The Billion Dollar Industry Crypto’s Been Waiting For
Since Bitcoin put cryptocurrency and blockchain on the map 10 years ago, the world has seen the technology transform, create, and recreate industries. Thousands of cryptocurrencies were launched with each uniquely aimed at disruption. While all industries may not benefit from cryptocurrencies, the gambling sector is in the midst of a revolution which may reshape its future.
The Global Gambling Industry
The global gambling market size reached a value of nearly $449.3 billion in 2018, having grown at a compound annual growth rate (CAGR) of 4.1% since 2014, and is expected to grow at a CAGR of 5.9% to nearly $565.4 billion by 2022 (Business Wire). Included in ‘global revenues’ is online gambling revenues.
In 2018 online gambling accounted for ~$50 billion of total global revenues. The online gambling segment is projected to reach $87.75 billion by 2024, registering a CAGR of 8.7%. Asia-Pacific was the largest market for gambling, accounting for 32.7% of the global market in 2018. It was followed by North America, Western Europe, and then the other regions. Going forward, Asia-Pacific and Africa will be the fastest growing regions in the gambling market, where growth will be at CAGRs of 7.9% and 7.7% respectively. These will be followed by South America and Eastern Europe where the markets are expected to grow at CAGRs of 6.13% and 6.12% respectively (Business Wire).
Gambling Legality
When gambling online as a United States citizen you need to be sufficiently knowledgeable about your state and federal laws regarding gambling and the transfer of funds in relation to gambling. In the United States there are currently no federal laws that prohibit placing wagers online with fiat or digital currencies such as Bitcoin, however, it is illegal to place a wager on a platform that is located within the United States and there is a federal law regarding the transfer of money to online casinos. In 2006 the federal government enacted the Unlawful Internet Gambling Enforcement Act of 2006. Contrary to popular belief, this law does not prohibit players from sending money to casinos, it merely prevents any person or entity from knowingly accepting funds that are meant for illegal gambling activities. This law is the reason that most online casinos use a payment processing company to facilitate money transfers as opposed to allowing the players to directly fund their accounts themselves.
Asia currently accounts for over 32% of global gambling revenues, but in many asian countries gambling is still illegal. Take China for example, it is projected that China accounts for over $50 billion in yearly global gambling revenue, yet online gambling and land based casinos are illegal. In other Asian countries such as India, Japan, South Korea, Philippines, Thailand, and Vietnam, gambling laws are sort of a grey area. These countries all partly allow gambling, but to what extent is gambling legal, and when does it become illegal? Some Countries allow gambling but only if it takes place through government created institutions, and in countries like Japan, Philippines, and Thailand, online and land based casinos can be operated with little to no restrictions at all. One interesting region in Asia is the Macau Special Administrative Region of the People’s Republic of China. Macao is known for its prolific casinos that generate an estimated $21 billion a year in gambling revenues. Whilst there is currently 26 Asian countries that partly allow gambling or some form of it, there are several that have banned gambling entirely. Asian countries that have completely banned gambling include Bangladesh, Indonesia, UAE, Pakistan, Kuwait, Brunei, Bahrain, Qatar . The gambling laws of Asia are a complex group with each country taking its own stance towards or against gambling.
The Crypto Gambling Sector
Cryptocurrency poses an enticing solution to many of the problems and inconveniences that the online gambling industry currently faces. Verified users, regulated operators, exclusion of third parties, cheaper transactions, and near instant fund transfers; are all features that cryptocurrency implementation can bring to online gambling. The Gambling sector is comprised of 42 different coins and tokens operating on six different blockchains; below is a breakdown of what platform each of these projects use to operate.
Gambling Sector Statistics
In the last three months (Oct 23, 19 — Jan 23, 20) the gambling sector has outperformed the overall crypto market by 5.3%. It is important to note that the gambling sector is small, not only in terms of monetary value but also in respect to other crypto gambling sectors. Currently the gambling sector sits at the 12th smallest sector and only captures 0.09% of the overall cryptocurrency market. With that said, there is a rather large amount of coins within this sector, and the top five coins by market cap account for over 80% of the entire sectors market cap. This means that some coins within the sector have highly illiquid trading supplies and are prone to large, inconsistent price swings in either direction. This can lead to the sector market cap being more volatile when compared to the market average.
At LunarCRUSH we like to say, without a community, there is no crypto. When analyzing investments in the crypto space, community and social metrics reign supreme. A project which has piqued interest as of late is CasinoCoin. (CSC) In the last 3 months, CasinoCoin has averaged 183 social posts across Twitter, Reddit, and News Channels daily, surpassing their yearly average by 85%. Subsequently, trading volume and price have increased dramatically.
Outside of the 42 coins that make up the crypto gambling sector there are a few different coins and projects that are helping cryptocurrency and blockchain technology make a splash in the global ocean of online gambling.
- Tron — In 2019 Tron, known by some as the “Las Vegas of the Blockchain”, registered over $4.4 Billion in Dapp (Decentralized Application) related transaction volume, the network added 579 new Dapps and now boasts over 990k users. A study published by Dappreview revealed that 90% of all dapp transactions on the Tron blockchain are gambling related. This would equate to approximately $2.8 Billion in gambling related transactions in 2019 alone.
- EOS — Much like Tron, casinos accounted for the vast majority of transactions on the EOS blockchain. Gambling accounted for ~$4 billion in transactions in 2019. However, while things look great for casino dapps on the surface, if you delve slightly deeper you will find that they are a bit rockier than they may seem. Following the launch of EIDOS (essentially a token airdrop that received mixed emotions from the community for how it initially congested the network) in the final quarter of 2019, the EOS network saw a ~50% drop in casino dapp activity and since the start of 2020 the number of active daily users on casino dapps has dropped further. Only time will tell us if Dapp activity will continue to fall or eventually rebound.
- Ethereum — Ethereum has a much wider array of dapps available on its platform due to its favorability among developers and the veteran status it holds in regards to smart contract/dapp development. With that said, in 2019 gambling accounted for only 4% of dapp transaction volume on the Ethereum blockchain totaling ~$500 million in USD value.
- Other notable blockchains that experienced moderately large gambling activity include NEO, IOST, STEEM, WAVES, ONT, and WAX.
Final Thoughts
The decentralized economy offers an intriguing avenue for online and land based gambling operations both domestic and abroad. While the value of the crypto gambling sector is volatile — the sector seems to be headed in the right direction considering how positive 2019 was for many projects within the sector with regards to partnerships, user growth, and institutional onboarding. Let us all keep an eye on how the gambling industry changes as the decentralized economy continues to move forward.
Author: Brandon McWard Market Analyst, LunarCRUSH
Twitter: @Bmcward11
Cryptocurrencies mentioned: $BTC, $TRON, $EOS, $ETH, $NEO, $IOST, $STEEM, $WAVES, $ONT, $WAX, $DRG, $WIN, $BXK, $CSC, $BST, $WGR, $PLA, $QNTU, $BET, $N8V, $CHP, $TFL, $DICE, $CBC, $UKG, $EDG, $PPY, $WNL, $ESBC, $BETHER, $AYA, $PLAY, $DBET, $TGAME, $FLOT, $TDP, $SPX, $GPYX, $WBET, $BETR, $GEX, $HORSE, $DFT, $BAZ, $GPKR, $RLT, $DRAGON, $ASA, $AZART
