Bitcoin enters debate on legal online gambling in US

P2P aspect intriguing

On April 15, 2011, a day now known in the online gambling industry as Black Friday, the U.S. Department of Justice shut down the three biggest poker sites accessible to players in the U.S., indicting 11 people on charges of bank fraud, money laundering, and illegal gambling. Player accounts were frozen, leaving thousands of Americans without access to their funds. “It was like a bomb went off,” say online poker site developer Hajduk. To continue gambling, “U.S. players were uprooting their families and moving to Malta. Crazy stuff was happening.”

However it seems the sites are unfazed as a result of plans to accept Bitcoin when it launches later this month. The online currency may allow American gamblers to avoid crossing U.S. laws that prevent businesses from knowingly accepting money transfers for Internet gambling purposes. “Because we’re using Bitcoin, we’re not using U.S. banks—it’s all peer-to-peer,” Hajduk says.

Individuals can buy and sell Bitcoins using global currencies through such online exchanges as Mt. Gox. Moreover, a service facilitated by BitInstant, a payment-processing company allows you to purchase the virtual currency for cash at 700,000 U.S. locations, including participating Wal-Mart, Duane Reade, and 7-Eleven stores. Once users have Bitcoins, they store them on their computers or mobile devices in files known as Bitcoin wallets or in cloud-based “e-wallets.”

Hajduk says Infiniti Poker will accept credit cards, wire transfers, and other payment options, but players in the U.S. will be able to play only using Bitcoins. He originally included the currency not to get around U.S. law but to reduce the time it takes to cash players out. Bank transactions can take up to 12 weeks; players who use Bitcoin can get a payout in a matter of hours, he says.

GamblingCompliance, which tracks the global gaming industry, says most estimates value the U.S. online gambling market at USD4bn to USD6bn. On Black Friday, gamblers in the U.S. had more than USD100m in online accounts frozen.  Hajduk says the ability to store Bitcoins on players’ computers is appealing. “At the end of the day, [the government] cannot freeze your account because they cannot kick down the door to Bitcoin,” he says.

It’s unclear whether the government will go after Bitcoin gambling sites. “Bitcoin poses some new legal challenges for financial authorities,” says Martin Williams, the Asia editor of GamblingCompliance. “

 “It’s still a pretty raw technology,” says Gavin Andresen, chief scientist at Bitcoin Foundation. “It’s pretty obvious that it’s been designed by geeks for geeks. It’s not easy to use yet, but it’s getting easier to use all the time.”

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