Bitcoin may be a bust on the Las Vegas Strip
Last week, two Las Vegas casinos said that they would start accepting Bitcoins in their restaurants and shops. But to date, no Vegas casino will accept the alternative currency for buying chips—and, regulators say, not one has even asked to do so.
Why? Bitcoin appears to violate at least one of the tenets of gambling culture: Casinos like currency that can be held in one’s hand. But even this explanation ignores what may be the real nail in the coffin: Two prominent executives in the Bitcoin community were charged with money laundering on Monday.
Bitcoins exist both as a store of value and a digital currency, with prices in dollars varying dramatically over the course of days or hours. Last week, the D Las Vegas and the Golden Gate Hotel & Casino of Las Vegas joined Overstock.com, Zynga, and Virgin Galactic in selling retail merchandise via Bitcoin.
Place your bets, Bitcoin
But that’s a far cry from betting a handful of Bitcoins at the craps table. To make that happen, casinos would formally propose using it to the Nevada State Gaming Control Board—specifically, the Enforcement Division, which works on everything from preventing organized crime to regulating the chips and tokens used by the casinos themselves.
Using Bitcoin for retail purposes, as the Golden Gate has, isn’t the dominion of the gaming board. But any use of the currency for gaming or for generating gaming revenue, “would be our concern,” according to Karl Bennison, chief of enforcement for the Las Vegas office. Bennison’s division would also need to approve the installation of a “Bitcoin ATM,” or a similar alternative to bringing Bitcoin onto the casino floor.
“But the bottom line is this: There hasn’t been a proposal,” Bennison said.
According to casino representatives we spoke to, many are still trying to understand how the Bitcoin technology works, and how casinos would allow Bitcoins to be directly “loaded” into slot machines via the current ticketing system, or similarly provide some sort of an exchange or payment processor to convert Bitcoins into dollars. According to Bennison, the latter isn’t in the works, either—at least for gaming purposes.
Bringing more money into Nevada’s casinos certainly wouldn’t hurt. Of the Nevada casinos reporting $1 million or more in revenue, gaming revenues consisted of $10.4 billion—of which about 65 percent consisted of slot machines, according to a state-authored abstract of 2013 casino revenues. However, the casinos as a whole lost $1.35 billion in 2013, the fifth straight year they’ve lost money.
Representatives from several casinos, including the Wynn, Caesars Palace, and Treasure Island, declined to comment when asked if they planned to offer Bitcoin support on the casino floor.
In part, that appears to be because casinos don’t yet understand how to take a “Bitcoin” and insert it into a slot machine. On the gambling floor, card games usually use chips as currency. Coin-operated machines like slot machines require either cash or stored-value “tickets” fed into them. In the abstract, there shouldn’t be much of a difference between withdrawing a dollar from a checking account and a Bitcoin from an online exchange. But casino executives say privately that not only do regulators want to be able to see evidence of bets and other gaming transactions—both on the books and from casino cameras—but that gamblers themselves want to be able to physically hold their winnings.
Casinos under scrutiny
And there are legal concerns, too.
Casinos are one of the entities that fall under the U.S. government’s Bank Secrecy Act, designed to curb money laundering. Last August, the Sands agreed to pay $47 million to settle allegations that it allowed an associate of a drug trafficker named Zhenli Ye Gon to gamble $58 million using wire transfers and cashier’s checks at The Venetian, which it owns.
Jennifer Shasky Calvery, the director of the Department of Treasury’s Financial Crimes Enforcement Network, roiled the Nevada gaming industry when she said last September that the government considers casinos to be financial institutions that can be used for money laundering, even if the casinos themselves don’t see it that way.
“[W]hether a company is in the business of helping people invest and protect their money, or using that money for the purpose of entertainment, both are at risk,” she said, according to the Las Vegas Review-Journal. “Both can serve as the vehicle for the use and movement of ill-gotten gains. And just like everyone else, casinos are responsible for reporting suspicious activity when they suspect that the money being brought to them for gaming derives from an illegal source.”
That hasn’t stopped entrepreneurs like Ardon Lukasiewicz, the chief executive of Bitmarkers, who hopes to offer a service to casinos by this summer: Gamblers would send Bitcoins to Bitmarkers, which would establish a “marker” with casinos, in dollars. At the end of the visit, Bitmarkers would hand back the remaining funds in Bitcoins to the gambler. “As of now, we’re a financial necessity for casinos,” Lukasiewicz said.
For now, Lukasiewicz said he sees himself as much an educator as an entrepreneur, trying to explain the advantages of Bitcoin to anyone who will listen.
Lukasiewicz said that Bitmarkers is currently in talks with investors to raise the funding necessary to get the Bitmarkers service up and running by this summer. The first phase will establish the Bitmarkers service itself. In the future, the site will evolve into establishing more of a community—not offering gaming itself, but possibly offering gamblers the opportunity to post details of their wins and strategies.
The most punishing blow to Bitcoin’s Vegas chances may have been struck Monday, when Charlie Shrem, CEO at Bitcoin exchange BitInstant, and Robert Faiella, the site’s compliance officer, were charged with scheming to sell more than $1 million worth of Bitcoins to users of “Silk Road,” an online black market.
Connecting Bitcoin to money laundering, at a time when the casinos are under federal scrutiny for just that, almost certainly means longer odds against Bitcoin turning up on Nevada gaming floors.
Bitcoin’s gambling future: online?
Of course, there are numerous places to gamble with Bitcoins—but they’re almost all online, with many sites based outside the United States. SatoshiDice, for example, claims that it takes an “edge” of only 1.9 percent—but it blocks the service to those operating from an IP address based within the United States. Still, traditional casinos may be a bit more receptive.
“From the online side, I can tell you that we think it is an interesting technology that we have recently begun to monitor more closely and gather data on,” a spokesman for Caesars Interactive Entertainment said in an emailed statement. “As we look for future payment solutions for our business, it could be viable, but we’re too early in the process to draw any definitive conclusions at this point.”
According to Lukasiewicz, the line between gaming at an actual casino and placing the same bet online is blurring, and will eventually disappear. Over the long haul, he sees Bitmarkers as more of a “customer relations” company. “We’re a company that leverages the benefits of Bitcoin, not necessarily a Bitcoin company,” he said.
But after the arrests of Shrem and Faiella? Las Vegas casino operators may stick to what they know: cold, hard cash.