Cryptocurrency In Legal Sports Betting: What’s Next?

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cryptocurrency in sports betting

The US sports betting industry has yet to fully embrace cryptocurrency, but at least one big name in the space is advocating for its adoption.

DraftKings co-founder and CEO Jason Robins chatted with cryptocurrency publication Decrypt last month about migrating more people to crypto. His main thought on the publication’s gm podcast is to make cryptocurrency more user-friendly for the general public.

“The types of things [we need] to become mainstream fly directly in the face of decentralization,” Robins said on the podcast. “If you don’t have some sort of centralized control, it’s hard to protect people from themselves.”

Robins and DraftKings are not alone working to grow crypto in the US sports betting industry, as others are also looking to help. Despite some momentum, however, there are still plenty of roadblocks in the way of full-scale sports betting adoption of crypto.

Hurdles for cryptocurrency in US sports betting

A significant reason operators might be hesitant to accept cryptocurrency in the US is the market volatility of crypto, said C.J. Fisher, co-chair at Fox Rothschild‘s Gaming Practice Group. There are several other speed bumps to US sports betting adoption of crypto, said David Yermack, chair of the finance department at New York University Stern School of Business.

“You don’t have the recourse to settle disputes if something goes wrong,” Yermack said of many crypto uses. “A lot of people simply don’t understand it. Ultimately, there are bottlenecks that only so many people use it.”

Additionally, sports betting regulators might be wary of crypto. It could lead to traditional payment providers raising concerns about the industry, according to Jeff Ifrah, managing partner at Ifrah Law. There are also interstate financial regulatory hurdles that could become an issue, Ifrah said.

Sports bettors beware of crypto?

Allowing crypto usage could be significant as the legal US sports betting industry battles the offshore sector. There are offshore sportsbooks that operate entirely in cryptocurrency and that can create confusion for US bettors who cannot identify which books are legal.

Some bettors might believe cryptocurrency is not the same as other government-issued money, Ifrah said. That leads to a belief it is OK to gamble with those sportsbooks not regulated in the US.

Both assumptions are incorrect, according to Ifrah. For now, it appears enough issues are taking up US sportsbook brainpower that Ifrah said widespread crypto usage might be at least three to five years away in the market.

On Wednesday, Barstool Sportsbook began accepting crypto deposits in Virginia and Colorado. It is the first sportsbook to widely tout it accepts crypto deposits.

Wyoming makes cryptocurrency waves

In Wyoming sports betting legislation passed in 2021, the language allows sportsbooks to accept “digital, crypto and virtual currencies.” The inclusion came as no surprise to Wyoming gaming regulators, said David Carpenter, Wyoming Gaming Commission project manager for online sports wagering.

Carpenter is bullish about crypto potential but knows it will likely take time. However, as the least populous state in the union, Wyoming’s regulations have not yet proved industry-changing.

“The delay in establishing cryptocurrency as a full method of payment will likely come from the appetite of the operators who haven’t had the opportunity to operate in such a cryptos-friendly market,” Carpenter said. “It is likely the operators will be hesitant to adopt the payment method until it becomes more widely accepted in larger markets.”

Future blockchain hub

Wyoming’s blockchain aspirations appear to stretch beyond sports betting. State lawmakers began work to make the state a friendly blockchain market in 2018. The legal changes set the state up to become a haven for crypto companies much the same way Delaware is for LLCs, Ifrah said.

“Wyoming saw an opportunity to become the first friendly crypto state and ran with it,” Ifrah said. “Wyoming is being smart, sort of like South Dakota being first to relax credit card rules in the 1980s.”

Other states including Nevada are also looking at allowing cryptocurrency in sports betting regulations. The Nevada Gaming Control Board has asked for industry proposals regarding crypto, according to The Nevada Independent.

Cryptocurrency, sports betting crossover

Ifrah said crypto acceptance could be a successful customer acquisition tool for sportsbooks. There is an overlap between the core demographic of crypto users and sports bettors: generally young and male.

There also is a similar intersection with core sports fans that cryptocurrency exchanges picked up on. Cryptocurrency companies entered a multitude of partnerships with sports organizations, including:

Cryptocurrency exchange looking at sports betting

FTX aimed to enter the sports betting industry and entered negotiations last year to buy PlayUp for $450 million. Those negotiations emerged in a lawsuit against former PlayUp US CEO Dr. Laila Mintas, who allegedly worked to tank the deal.

The crypto exchange was already known to be eyeing the US sports betting industry.

In November 2021, FTX invested in BetDEX, a blockchain sports betting startup founded by former FanDuel executives.

DraftKings big in blockchain

DraftKings has plenty of motivation to influence the adoption of cryptocurrency. In August 2021, the company launched DraftKings Marketplace, which is meant to be a “mainstream digital collectibles ecosystem.”

“The NFT boom has reinvented the collectibles industry and driven excitement to early-adopting audiences worldwide—including the DraftKings community,” said DraftKings co-Founder and President Matt Kalish said in a release. “DraftKings Marketplace will sit at the center of this technological and cultural phenomenon, providing our immense existing customer base with an easily accessible experience that rivals all legacy marketplaces.”

Before March Madness, the company dropped its College Hoops Collection. It also tied the digital collectibles to DraftKings daily fantasy sports and sports betting products. In the fall, DraftKings will launch an NFT-based fantasy game in partnership with the NFL Players Association, according to Beth Beiriger, DraftKings SVP of marketplace operations.

US crypto updates

US lawmakers are starting to discuss national regulations for cryptocurrency. There is a recently proposed bipartisan US Senate bill aimed at crypto regulation, but there is no timeline for it to become law.

PayPal announced this week it will allow users to transfer cryptocurrencies to other people, as well as external exchanges and wallets. The online banking company first offered customers the ability to buy and sell crypto in 2020.

Additionally, in New York this month, the New York Department of Financial Services awarded PayPal a “BitLicense.”