Lewis Silkin's Wendy Saunders: Gambling in Crypto: The Next Revolution?
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Before creating new gambling products in crypto, it is worth considering how that might be captured under the existing legislative and regulatory framework.
Gambling and gaming websites may be used to launder money laundering proceeds of crime. Gambling operators will need to update their risk assessments to take account of the new risks to their business.
Casinos are regulated businesses for the purposes of anti-money laundering (AML) legislation. Remote licensees must assess the risks of their business being used for money laundering and terrorist financing. They must also have appropriate policies, controls and procedures to prevent moneyaundering and terrorism financing and verify the identity of customers. The Gambling Commission Guidance for remote and non-remote casinos mentions the higher risk posed by e-wallets including those accepting crypto. Casinos will need to consider how to satisfy AML obligations when accepting cryptocurrency as a means of payment.
assess the risks of their business being used for money laundering and terrorist financing. Have appropriate policies, controls and procedures (PCPs) to prevent money launderers and terrorists financing and to ensure PCPs are implemented effectively.
Gambling Commission reminds operators of their obligations and duties under the Proceeds of Crime Act 2002. Gambling operators need to make sure they do not accept bets, stake, or funds on account which represent the proceeds of crime. Financial Conduct Authority published guidance on which types of crypto assets were likely to be regulated and which were outside the scope of regulation. If a crypto asset is regulated, it may be a criminal offense. If it's unregulated, then it could also be criminal property. Lewis Silkin's Wendy Saunders: Gabbling in Crypto: The Next Revolution? is a book about gambling in crypto.
Additional Registration Needed under the MLRs 2017. Following the UK’s implementation of the Fifth EU Money Laundering Directive, additional types of firms were brought within the scope of MLR 2017 including crypto asset exchange providers and custodian wallet providers.
Cryptoasset exchange providers include firms that exchange cryptoassets for money or money for cryptoassets. They also operate a machine which utilises automated processes to exchange them.
Exchanges cryptoassets for money or money for cryptoassets. Operate a machine which utilises automated processes to exchange cryptoasses for cash.
Gambling operators should consider whether they need to register as a custodian wallet provider before offering new products or services involving crypto. In July 2021 the FCA published a memorandum of understanding that it has entered into with the Gambling Commission.
cryptoassets on behalf of its customers. Private cryptographic keys on the other hand are used to hold, store and transfer cryptoassets.
Crypto is highly volatile. Gambling operators are subject to conditions concerning the protection of customer funds. The terms of the gambling contracts between operator and customer will need to be addressed within the contract. The assessment of fairness under the CRA and UTCCR does not apply to the appropriateness or adequacy of price or remuneration. When drafting or revising terms concerning price, operators will have to consider the G gambling commission's objective of "ensuring that gambling is conducted in a fair and open way"
Gambling firms should review AML risk assessments and PCPs to check they adequately cover the risks associated with crypto. They should also check terms and conditions to make sure they are sufficiently transparent on pricing and appropriately allocate liability.
reviewing AML risk assessments and PCPs to check they adequately cover the risks associated with crypto. Reviewing terms and conditions to make sure they are sufficiently transparent on pricing and appropriately allocate liability.
Wendy Saunders is the legal director at law firm Lewis Silkin.
