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Virtual Currency & Wagering
Bitcoin and Online Poker: The intersection between gambling and speculation

Photograph by Duncan Rawlinson / license

Virtual Currency & Wagering
Bitcoin and Online Poker: The intersection between gambling and speculation

Michael Friedman
Pokernews.com



Bitcoin poker wagering is on the rise, creating a new class of speculators. 

As bitcoin evolves into a more stabilized currency market, the digital exchange should be on every poker player’s radar. One of our fascinations with online poker players using bitcoin is the intersection between speculation, gambling and optionality.

There has almost always been a connection between investors and gamblers. Although not identical, shared similarities in risk assessment, allocation of assets and an appreciation for outlier events are quite evident. 

That is why we wanted to provide an assessment of the growing use of bitcoin in online poker and gaming, highlighting the benefits and challenges for the road ahead and issues that poker-playing virtual currency speculators should consider in the future. We turned to our friends at PokerNews.com for an update on this growing trend.

The recent surge in online poker sites accepting bitcoin has created a wealth of opportunities for bitcoin speculators and gaming enthusiasts alike. Bitcoin offers the potential for appreciation in the crypto-currency’s value and profit potential from strategic play on the virtual poker felt. 

The nature of bitcoin’s highly watched value offers online gamblers a chance to become currency speculators thanks to the fluctuating value of bitcoin. This opportunity increases a player’s (investor) chances of maximizing their playing R.O.I. (Return On Investment) by wagering their current holdings in the hopes of increasing their poker bankrolls and profiting at an even greater clip because of bitcoin’s ability to increase in value.  

Poker players who use a bitcoin-driven site can see increases in the value of bitcoins based on the current trading price. This means that if you won or purchased a bitcoin when it was valued at $450 in April and then you sold it on July 10 the value would have jumped to roughly $620.

The ability to profit twice off one investment (a player’s poker bankroll) is an attractive offer for those that understand the digital currency and speculation. A player can make good money on the growing number of poker sites that accept the digital currency by winning bitcoins and watching their profit margin increase the same way a stock does.

The obvious goal for the speculative bitcoin poker player is to buy the currency on the cheap, win more bitcoins playing poker, and sit on them so they make money without having to risk the bitcoins already won at the tables. 

Of course, as with stocks, bitcoin could decrease in value. Like any precious traded commodity, the value of a bitcoin can change very quickly depending on numerous factors as seen with the dramatic highs and lows. This is best evidenced by the recent surge that saw it hit $1,000 per bitcoin and then several days later drop to $572 after the U.S. shut down a major website called Silk Road that also used the currency — except for more nefarious purposes.

There’s more than just profit potential for the bitcoin poker player, as the growing phenomenon must address other important issues like regulation, transaction times, anonymity, and, of course, criminal activity.

take the money and run

One of the most vaunted benefits to bitcoin poker is the ease of transactions when withdrawing winnings from the sites. Users are sites like SealswithClubs.eu, and the recently shuttered Satoshi Poker (slated to re-open in the near future under new management) see the benefit in using bitcoin.

Requirements for depositing and cashing out for bitcoin (BTC) sites is similar to playing on traditional online poker sites in the sense that an intermediary eWallet is needed to move money to and from a site. But that’s where the comparison ends. 

Depending on which non-bitcoin online poker site you use and how much you first deposit, moving money on and off a site can be easy or difficult, but according to the leading bitcoin poker site, Sealswithclubs.eu, players can make  instant deposits, and cash-outs take less than 12 hours. 

PokerStars is one of the more popular traditional online poker sites. Many consider the site to also provide the fastest and most reliable transaction times for non-bitcoin poker. 

PokerStars requires players to wait a minimum of 48 hours to cash out from their last deposits because of the company’s security policy, which is designed to protect players from collusion and fraud. You can only have one pending cash-out — requested, not processed — per payment method, whereas a bitcoin site has no limits. The slowest method to cash out on PokerStars is to receive a traditional check, and requires up to 15 days for payout.

the issue of player anonymity

Bitcoin site SealswithClub.eu doesn’t personal information, allowing players to play anonymously and without any documentation.

All other poker sites require a player to input certain amounts of personal information to play and deposit or cash out of the site, including their place of birth and citizenship (depending on their jurisdiction). 

Micheal Hadjuk, owner and CEO of Infiniti Power, which recently approved usage of bitcoin, says his company is addressing issues of anonymity like the approaches taken by traditional online sites.

“People will register on Infiniti Poker in the exact same manner as any traditional online poker operator. I am of the mindset that transparency is a very important virtue in the realm of business and customer relations. It is difficult to become accepted in the mainstream when you operate in the shadows,” Hadjuk said.

Whether not having to input your personal details or having to is a pro or a con depends on a poker player’s personal views. Some like the concept of anonymity (one of the original reasons behind the bitcoin currency) and being able to not be logged into the registry of a poker site, while others might see it as a potential pitfall and feel more secure on a site like Infiniti that requires their personal data.

anonymity has its risks

Because some bitcoin sites don’t require player details and allow players to play from different ISP addresses, safety measures to deter collusion and give poker players the confidence that they are not being cheated are weak, at best. These sites are not forced to follow stringent rules like those required of Nevada online sites (set by the Nevada Gaming Commission), leaving players little or no means of recourse, because the sites police themselves, as well as the players.

If you are a U.S. poker player not living in Nevada, New Jersey, or Delaware your options for playing online poker are next to none and for those living in those states, they can only play other players within the state’s border. The choices left for U.S. players are non-regulated sites like Lock Poker, Bovada, and Carbon Poker. 

Technically, bitcoin-driven sites are operating in a “gray area” by serving U.S. customers. 

Because bitcoin is not yet regulated as an official currency within the U.S., as long as a player’s state doesn’t have laws making it illegal of them to participate in a live wagering poker site, then they can play without fear. 

PokerNews reached out to several online sites including PokerStars and WSOP.com, but received no response regarding the possibility of these groups incorporating bitcoin to their currency portfolios and no operators would answer these questions.

a lack of regulation can be a bad thing

There is a concerning downside to the “gray area” in which these poker sites operate. Many of these bitcoin sites operate offshore, leaving them unregulated and susceptible to problems that have already faced the online poker industry.

Poker players recall the Black Friday debacle and the problems players still face after Full Tilt Poker failed to keep players’ money in segregated bank accounts. Players also are familiar with online sites that failed because payment processors were busted by U.S. authorities, rendering those sites unable to pay back players. 

Although bitcoin sites like SealswithPoker.eu promise that funds are segregated, no regulatory body backs this promise, meaning poker players’ bitcoins could potentially be at risk.

According to iGaming lawyer Stuart Hoegner, using bitcoin is not the potential problem; the ethics of the online poker sites are. 

While using bitcoins often doesn’t require trust (in processors, in central banks, etc.), there can still be counterparty risks, depending on the nature of the transactions. Playing on a bitcoin poker site is no different. The good emerging bitcoin-driven sites will strive to prove conclusively to their customers that their games are fair (e.g., there’s a random shuffle). The best sites will also think carefully about the nature of any customer bitcoins that they hold.

For U.S. players, (and potentially players in other countries, as well), there is also a risk that government might try to take action against an online site offering bitcoin, Hoegner said. This opens up an entirely different issue of regulation ranging from the criminality of the practice to the tax matter on the backend.

Naturally, the government wants its share of bitcoin profits, and is angling legislation to do so.

the tax man cometh

Regulatory efforts could include outright bans and harsher regulatory pressures that force operators to function in the dark. However, it is possible that increased innovation and transparency take hold. Then, as the market place forms, government will be forced to recognize the legitimacy of bitcoin poker operators much like other forms of technological innovation including Uber, which shattered the regulatory barriers created by years of protections to taxi unions favored by bureaucrats.

Right now, there doesn’t appear to be steep opposition to the currency in Washington given the formation of the market. It’s also clear that regulators from the U.S., Europe and other nations are looking at regulating both the currency and the online gaming industries. 

One of the primary challenges is to understand how they will would tax profits of bitcoin poker players. 

Different countries are beginning to think about bitcoins in terms of taxing profits. 

Although bitcoins are not yet taxed in the U.S., the day may come when you will have to report profits from a sale of bitcoins that increased in value. You can also assume that you could also declare a loss if you sold bitcoins for less than you bought them just as is the case with stocks. 

However, U.S. bitcoin users will have to take a “wait and see” approach in terms of how this will play out whereas in Germany the government has declared that profits realized from bitcoin investing are taxable, so it is logical to assume that the U.S. will go this route, as well.

Overall, the intersection between speculation and gaming creates both uncertainty and opportunity in the years to come. As new rules come on line, regulators and operators promote greater transparency, and bitcoin stabilizes and reduces its volatility over time, the currency stands to be a beneficiary in the global poker markets.
















































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