AGA warning to DoJ could lead to trouble for online gaming and crypto

Earlier this year, the American Gaming Association issued a letter urging the DoJ to take action against unregulated gambling sites. It’s interesting to note that the timing coincides with revenue shortfalls and other poor performance by regulated sites. This very likely hints at closer ties between regulators and operators than what is ethically proper. Especially when you take into account the info in our previous piece on the AGA. Also much of the wording and reasoning they use is interesting to say the least, so let’s go through their statement.

Firstly the AGA admits that the issue is nothing new, but tries to exaggerate the matter as being more brazen and coordinated. Though hardly more than a cursory glance would show that the climate is nowhere near the levels reached in the mid-2000s, and certainly nothing like current regulated sites with the constant advertising and increasingly unfair practices. Nonetheless, the AGA President claims that conditions have reached levels that require “significant federal attention”. Every previous attempt at federal intervention has ended in complete disaster, with users being harmed the worst by far.

He goes on to state that unregulated operators pose a serious threat to consumers and “prey on vulnerable customers”, while offering no consumer protection and not ensuring integrity or fair play. If these operators are truly that bad compared to regulated options, then why not simply let the free market do its job driving the best to the top and the worst to an early demise?

The truth is that the current regulated solutions may not even be sustainable in the long-term, let alone being anywhere near an acceptable level of efficiency. To start, many of their most active users get limited or banned if the operator feels that they are or will be a profitable bettor. To see the sheer madness of their logic, just imagine if other markets/exchanges worked that way. The central authority would almost certainly profit massively, and all of the grifters attached to it, but it would be at direct cost to all users…or as they like to put it “vulnerable customers”.

Of course that is assuming that the solutions can reach and maintain the critical mass of betting volume required to keep markets balanced and healthy. The state-by-state regulatory scheme makes this much more difficult also, primarily as it strongly hinders scalability. The patchwork of regulations that such a scheme creates is extremely difficult to navigate at times and the vast majority of states aren’t even up and running yet. All of these schemes cost the states and federal government large amounts of money, which very conveniently brings us to the final main talking point in the letter. Uncle Sam is in some serious debt as of late, and therefore demands a large cut of the profit.

This is where gaming regulators’ true interest lies, as this was touted as a massive cash cow for states all throughout the legislative process. Their very existence is tied to maximizing the flow of gaming revenue to states, which is obviously a rather strong incentive for these regulators. So much of an incentive that they continually overlook unethical practices like banning winning bettors, pushing losing bettors to bet higher and more often, developing betting formats/schemes that are borderline predatory, and a wide range of other issues.

When unregulated operators use these practices regulators consider them a scourge and a critical threat to the industry, and of course the result of no integrity or consumer protections. When regulated sites use these very same tactics then the same regulators merely shrug and say it’s just business as usual, then go right back to ranting about the dangers of unregulated operators. Aside from the sheer hypocrisy, it seems to demonstrate that the true primary function of gaming regulators is more about protectionism instead of looking out for the best interest of users and progress in the industry as a whole.

The rest is mainly a haphazard combination of biased propaganda, feel-good fluff, and a good measure of thinly-veiled advertising. The top line in their own description of the letter even urges the DoJ to directly step up their participation in this by “Continuing to educate consumers on legal gaming options and the dangers associated with illegal operations”. Maybe an F for ethics, but that’s a solid B+ for spin.

Every single time regulators and the legal system have tried such heavy-handed intervention, it resulted in epic fails and massive disasters for users and the overall global market. Back then crypto was far too small for all of these, or completely nonexistent for the earliest instances. Regulators had zero knowledge or even awareness of crypto then, let alone access to all of the tools and procedures that have been developed in recent years. Now crypto has been clearly stated as an obstacle and major threat to them, and they are motivated to clear it out of their path at nearly all costs.

Historical evidence demonstrates that they nearly always target the payment processors and core web services, in addition to the unregulated casino and sportsbook operators. Bitcoin, Ethereum, stablecoins, and other top coins have filled in for a massive portion of payment processing functionality. While the core functions of these networks are highly resistant, exchanges are a notable weak link in the chain.

Gambling is a rather large, if generally unseen, part of crypto and kicking that leg from under the market could get rather ugly for the crypto markets in the short-term particularly. The creation of harmful legal precedents and/or the sheer bad publicity could even cause some long-term damage. We would be wise to remember the saying ‘an ounce of prevention is worth a pound of cure’.

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