Decentralization Of The Gambling Industry Through Blockchain – Media, Telecoms, IT, Entertainment


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As we discussed in our prior post, Blockchain and Cryptocurrency: The Future of
Online Gambling?
, the blockchain technology offers the online
gambling industry security, privacy, efficiency, and
cost-effectiveness. While some online casinos have authorized
cryptocurrency payments, others have gone further by building
platforms entirely on the blockchain.

Much like the rise in popularity of cryptocurrencies and
blockchain technology in recent years, the online gambling industry
has burgeoned as states continue to legalize gambling online,
specifically sports betting activity. As of November 1, 2021, in 32
states and Washington, D.C., single game sports betting is legally
offered to consumers through retail and/or online
sportsbooks.1 The global online gambling market is
projected to increase from USD $66.72 Billion in 2020 to USD $158.2
Billion by 2028.2 In September, sports betting operator
DraftKings made a USD $22 Billion offer to acquire competitor
Entain.3 This  deal reflects the state of the
industry-dominated by large, centrally-controlled corporations-but
blockchain technology may serve to change this in the near future
by offering decentralized alternatives. A decentralized gambling
industry will serve both operators and players alike through
reducing costs and increasing confidence in transactions.

WHAT IS BLOCKCHAIN?

Essentially, blockchain is a database that stores encrypted
blocks of data chained together to form a single chronological
ledger of transactions. Often, the data is distributed among a
network to create a provable and immutable record of the
asset’s history that is accessible to the public. This creates
a decentralized, digital record of all the transactions that take
place using a particular digital asset. The overall purpose of
blockchain is to “let people-in particular, people who
don’t trust one another-share valuable data in a secure,
tamperproof way.”4

WHAT DOES DECENTRALIZATION LOOK LIKE IN THE ONLINE GAMBLING
INDUSTRY?

In a traditional online casino, players deposit funds to bet or
play, and then withdraw the funds when they are finished playing or
at a later date, relying on the operator’s integrity to settle
when they request a withdrawal. Moving the funds is expensive for
the operator, so they tend to make it difficult or time-consuming
for players to withdraw funds. According to Adriaan Brink, CEO of
FUN Token (FUN), decentralization at its core is about reducing
this custodial element of online gaming.5 As a first
step, Brink plans to provide a mechanism for players to attach
their cryptocurrency wallets to the operator site, giving players
absolute control over their funds at all times and making deposits
and withdrawals seamless, cheap, and fast.6 He also
points to potential future steps towards decentralization including
“sports betting entirely on-chain and on-chain mechanisms for
player lay-staking.”7

By accepting the attachment of cryptocurrency wallets to
gambling accounts, operators can allow users to stay anonymous,
potentially only requiring an email address and a username. Users
may be able to bypass disclosing personal information to the site
for verification, as deposits from a cryptocurrency wallet are
instantly verified by the public blockchain. Likewise, withdrawals
from a gaming site can be instant, without the need for a third
party to verify the transaction. A fully decentralized casino can
offer increased odds to players offset by a reduction in costs by
using cryptocurrencies with low fees to facilitate transactions.
Some sites may also be able to fully eliminate the house edge in
certain sports betting contexts by allowing true peer-to-peer
transactions where users bet with one another, with no fee going to
the “house.”

ARE THERE DECENTRALIZED ONLINE CASINOS IN OPERATION?

FUN Token launched its online casino, DPLAY.Casino, in
August with the goal of creating “the first properly
decentralized casino.”8 In a public comment, Brink
emphasized the importance of decentralizing the games and making
them provably fair.9 The transparency of blockchain
allows online gaming to be provably fair because the entire
transaction history accessible on the ledger-the legitimacy of the
game or transaction can be proven and users need not trust a third
party to provide fair games.

­FUN is not alone in the space. EarnBet.io has laid claim to
operating “The First Fully Decentralized Casino” while
Edgeless.io touts being “the world’s first
Ethereum-powered crypto casino.”10 In reality,
users wishing to game online with companies utilizing blockchain
technology have a bevy of options. However, none have grown enough
to rival the large players in the field, yet.

In June, Decentralized Gaming Technologies S.V. announced the
August launch of Moonbet, a project aimed at bringing ownership of
an online sportsbook and casino to the masses.11 Profits
of the platform will be divided 50% directly into the wallets of
Moonbet (MBET) token holders, with the remaining 50% reinvested
into development, marketing, and operations to ensure the platform
can compete with traditional online gaming brands.12

“Currently, owning a casino or sportsbook is for global
conglomerates or high-net-worth individuals that can put up the
capital themselves, then receive all the profits,” said Jason
Poprawa, founder and CEO of the Moonbet Ecosystem who has served as
sportsbook and casino manager for a traditional online betting
platform, adding, “With Moonbet, our community members receive
regular profits, have a say in the project through community
governance, and can be a part of all organic marketing
initiatives.”13

Moonbet’s Whitepaper mirrors the sentiments of Brink and
others in the space, citing lack of transparency, potential
manipulation of data, lack of user trust, and payment constraints
as problems currently existing in the online gambling industry that
can be solved using blockchain technology.14

TAKEAWAY

While blockchain technology is not new, and major online casinos
have long accepted cryptocurrencies as a form of payment, the
industry has been slow to adopt the technology to address user
concerns about security, privacy, efficiency, and
cost-effectiveness. Industry trends indicate heightened interest in
applying blockchain technology to these issues present in
traditional online gambling sites, but it is unclear if
mass-adoption of decentralization will become a reality.
Ultimately, market participants will decide which platforms
succeed. Only time will tell if the winners will be the large,
centrally-held players or platforms with a truly decentralized
operation and ownership like Moonbet.

Irrespective of the level of adoption, all online casino
operators can benefit from the security, privacy, efficiency, and
cost-effectiveness offered by blockchain technology. Increased
transparency and user privacy may attract new customers who are
otherwise distrustful of the industry in its current state. Lower
transaction fees allow for lower costs for operators-and if they
choose to pass the savings on-could result in better odds for
players or increased promotional deals, serving to attract
customers from rival sites.  

Winston & Strawn Law Clerk Tyler Boyce also contributed
to this blog post.

Footnotes

1.
Interactive Map: Sports Betting in the U.S., American Gaming
Association, https://www.americangaming.org/research/state-gaming-map/.

2.
Here’s a Look at the Top Trends Shaping the Online Gambling
Market, Fortune Business Insights (August 9, 2021), https://www.globenewswire.com/en/news-release/2021/08/09/2276847/0/en/Here-s-a-Look-at-the-Top-Trends-Shaping-the-Online-Gambling-Market.html.

3.
What’s Behind DraftKing’s $22 Billion Offer for
Entain
, Yahoo! (September 22, 2021), https://www.yahoo.com/now/behind-draftkings-22-billion-offer-175848519.html.

4. Mike
Orcutt, How Secure is Blockchain Really?, MIT Technology
Review (Apr. 25, 2018), available at https://www.technologyreview.com/2018/04/25/143246/how-secure-is-blockchain-really/.

5. Chris
Jones, Decentralization of gambling industry will help achieve
its full transparency
, Coin Telegraph (November 8, 2021), https://cointelegraph.com/news/decentralization-of-gambling-industry-will-help-achieve-its-full-transparency/amp.

6.
Id.

7.
Id.

8.
FUNToken.io launches DPLAY.Casino, ZyCrypto (August 24,
2021), https://zycrypto.com/funtoken-io-launches-dplay-casino/.

9.
Id.

10.
See Top 5 Truly Decentralized Casinos, Medium (March 23,
2020), https://medium.com/best-bitcoin-casino/top-5-truly-decentralized-casinos-afc8e742f996;
see also Here’s a Look at the Top Trends Shaping the
Online Gambling Market, supra note 3.

11.
Moonbet Brings Decentralization to the World of Online Gambling
via Blockchain Technology
, KTVN News (June 10, 2021), https://www.ktvn.com/story/44070663/moonbet-brings-decentralization-to-the-world-of-online-gambling-via-blockchain-technology.

12.
Id.

13.
Id.

14.
Moonbet Whitepaper, The World’s First Community Driven,
Decentralized iGaming Ecosystem 9 https://www.moonbet.org/doc/Moonbet%20Whitepaper%20v2.3.pdf.

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