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The Rise of Using Cryptocurrencies for Online Betting and Its Role in Money Laundering

A news story by Fred Kahn

Cryptocurrency adoption has surged in recent years, with online betting platforms being among the biggest beneficiaries. Using cryptocurrencies for online betting allows users to gamble anonymously, transfer funds across borders without regulatory oversight, and circumvent traditional financial scrutiny. While this presents convenience for legitimate users, it also creates significant risks in terms of money laundering, as criminals exploit these platforms to wash illicit funds.

Additionally, the increasing adoption of digital currencies in online betting has prompted concerns from financial regulators. Many of these platforms operate in jurisdictions where gambling laws are either nonexistent or not effectively enforced. As a result, individuals engaging in illicit financial activities find these platforms an ideal means to launder money without the scrutiny that traditional financial institutions impose.

Deposit Illicit Funds into Crypto Wallets – Criminals acquire cryptocurrency through various channels, including darknet markets, ransomware attacks, and fraud schemes. These funds are then deposited into crypto wallets that lack strong KYC verification.
Transfer Funds to Online Betting Platforms – Using decentralized exchanges or mixing services, criminals move the illicit crypto to online betting platforms that accept digital assets. Many of these platforms have lax regulations, allowing users to place bets without revealing their true identities.
Betting and Creating Transactional Histories – The launderers place bets, either winning or losing, to create a history of legitimate transactions. Even if they lose a portion of the funds, the remaining amount appears as legitimate gambling winnings.
Withdraw Cleaned Money – Once a sufficient transaction history is created, the money is withdrawn in a different cryptocurrency or converted into fiat currency through offshore exchanges, making it harder for authorities to trace its origin.
Conversion to Other Financial Instruments – Some criminals further obscure their transactions by using the cleaned money to purchase assets such as real estate, luxury goods, or additional cryptocurrencies through peer-to-peer trading platforms.

Why Using Cryptocurrencies for Online Betting is a Laundering Hotspot

Several factors make using cryptocurrencies for online betting particularly attractive to money launderers:

Anonymity and Pseudonymity – Unlike traditional financial institutions, online betting platforms accepting cryptocurrencies do not always require strict identity verification.
Cross-Border Transactions – Digital assets allow money to move across jurisdictions instantly, avoiding traditional regulatory checks.
Decentralization – Many online gambling platforms operate in unregulated or loosely regulated jurisdictions, making them difficult to police.
High Liquidity and Volatility – Cryptocurrencies can be quickly traded or swapped into different tokens, reducing traceability.
Use of Privacy Coins – Some platforms accept privacy coins such as Monero or Zcash, which offer even greater anonymity compared to Bitcoin or Ethereum.
Lack of Reporting Requirements – Many online crypto gambling platforms do not report transactions to financial intelligence units, making it difficult for regulators to detect suspicious activities.

AML Challenges and Regulatory Responses

Regulators worldwide are struggling to keep pace with the rise of using cryptocurrencies for online betting and its associated risks. Some key AML challenges include:

Lack of Universal Regulation – While some countries enforce strict KYC/AML compliance on crypto betting platforms, others provide a haven for unregulated operations.
Difficulty in Tracing Transactions – The decentralized nature of blockchain transactions complicates the tracking of illicit funds.
Use of Layered Transactions – Criminals often use multiple transactions across various wallets and platforms to obscure the money trail.
Lack of Cooperation Between Jurisdictions – Many regulators operate in silos, making it difficult to coordinate efforts against cross-border money laundering schemes.

To combat these threats, authorities have taken several measures:

Stronger KYC Requirements – Some jurisdictions have enforced stricter identity verification for crypto betting platforms.
Enhanced Transaction Monitoring – Blockchain analytics firms are helping regulators trace suspicious activities linked to crypto gambling.
Blacklisting Non-Compliant Platforms – Some governments have blocked access to betting platforms that do not adhere to AML regulations.
Collaboration Between Agencies – Global cooperation is increasing to tackle crypto-related financial crime.
Implementing AI and Machine Learning – Advanced monitoring systems leveraging AI can detect suspicious betting patterns and flag potential money laundering activities.

Conclusion: The Future of Using Cryptocurrencies for Online Betting and AML Compliance

The growing use of cryptocurrency in online betting is a double-edged sword, providing both convenience and a gateway for financial crime. Without proper oversight, using cryptocurrencies for online betting will continue to be exploited for money laundering. Regulatory bodies, law enforcement agencies, and financial institutions must collaborate to develop stronger AML frameworks tailored to the crypto gambling sector.

Future AML regulations will likely focus on implementing blockchain forensics, stricter licensing requirements for betting platforms, and deeper scrutiny of peer-to-peer crypto transactions. If authorities fail to establish stringent regulations, criminals will continue to exploit online betting for illicit financial gains. As the regulatory landscape evolves, companies operating in this space must proactively comply with AML requirements to avoid legal repercussions and reputational damage.