Top online gaming lawyer Jeff Ifrah says that US regulators are unlikely to have a problem with tokens that are “offered on the game to extend play, to skip levels, to gain certain powers.”
The news will be welcomed by game developers keen to monetize through the integration of cryptocurrency wallets and blockchain technology.
Jeff is also optimistic about the recent flurry of activity around NFTs. He said “it’s a very exciting space right now and I really hope the regulators don’t ruin it.”
He singled out NBA Top Shots, saying that the endorsement of the NBA and stars like LeBron James could have a positive influence on regulators.
However, Jeff, speaking on this week’s episode of CoinGeek Conversations, did stress that in the US, regulation varies depending on what state you’re in. He explained to Becky Liggero that it ultimately comes down to state regulators who have “to decide whether or not he or she is going to permit an operator to accept crypto.”
He pointed out that when it comes to using cryptocurrency for gambling in America, “there’s no prohibition that’s written into the law about it. It’s just that the regulators haven’t approved it as a form of alternative payment.”
This is because regulators are more concerned with onboarding payment systems like banks and credit companies first. But Jeff believes that regulators will address cryptocurrency, they just want to get traditional payments sorted first.
Lots of states in the US require crypto companies to obtain a money transmitter license to operate. Jeff warns, “if you were to accept some sort of payment processing that was not licensed, you would not just be, as a processor, in trouble with the regulator, but you’d be putting the entire license of the operator at risk as well for doing business with an unlicensed supplier.”
On the use of blockchain, Jeff tells Becky that regulators are likely to need only the lowest level of licensing. They will want to know who owns the technology, but nothing more complicated than that.
This will be music to the ears of companies using blockchain to develop new gaming systems that are ‘provably fair’, in a way that is transparent to all users. Once a casino can prove it’s trustworthy, users are much more likely to game there.
It’s not all plain sailing for the use of digital currency in iGaming though as Jeff warns that any tokens “offered to an entire market through an ICO… that’s going to be a problem.”
He also cautions that even if a site is being operated from a country where Bitcoin and online gambling are totally legal and properly licensed, if you allow “someone who’s physically located in the United States to access your technology, you have opened yourself up to risk.”
Overall, regulators in the US have been slow to take account of cryptocurrency in the online gaming space. But Jeff is hopeful that an injection of cash could be the answer. He believes that “state regulators need to set aside money from their licensing regime” to clarify the rules and enforce regulation where necessary.