The North Carolina sports betting law appears to put the state ahead of others when it comes to allowing cryptocurrency. However, whether the industry is ready to embrace such a move remains to be determined.
House Bill 347, which the North Carolina General Assembly passed and Gov. Roy Cooper signed last month, states that registered players “shall be permitted to deposit cash or cash equivalents into the interactive account.” The options listed under cash equivalent include cryptocurrency.
Currently, Wyoming is the only state that allows for cryptocurrency transfers, but it does not appear that any operators accept that. Two other states, Colorado and Virginia, allow crypto holders to transfer their digital assets into cash, but as gaming industry consultant Jonathan Michaels told BetCarolina this week, those exchanges can be expensive.
“The way sports betting cashiers work today, customers pay no fees. So that’s what they’re used to,” said Michaels, a former executive with the American Gaming Association and Sightline Payments who founded Michaels Strategies earlier this year. “For me to put crypto through an exchange into my wagering account, some exchanges are charging up to 10%. Why would I take a fee-free deposit and instead choose a 10% fee on me? It just doesn’t make a lot of sense from a consumer perspective.”
Similarities Between Crypto and Sports Betting
In some ways, cryptocurrencies and sports betting seem to be a natural fit.
“If you look at the demographics for sports betting and cryptocurrency, they’re concentric circles,” Michaels said. “They’re 35-year-old men, high annual income, highly educated.”
However, he added enthusiasm for crypto from a sports betting operator standpoint has waned somewhat in the last year or so.
While crypto had been around for years, the market took off in 2017 and reached its first peak in January 2018, four months before the U.S. Supreme Court’s PASPA decision opened the door for all states to legalize sports betting, clearing the way for incoming North Carolina betting apps.
The crypto market hit a low point at the beginning of the COVID-19 pandemic before entering a tumultuous period beginning in the fall of 2020. According to CoinGecko.com, which tracks more than 10,000 cryptocurrencies, the market cap dipped below $400 billion on Sept. 1, 2020.
On Nov. 8, 2021, the market cap was $3.06 trillion, but by the end of 2022, that cap was at $828 billion – a nearly 72% loss in value.
As of Wednesday, the market cap was $1.24 trillion. While up nearly 50% from the end of last year, it’s still roughly 60% lower than its 2021 apex.
Unlike other investments, like bonds or mutual funds, cryptocurrencies are a more volatile asset, and people who may have a lot of their money tied to crypto are likely trying to play the market.
“It’s not dissimilar from people who wager on sports,” Michaels said. “They want to ride the wave. They think they can make a lot of money. I would say that those two categories are probably greater risk-takers than the average population.”
That leads Michaels to think about responsible gaming practices and payments, an issue he worked closely on with researchers at UNLV.
“If somebody tried to deposit with crypto, that would be something that we would probably flag and say, ‘Let’s monitor that person and see how they operate,” he said. “Some of those transactions can just look like VIP players, but between a VIP player and problem gambler, there are certain distinctions.”
‘Pathway’ To Crypto Acceptance Likely Longer
There are other issues at play when it comes to cryptocurrency and the legal sports betting market. For instance, the decentralized nature of cryptocurrency means it can attract people and organizations that engage in money laundering. While there’s anonymity in crypto, that’s not accepted in regulated sports betting markets that must confirm an account holder’s identity.
John Pappas, GeoComply’s senior vice president for government and public affairs, told BetCarolina that cryptocurrencies face obstacles in going mainstream with sports betting operators like a BetMGM North Carolina because those operators must follow Bank Secrecy Act guidelines just like a financial
institution. Besides providing geolocation services for gaming operators, the Vancouver-based company also provides services to fight fraud and money laundering and confirm customers’ identities.
“I would applaud lawmakers and the regulators for keeping options open,” Pappas added. “There is a pathway for digital currency in the regulated gaming world. I just think it’s not in 2023 or 2024, probably.”