Crypto gambling: advantages, risks and tax consequences

SECURITYCRYPTOREGULATION
4 min read
First published:
Last updated:
Sam Adams
Written by
Samantha Adams
Head of Content

The demand for crypto gambling is growing as players have access to a wide range of games with high bonuses and faster transaction periods than traditional online casinos. In this article we analyse the benefits and risks of crypto gambling, point out what to consider when choosing a gambling platform and look at the tax consequences.

What is crypto gambling?

Crypto gambling is a form of online gambling where players use cryptocurrencies like Bitcoin, Ethereum or other digital assets to place bets or wagers on games or events. These platforms function similarly to traditional online casinos or sportsbooks offering a wide range of games, like slots, blackjack, and roulette, as well as sports betting and esports betting, but operate with cryptocurrencies. Some popular sites include Bitcasino.io and BC game.

The legality of crypto gambling varies significantly from country to country and it is subject to various regulations and restrictions. In some jurisdictions, like the United States, online gambling, including crypto gambling, is heavily regulated or even prohibited at the federal level, though individual states may have their own laws.

On the other hand, countries like the United Kingdom and Malta have more lenient regulations regarding online gambling, allowing for the operation of licensed crypto gambling platforms within certain guidelines. Platforms must adhere to strict regulatory requirements to ensure fairness, security, and consumer protection.

It's essential to familiarise yourself with the regulations and taxation guidance regarding online gambling in your region before participating in crypto gambling activities to avoid potential legal issues or penalties.

What are the benefits of crypto gambling?

Crypto gambling offers several advantages over traditional online gambling platforms:

  • Faster deposits and withdrawals: cryptocurrency transactions typically have shorter processing times compared to traditional payment methods, allowing players to deposit funds into their gambling accounts and withdraw winnings more quickly.
  • Support for more currencies: crypto gambling platforms often accept a wider range of cryptocurrencies than traditional online casinos, allowing users to gamble with their preferred digital assets.
  • Increased accessibility: since crypto gambling platforms operate on decentralised networks, they can be accessed from anywhere in the world without the need for region-specific banking regulations or restrictions. That said, it's important to check your local and country regulations before participating in crypto gambling!
  • Anonymity: cryptocurrency transactions provide a higher level of privacy compared to traditional payment methods, allowing users to gamble without revealing their identity or personal information.

Overall, crypto gambling is an attractive option for users looking for a more convenient, private, faster and accessible way to gamble online.

What are the risks of crypto gambling?

Despite its advantages, crypto gambling also carries several risks:

  • Lack of regulation: the decentralised nature of cryptocurrencies and crypto gambling platforms means they are often not subject to the same level of regulation and oversight as traditional online gambling platforms. This lack of regulation can expose users to fraudulent platforms, scams, and other illegal activities.
  • Security concerns: crypto gambling platforms may be targeted by hackers and cybercriminals seeking to steal funds or personal information from users. Without proper security measures in place, users risk losing their funds or falling victim to identity theft or other cyberattacks.
  • False advertising: some crypto gambling platforms engage in false advertising and misleading practices to attract users, promising unrealistic returns or bonuses that may not materialise. Remember the old saying - if something seems too good to be true, it probably is!
  • Withdrawal issues: users may encounter difficulties withdrawing their winnings from crypto gambling platforms, with some platforms refusing to pay out winnings or imposing arbitrary withdrawal limits and fees.
  • Lack of consumer protection: unlike traditional gambling platforms, which are often subject to consumer protection laws and regulations, crypto gambling platforms may offer limited recourse for users in the event of disputes or issues with the platform.

You should exercise caution when engaging in crypto gambling activities and carefully research and vet the platforms before getting started.

How to find the best crypto gambling sites

When selecting a crypto gambling site, users should consider the following factors:

  • Geographical restrictions: check the platform's restrictions to ensure it's available in your country or region, as some platforms may have limited availability or be prohibited.
  • Licensing and regulation: verify that the platform is licensed and regulated to ensure it operates in compliance with legal and regulatory requirements and provides a safe and fair gambling environment.
  • Reviews: head to sites like TrustPilot or seek recommendations from trusted sources. Online communities like Reddit or forums dedicated to crypto gambling, offer insights and feedback from other users who have experience with different platforms.
  • Customer support: evaluate the quality of the platform's customer support services, including responsiveness, availability, and helpfulness, to ensure you can receive assistance and resolve any issues or concerns in a timely manner.

If you need help to discover the best platform for your needs, resources like Online Casino Reports can help. Their range of guides from experts who evaluate and rank crypto gambling platforms cover all aspects of the experience from game selection to banking options, customer support and more.

How is crypto gambling taxed?

The taxation of crypto gambling transactions depends on various factors, including jurisdiction and the specific nature of the transactions involved. Crypto tax is already an extremely complex subject and there’s little or no official guidance on crypto gambling from tax authorities.

There are three primary types of crypto gambling transactions, that may be subject to taxation you should consider:

  • Placing a bet: when users place bets or wagers using cryptocurrency on a gambling platform, it may be considered a disposal of the cryptocurrency.
  • Winning crypto: in some jurisdictions, such as the United States, gambling winnings, including those obtained through crypto gambling, are subject to income tax. However, other countries like the United Kingdom treat gambling winnings as tax-free.
  • Selling or disposing of crypto winnings: if you later sell or dispose of the cryptocurrency won through gambling, any resulting gains or losses may be subject to capital gains tax.

Guidance for crypto gambling is scarce so if you’re unsure we recommend consulting with tax professionals or legal experts familiar with the taxation of cryptocurrency transactions in your jurisdiction to ensure compliance. To find out more about crypto tax take a look at our Crypto Tax Guide.

Track your crypto gambling transactions with Recap

Our crypto tax calculator can help users accurately calculate and report their crypto gambling transactions for tax purposes. Connect your accounts and import data to the platform to track all of your activity and automatically calculate your crypto tax position. With Recap, users have the option to download a comprehensive tax report ready for self-filing, or they can choose to invite their accountant to share their account and delegate tax filing responsibilities to them.

Wrapping up, let's remember that while having a flutter with crypto can be an exciting journey filled with possibilities, it's crucial to tread carefully and stay informed. By understanding the ins and outs of crypto gambling, including its legalities, perks, and potential pitfalls, you can make smart choices and protect yourself against any risks. Don't forget to do your homework, choose reputable platforms, and prioritise security. And when it comes to taxes, navigating the tax implications of your crypto gambling adventures becomes a breeze with Recap.