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Opinion: Australia will eventually legalise cryptocurrency gambling

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Australia has the highest rate of gambling in the world, with over 80% of adults engaging in gambling of some kind. By the numbers, Australians just love a flutter.

The explosion of online gambling in the early 2000s saw plenty of Australians take their punting online, so regulators responded with the Interactive Gambling Act. In its initial form, this may have inadvertently handed a sizable chunk of the Australian gambling market to offshore companies and seen people start throwing their money at less-regulated overseas companies rather than more-safely throwing their money at regulated Australian companies.

In its 2015 Review of Illegal Offshore Wagering, investigators concluded that it wasn't really possible to say whether the act was having any real impact on illegal gambling as a whole, but did express concerns that it might actually be driving people towards offshore gambling.

The efficacy of the Interactive Gambling Act was uncertain, but after some fine-tuning amendments, it might have had the desired effect of moving gamblers back to Australian companies and the legal, licensed overseas operators. Some of the key elements seem to have been ensuring that legal companies could remain competitive with illicit operators, and ensuring that the requirements for legally serving Australian customers weren't too onerous for overseas companies to comply with.

Fiat currency and its corresponding bank transaction records are what make it possible to enforce these kinds of laws. As long as payments have to go through third parties like banks, there are reasonable avenues to obstruct payments to illegal sites.

However, cryptocurrency is a different beast, and Australia might have to grapple with the problems raised by cryptocurrency gambling at some point in the very near future.

Illegal sports betting accounts for 90% of the global market

According to the United Nations Congress on Crime Prevention and Criminal Justice, the illegal sector of the $3 trillion global sports betting market is estimated to account for about 90% of the market. Some of this is from match fixing, money laundering and organised crime involvement in the sector, especially in areas where gambling is outright barred.

Others are technical illegalities, such as someone in a country where gambling is illegal having a bet with their neighbour, or someone in Australia placing a bet online with bitcoin.

As ABC reports, this is what's happening with betting sites that aren't in Australia.

"AFL, NRL, Super Netball, greyhounds and even suburban soccer matches can be found on bitcoin betting sites with links to countries like Estonia, Montenegro, Curacao and Cyprus," ABC says.

The use of pseudonymous cryptocurrencies to gamble makes it difficult to know who the betters are and opens up entirely new concerns around match fixing, industry competitiveness and the dangers of an unregulated and seemingly untouchable Internet gambling market. It also raises the question of how one can enforce the laws without the ability to effectively monitor and disrupt payments.

"For those who don't want integrity officers to see their betting, bitcoin adds another cloak of secrecy to it," said Ray Murrihy, the former chief steward of Racing NSW and current board member of Responsible Wagering Australia, to ABC. "With bitcoin, there's no access to the identities of the parties involved... It's very unlikely that the casual or weekend punter is going to be involved in this. It's usually people that seek to hide their identity for one reason or another... perhaps people who have access to inside information."

"It's definitely not an imagined threat," said the pseudonymous bitcoin betting blogger Bitedge. "It is most likely already happening. The incentive and the opportunity have existed for years. The first time we find out about match fixing being done with bitcoin will not be the first time it has happened."

"Professional athletes are mostly tech and gambling savvy young men in a career that will stop paying within 10 years," they point out. There's a strong motivation to make hay while the sun shines, and cryptocurrencies make the process much easier.

An impossible problem?

It might be a little too late to get ahead of the problem, but the eventual solution will most likely have to involve some framework for legalising online gambling with cryptocurrencies. As Australia learnt from previous ventures into Internet gambling regulation, it's not possible to wield a big enough stick to make everyone follow the law. Instead, the way forward is to create a system that allows overseas operators to follow the law, while also offering appropriate consumer protections.

Relevant lessons might be found in India, where gambling is currently more or less completely illegal. Researchers there are recommending a movement towards legalisation; first, on the grounds that India is experiencing a seemingly constant stream of match-fixing allegations, and that the sports betting market has become a playground for organised crime groups.

And second, on the grounds that cryptocurrency means it's almost impossible to enforce licensing and regulatory standards on unwilling providers. Most countries are grappling with the same issues.

Part of the problem is that cryptocurrency means bookmakers don't even really need websites anymore and can just paste odds on social media and other Internet platforms, and take bets from anyone right there and then – no bank account or prep work needed.

Beyond the problems with match fixing, money laundering and the other downsides of having a multi-trillion-dollar global industry under the control of gangsters, there's the lost revenue for local industries and missing tax dollars.

The shape of regulation

Complete legalisation might not be ideal, but it's extraordinarily difficult to find any evidence suggesting that outlawing gambling has ever produced the desired results.

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A look back at the discussions around the legalisation vs prohibition of Internet gambling from 1998, when this Internet thing was really starting to take off, is entertainingly similar to the debate that might soon emerge around legalisation vs prohibition of cryptocurrency gambling.

Part of the solution might be to create a system that allows providers to get licences and operate legally without an unreasonable amount of hassle and even encourage the discovery of ways for the legitimate gambling market to operate more efficiently than the illegal one in order to offer gamblers a more competitive product.

In the long run, this might be accomplished by leveraging blockchain technology to offer transparently fair odds while gambling and to cut costs dramatically. An exceptionally high quality, regulated, legal gambling industry might go a long way towards keeping the dirty money out.

The primary goal might be to draw in as large a portion of the legal market as possible to make sure tax revenue and industry dues are exacted as appropriate. Once you have a legal cryptocurrency gambling industry, it can start looking for ways of protecting its market share by squeezing out the illegal operators. Similarly, the existing legitimate gambling industry is likely losing market share to the ongoing rise of cryptocurrency gambling and might not be satisfied operating at such a disadvantage for too long.

Beyond its anonymity, cryptocurrency is functionally exceptionally suitable for gambling, being programmable and cheap to send anywhere in the world.

Still, cryptocurrency and its relative anonymity might still be drawing in a lot of match fixing, money laundering and other badness, held aloft partly by jurisdictions where gambling is still outright banned. Complete global unification on gambling laws, of all things, probably isn't coming any time soon.

Perhaps there's just not much to be done yet, except wait for the established online gambling industry to start calling for the ability to legally accept cryptocurrency and to adjust to the idea that sports match fixing is a problem as old as time itself. Maybe you've seen a few rigged games in your time without even knowing it.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VET, XLM, BTC and ADA.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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