of the control board’s technology division. He said any gaming regulations would have to include some type of patron protection or reserve requirement for casinos on wagers handled with cryptocurrency.
He offered up a scenario in which a patron might place a future wager on the outcome of the Super Bowl using cryptocurrency. Any fluctuation in cryptocurrency pricing between when the sportsbook accepts the bet and when the winning ticket is cashed could cause major issues.
“You can actually win the wager and be paid in cryptocurrency, but if the value of the cryptocurrency has deflated, you could potentially lose money on that endeavor,” Barbie said. “There is a unique facet to the gaming space when it comes to making use of cryptocurrency.”
The Federal Reserve representatives profiled cryptocurrency buyers as mostly male between the ages of 25 and 34 with an annual income of more than $100,000. Of those who own cryptocurrencies, 69 percent view their stake as a long-term investment.
Gibson said there were a handful of unregulated cryptocurrency-based casinos on the internet which are not located in the U.S.
“One of the reasons why cryptocurrencies are so attractive for that kind of gambling is that it's difficult to trace the activities back to any individual,” Gibson said.
Gaming regulators said their key concerns are having the ability to collect gaming taxes from cryptocurrency transactions and ensuring there are zero issues with illicit activity that would raise the concerns of the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN).
“Our posture is not one of rejection,” Gibson said of any cryptocurrency proposals offered by the gaming industry. “We’re just trying to get in front of something that is so complex.”