The specifics vary from country to country, but bitcoin gambling has been the main driver in bitcoin transactions since SatoshiDice was created. In fact, in August 2013, about 5% of the value of all bitcoin transactions occurred on SatoshiDice.
Bitcoin is very good at moving lots of small transactions. It is the perfect vehicle for many small bets and is one of the reasons online gambling and bitcoin transactions have increased over the years.
Although legal, every country has different rules. For example, in the United States, the U.S. Justice Department passed the Unlawful Internet Gaming Enforcement Act making it illegal for U.S. banks to process payments to known gambling sites. This essentially shut down the U.S. online gambling market.
However, gambling and internet gambling is legal in Europe. There is no equivalent “Unlawful Internet Gaming Enforcement Act” in Europe and online gambling sites and casinos continue to operate.
For individuals in the U.S. worried about legality, then the current regulations provide clear gaps that make bitcoin gambling legal.
To start, the Internet Gaming Act restricted U.S. banks from processing payments, which was the main reason U.S. individuals were unable to gamble because there was no way to fund accounts and collect payments. However, bitcoin gambling sites do not require banks to operate.
Bryan Micon, the founder of bitcoin poker site Seals with Clubs, says:
“It would be trivial to circumvent some ban. Seals are open to the world. There’s no banking at all done on the site. It’s a pure bitcoin poker site, so this is a totally brand new thing. It’s only been a few years for the legal world and there’s nothing at all that says anything about this protocol.”
Although Micon and Seals with Clubs accept players across the globe, not every bitcoin gambling site takes the same interpretation. Each online casino that accepts bitcoin for gambling has their own requirements, which differ between online sites.
For example, the aforementioned SatoshiDice does not accept players located in the U.S. Due to the ambiguity of bitcoin, certain sites take the default position that online gambling is based on the gambling laws established by each country. Sites restrict use based on the IP address of the user.
However, to make matters more interesting, gambling rules are typically based on using currency. In the U.S., bitcoin is a commodity. As bitcoin is not classified as a currency, bitcoin gambling would not be prohibited under current rules.
Of course, with all emerging technologies, then the regulations are subject to change. For those interested in bitcoin gambling, then consider looking into the current gambling laws. If you want a conservative understanding around the legality of bitcoin gambling, then apply the standard gambling regulations.
If you are comfortable with uncertainty, then know that bitcoin gambling sites will likely protect themselves from potential lawsuits. If they allow you to gamble on the site, then you are probably ok under current regulations but make sure to avoid common scams.