iGaming Daily

Joe Streeter (00:01.592)
Good morning and welcome to the iGaming Daily podcast brought to you by OptiMove, the number one CRM marketing solution for the iGaming market. And today I'm joined by Chris Elliott, a partner at Wiggin and we are going to be talking about crypto and its complex but evolving relationship with UK gambling and I guess UK consumers in general as well. Chris, firstly, I guess, how are you doing and

Could you tell us a little bit more about your role and what you do on the day to day?

Chris Elliott (01:08.017)
Yeah, so thanks and thanks for having me on Joe. So I am one of the partners in the betting gaming team at Wiggin. Wiggin is one of the sort of leading betting gaming firms, law firms in the sector. So we act sort of day in day out for a lot of the largest online gambling operators in the market as well as a lot of their vendors. So sort of regulation is sort of my bread and butter day in day out. So hopefully able to speak to the topic.

Joe Streeter (01:32.716)
Yeah, no doubt the perfect guest for this podcast. In fact, I would say probably the perfect guest for many of things we've discussed on the iGaming podcast. So yeah, we'll have to have you back and pick your brain on numerous other things. But today we are talking crypto. And the great thing about doing this podcast every day, we are hot off the press. We can react to the latest news. And there was a little bit of crypto news yesterday with, not monumental for the gambling industry.

but I think it's an indictment of the relationship between mainstream finance, if you like, and mainstream banking and the crypto sector. Barclaycard took the decision to block customers from purchasing cryptocurrencies with credit card. It's just with credit card, Chris, that's right, isn't it?

Chris Elliott (02:20.517)
I think that's right. Yeah, exactly. So actually you saw a similar thing. It's not dissimilar from matching moves that have happened in the gambling sector itself to prevent people using effectively borrowed money to gamble. Barclaycard have obviously taken that decision to prevent people from using credit cards to actually acquire crypto assets. think there are similar reasons. I it's currently proposals actually to consult on actually introducing that as a sort of policy from I think the FCA or someone consulting to actually introduce that as a point. But it seems to make sense for us.

common sense perspective people actually speculated or acquiring these assets in the hope for gain that actually you should do so with your own money rather than perhaps a credit card. Other people have different views on that I think.

Joe Streeter (03:02.124)
Yeah. was, it was always really interested. We're going a bit off topic here, but it was always really interesting to me. when I think we were long overdue in making that credit card ban in the gambling sector. think it was largely welcomed. There wasn't much friction around that credit card ban. but it was always really notable to me that when I went to the U S just kind of a couple of months after that and spoke about, you know, a credit, bad, the banning credit cards for gambling.

the mindset was just completely different just because, it was kind of seeing this, type of, type of infringement on rights and too much intervention. was very interesting.

Chris Elliott (03:39.921)
Well, exactly. That's what people will say. It's nanny statism. people in different parts of our society will say, it's not for the state to decide how it is that we should be able to spend and use credit cards to acquire things for our goods. And we should respect the free agency of adults to decide how it is they wish to borrow money and spend their money. But clearly, regulation is there.

to try protect against people who don't have that free agency, particularly in this sector because obviously some people can't control the compulsion to gamble. that's the balance really. And I'm sure it's why Barclay kind of moved to actually introduce that as a sort of a good idea.

Joe Streeter (04:21.666)
Yeah. And I think that principle certainly stands for both crypto and for gambling that that protection is needed in some form. It's interesting that this, I guess the crypto sector is a lot younger than the gambling sector in the UK. It's interesting that this move came earlier. Then it came a lot quicker. There were a lot quicker in taking this step than we were in gambling, if you like.

Do you think that shows the kind of maturity of the market, how fast the market is maturing when it comes to UK crypto?

Chris Elliott (04:59.953)
think it's potentially seen as an indication of that. Often what happens in newer evolving sectors is that you have actors or various different stakeholders try to take voluntary action as this to try and mitigate some of the risks that are involved in this sort of developing use cases for crypto. Usually to stave off the intervention that comes from it being introduced by a change in law or regulation to say rather than actually being mandated on us, we're going to act.

first to try and prevent it from being used because we think it's the right thing to do. But that's one side of that story. other ways, it's really to try and stay above and say that intervention, the move to make it or mandate it. know, Barclaycard as well, remember, those types of banks, they've got interests in very many different sectors. So they're often, they're more likely to make that type of decision, but a purely crypto.

service provider may be less prepared to take some of those actions because clearly it comes at a cost as well.

Joe Streeter (06:02.562)
Yeah. And it still feels though, even as kind of, this market has matured, the view of the gambling industry is, an exclusionary one. you know, we, there's no, there's no move to kind of not embrace, but there's, there's no move to kind of equip operators or regulators to, kind of deal with crypto. It's very much, a route of exclusion. is this, going to have an impact on the black market?

Chris Elliott (06:32.739)
I think there's a couple of points in your question. don't think it's not the gambling industry that has moved to exclude crypto as at least as a payment method for using connection with gambling, but it's association with, in the sort of early days of crypto that there was no, there was effectively no regulation that was capable of addressing some of the issues or risks that were involved where you were creating these disintermediated.

possibilities for exchanges of value without it going through a bank or other payment service provider. It's association with the early days of the nefarious actives, which has led to its association with things like money law-wanderings, sanctions, evasions, and that sort of thing. So it's kind tainted by its past. And what you've seen is rather than being the gambling industry, it's really the regulators in regulated markets who are extremely nervous and continue to be about.

about actually embracing crypto as a use case in gambling. It's the sort of perfect storm in their eyes, not to put words in their mouth, but you've got gambling, is perceived to be a high risk sector, from an association with crime, but there's also crypto, which has similar things. You put those two things together and actually it's the sort of perfect storm in their eyes. The reality now though is somewhat different. Moves in...

in increasing standards of regulation and gambling, but also in crypto, your regulation is catching up to deal with very many of the same risks. And actually, I think we're close to or at a bit of a turning point where I think eventually regulators are going to have to embrace it. Because as you say, if they don't, one of the consequences, and we're already seeing this in the market, that where there's no opportunities to actually gamble using crypto, the only opportunities are in the black market. And you're certainly seeing that.

being much spoken about at the moment. There's growing consumer demand for this, there's nothing within the regulated sector actually servicing that demand. So absolutely, it's going to be a continued source which drives the black market in the UK.

Joe Streeter (08:35.532)
Yeah, I do tend to agree with that. And I wanted to kind of revisit some of those, that tainted past that you talk about, not to make this a kind of a therapy session for crypto, but yeah, I wanted to kind of revisit some of those sentiments, those negative sentiments around crypto and just check in on how they've been dealt with as the market's matured.

One thing is a key one and a key one around AML is around customer identification and source of funds. Obviously a big issue for the gambling industry. Anyway, something the industry looks to tackle. Yeah. How has this changed within the crypto sector?

Chris Elliott (09:17.669)
Yeah, so just as in gambling, regulators are concerned about use of criminal money in connection with gambling. So, too, crypto has to deal with the potential vulnerability it has as a means of exchanging value for its use in connection with nefarious actors, people who are sophisticated actors who use it to facilitate the committing of ill deeds. So, much the same way that...

they say gambling pursues those objectives of trying to keep crying out out of the sector. So to does crypto and crypto regulation. And what's happened, what you've seen both in the UK and across Europe, but also outside of Europe, you've seen regulations now being introduced at the moment with with micro in in Europe, but also in the UK as is proposed, and the current AML registration regime, you've seen laws and regulations introduced to to seek to address those by placing obligations on

currently FCA registered for AML purposes firms in the UK, but soon to be or as he's being consulted on fully authorized FCA authorized firms and crypto asset firms in the UK will have a whole raft of obligations to do things like establish proper monitoring of who is actually transferring money to and from one another by these means. So what actually happens is,

you know, the rules will now start to require and currently require the exchange providers, so the service providers to actually identify who is the actual wallet owner and who are they actually sending the money to. So we're actually identifying not just the wallet ID as is available on the blockchain, but who actually is the beneficiary of that to actually identify who they are. You know, lot of that regulation is there, say, to address the same risks, but obviously it introduces, you know, in the same way as we see in the gambling sector, introduces

friction and it introduces an attack on potentially the privacy of individuals who might actually like the idea. There are very many people who use crypto in the early days liked the fact that it was anonymous, that it was disintermediated, that you didn't have to go through a bank. was almost like the democratization of payments and what regular, know, which is, you know, a positive, but also then it creates the pathway for it's used by people who aren't in the mainstream as I've sort of mentioned.

Chris Elliott (11:35.153)
And so actually regulation in crypto in much the same way is introducing sort of friction in the way that we spoke about lots in gambling to actually say, actually, if you want it to be used and capable of being used in connection with the mainstream, you're going to have to forego some of that privacy because if you don't, it carries with it the same risks that actually has so far meant that it can't be used in connection with things like gambling or even mainstream payments. you're seeing similar things. There's lots of commonality, I think, in between the sort of evolving regulatory framework for crypto as you've seen for.

for gambling, we must talk about, I'm sure, your podcast, historically.

Joe Streeter (12:06.476)
Yeah, for sure. It's, it's really interesting to see the two kind of run simultaneously and the two narratives play out similarly. I guess what I'm getting from this a little bit is we could, there's room or potential for gambling to embrace an element of crypto, but possibly some corners of the crypto industry aren't ready to be embraced by gambling, regulated gambling just yet.

Chris Elliott (12:35.267)
I think that's right. If we were to say, let's say at the moment there's no, certainly from the UK perspective, if you say actually we're gonna create a framework to allow for the people who are currently using crypto in the unlicensed black market in the UK to be able to play within the regulated perimeter, I don't think you're gonna convert a significant proportion of those to playing with regulated gambling operators because they value privacy, because they value...

playing at high stakes where you can't necessarily get that on with regulated operations with where we've got to now. Because you know, they're actually playing with, you know, a lot of these crypto operators are actually, it's not just the payment innovation, it's actually the product innovation. Some of these operators who are large are actually creating platforms that are truly innovative. They're not just reskins of other operators. And so actually a lot of those are gonna stay because, you know, they like the environment they're currently working in and then actually they probably value that more than that.

the protection afforded by playing with a licensed operator. All that said, I still think there's growing demand amongst the sort of more mainstream people that are perhaps more prepared to or less concerned by the things you give up by playing with a regulated operator. And that may wish to use crypto in connection with gambling with the brands that they're already playing with. And that I think is only gonna grow, but I don't think it's gonna be this.

this huge increasing popularity of crypto in the UK. think outside of the UK maybe slightly different, but not in the UK.

Joe Streeter (14:04.022)
Yeah, it's a really good point. You kind of stole my follow-up question a little bit, answered it prematurely because that appetite for kind of, that appetite for anonymity and, you know, being kind of Jason Bourne like and just flying under the radar and the, on the wire of crypto, you possibly lose that with the things that you would need to bring crypto to gambling. So I guess.

the unlicensed casinos that we see sometimes, the crypto casinos that we see that are dwarfing regulated casinos. How much of a chunk would integrate in crypto in a responsible way into the legalized gambling? How much of a chunk would it take out of them? Would it take anything out of them or are they, yeah, are they still going to exist just because of that appetite for anonymity is the only word I can think of, but I think it's a bit more than that, right?

Chris Elliott (15:00.369)
Yeah, I think it's not just the it's not just the the identity, but that is obviously a part of it. I don't know. I mean, the thing is, it's quite hard to even quantify the size of the crypto market in places like the UK and elsewhere, because it is a bit it's under the radar. It's in the shadows. You know, you hear people speak about it. And that actually it's depending on who you ask, it's either large or smaller than is predicted. But the fact is, this data is not there to actually quantify it. I think it's inevitable if

Certainly some of the bigger brands, they were minded to actually introduce it, some of it would come within the regulated market. But I'm not sure it's gonna be the majority of it. That might change. There's been a bit of a reset post as part of the implementation of the white paper around whether or not you can.

You can justify VIP schemes and the sort of things where a lot of the leakages spoken about in the industry sort of leaked to the black market was because actually you just couldn't get it on with the regulated operators in the way that perhaps you're used to. That might change as people, as say the white papers reintroducing or reset of that balance. But I don't think it's gonna materially shift the dial as it were. What you might find is rather than it being the incumbents of the large existing online gambling operators,

you might start to see as crypto becomes, as is inevitable, think, becomes embraced in the sector. Not least because I think actually gambling crypto are sort of natural bedfellows. You might find actually there are some disruptors, so newer brands or newer entrants into the market that are actually specifically designed and catered for a sort of Web3 crypto audience. And actually they are the ones that might actually start stealing a bit of a step on the existing sort of black market operators that might or might not be available in the UK.

Joe Streeter (16:47.31)
Interesting. Yeah. Watch this space for sure. And we are going to go to a quick ad break, but, uh, we've been very UK focused in the first half. We're going to talk a little bit about Mika in the, in the second half, the, uh, the regulation, not the, uh, 90s pop star to early 2000s pop star. Uh, yeah, we're to talk a little bit about Mika, um, and, uh, price volatility and also maybe a little bit about influencers, a little bit about influencers as well. Uh, yeah. Join us after the break.

Joe Streeter (17:20.578)
Welcome back everyone. And we are joined by Chris Elliott, a partner at Wiggin who has, yeah, we've been diving deep into the UK's relationship and also, I guess, potential relationship with crypto in the first half. Somewhere where the relationship has evolved with crypto and with crypto regulation is in the EU and with the MECA regulation.

Yeah, what do we know about this, Chris? How important could this be? Obviously it's a wider crypto regulation, but how important could this be for the gambling sector? Why will the gambling sector be vigilant over the developments involving this regulation?

Chris Elliott (18:01.713)
So Mika in Europe is sort leading the way in terms of, say, a full authorization regime for crypto. So over and above the sort of AML registrations like you see in the UK, it's actually a wide-ranging sort of quasi securities financial services type authorization regime. So it's got rules broader than just AML. It covers things like governance and capital reserves for crypto assets. So it provides rules around things like market integrity inside of trading.

that sort of market manipulation. it's a sort of warts and all type regulations, still trying to strike the balance, but they're trying to wrap the arms around, know, acceptable uses of crypto and particularly how it is that you can properly supervise the activities of those that subject themselves to regulation. There's a very important development in crypto regulation in Europe. As I say, there's a sort of, not a mirror, but there's a sort of similar thing happening in the UK and you're seeing it elsewhere. The reason it's potentially

significant for gambling in Europe is, as I said, in regulated markets, which there are most countries in Europe now regulated, there has been this hesitation about use of crypto. But because actually you couldn't control for the risks, as we know, we've spoken about already on the podcast around controlling things like money laundering risks, sanctions evasion risks, custody risks, how you're actually going to protect funds that are held on account for future gambling.

Those are all things that are actually addressed through the use of these authorized service providers, particularly those that are custodians, they're going to actually hold these funds on account. You have a layer of protection now forward through that regulation that can basically protect against some of the very significant scandals that have happened in the crypto market that have led to billions of pounds worth of people's money being lost effectively because there's not that control.

So I see it being a potentially very significant development. I think it's still playing out. It's in the process of being implemented. But you will see, I think, as a consequence of that, and certainly as it's embedded in, I think more people prepared to actually accept and partner with these people that are subjecting themselves to authorization.

Joe Streeter (20:15.66)
Yeah, it's, it can, certainly lend a level of, legitimacy to it, to a lot of operators and, to a lot of companies, for sure. I w were running out of time here, but I have quite a few more questions for you on, on this subject. forgive me for kind of jumping all over the place. I just want to get your thoughts on a, a few things. when we kind of, to draw us back to the first half of the show, we were kind of revisiting some of the tainted sentiments.

about crypto that it has gone some of the way to dissolving. One that I think has a big impact on gambling is, or on its relationship with gambling, potentially being embraced by the gambling sector, is around price volatility. You you're already making a play on whatever you're wagering on. Are you also wagering on the volatility of a coin? Is it kind of a double whammy?

I think that's one that comes up all the time when, we're kind of having office discussions around this. Yeah. How much has that changed as the market has matured? What has been done to kind of dilute those fears?

Chris Elliott (21:22.553)
Yeah, I think people have people have seen, you know, certainly recognize that as long recognize that as a risk, particularly in the sort of age of or sort of new issue tokens that are hugely volatile continue to be so you know, people really use acquiring those to speculate for gain. And if that's what's actually happening, it's, it's really indistinguishable from from gambling or investing in the in kind of high risk assets. So it's, the regulators and consumers are right to be concerned by that sort of thing, because you can lose a lot of money.

But in addressing those concerns, things like Metmica and regulation elsewhere have sought to address those things like stablecoin regulation. You've seen that being introduced that actually has confiat backed or asset backed stablecoins to actually completely remove the volatility risk effectively bring with it the security of it being backed or tethered to a fiat currency. That again, I think will be.

really certainly in regulator markets will be the first use case I would predict for crypto and connection with regulator gambling will be some sort of stable point I think because I say regulators have been long concerned about that volatility the double whammy risk of speculation on both the value of the asset and as well as the the wager itself. So you've seen, say regulations develop on the crypto side that will address or largely address that risk I think.

Joe Streeter (22:45.558)
Interesting. that, that thing we kind of tapped into in the first half of the show about the appetite for this kind of maverick side of crypto, be it being diluted as the gambling industry embraces crypto because of the, the things that the elements that need to be put in place to, safeguard, does a stable coin, I mean, when I mentioned stable coins to my, to my crypto guys there, there is almost like a dirty word. Does a stable coin, it being pegged to a stable coin?

kind of scare a lot of that audience away and keep them on the black market? Is there a risk that happened?

Chris Elliott (23:18.801)
It touches on that point we spoke about earlier, is it addresses or removes some of the perceived benefits that lot of the earlier adopters of sought to benefit from, so that there isn't the ability to potentially gain as you've done in early investors in other forms of crypto.

And so actually it's not as interesting for many of those people. suspect that's why it's referred to in that way between the people you're talking to. But as I it's deliberately there to address one of the key risks that has been associated with crypto historically. You're right that actually one of the reasons why I make the prediction that it's likely to be one of the earlier use cases of crypto in gambling is because really what I think is likely to happen is in regulated gambling, rather than just going full in saying we're going to accept.

Bitcoin, Ethereum, we're gonna get all sorts of crypto, connection with gambling. People are gonna sort of dip their toes in. They're gonna have very risk averse controls, low limits, they're gonna use stable coins. They're gonna try and actually say, we'll accept it, but only up to these sort of relatively lower risk tolerance. It's certainly for the large incumbents. Over time, that will erode as people better understand the risk and actually have a better calibration for the risk appetite. But given where we are now, I suspect that's more likely to be the case. So things like a stable coin.

a sort of lower risk crypto I think is likely to be, as I say, the earlier adoption within the sort of regulated perimeter. For while that happens though, of course, the big crypto operators who are accepting Ethereum and Bitcoin and the others, they're not really threatened by that really, are they? Because they're not competing with that market.

Joe Streeter (25:02.924)
Yeah, no, agreed. And, just a couple more and then I will let you go. promise. I wanted to ask you about influencers. saw, the extent of Drake's losses or alleged losses on stake.com this week. there's a big UFC card on Saturday. have no doubt. Conor McGregor will be, I'm not sure what casino he's partnered with, but whichever one it is, he'll be, tweeting about crypto bets on or bets on that casino. yeah. What is the role of influencers in driving? Do we need more?

kind of regulation around influencers driving players to crypto betting websites.

Chris Elliott (25:37.327)
I think, yeah, almost inevitably. it's, it's, you know, from a sort of commercial perspective, it's huge. It's usually, popular and it's usually lucrative to have these days, Brandon Bastis with huge followers, probably amongst gamblers and non gamblers alike, but who are, you know, it sits a little bit uncomfortable with me to be incentivized to, to gamble out perhaps a high level. Some of the levels that state, you know, Drake was allegedly gambling at, you know, people speak about him as though, you know, he's an obvious problem gambler, but of course he's, he's avoided the

the downside risk of, or potentially avoid, I don't know the facts, but avoiding the downside risk of losing by being effectively funded on his behalf. And nevertheless, it's celebrated when he wins, but the full extent of his losses aren't suffered by him. Meanwhile, he's got audiences of millions of people who are watching this sort of stuff and being incentivized to sort of follow suit. you know, hugely popular, but I think largely, I don't think regulators have necessarily sort of caught up.

with the sort of level of influence and audiences that these people are actually reaching. So no doubt, I suspect it will start to attract more more attention from regulators once they understand the sort of full extent of it. You wonder how effective they can actually be to prevent it. As I said, there's always been limits to how it is that you actually could tell access to crypto sites, those that are promoted through these brand ambassadors. But yeah, we'll see, I don't know.

Joe Streeter (27:05.324)
Yeah. And you bring me onto my final question perfectly really to kind of round it all up. Chris, are you concerned by the lack of movement when it comes to the UK GC around crypto regulation and around sort of tackling crypto and not just tackling it, but yeah, kind of action on crypto and umbrella in crypto, if you like.

Chris Elliott (27:31.409)
Yeah, think concern might be too strong. I there is concern if you know, or we know that there's a segment of the market that is currently only able to play with effectively, know, black market operators, unlicensed, you know, effectively criminal enterprises, we should all be concerned that that's the case, you know, actually, there's no avenue to service what is a legitimate use case, I think. But, but actually, it's more I would sort of characterize it as a sort of disappointment, you know, the industry in the UK, the gambling industry in UK,

It's long heralded itself as being sort of at the forefront, the most sophisticated industry, the highest regulation, the people that understand the product, as well as any other. And I think as us being on our heels or slow to sort of, or recognize that this is happening and to actually have an aversion or just hesitation or in fact to maintain a de facto prohibition, it's just a little bit disappointing. You're thinking this is, there are opportunities here to be able to say protect those that are...

that wish to do so and are prepared to do so. But also you want to see this industry and this sector and this market continue to stand up to the rest of the challenges that are presented when these sorts of new technologies are presented. So yeah, think there's still an opportunity here. Regulators are waking up to it, but I think we do need to wake up and realize that this is happening. So that's my call out. I think the time is now, so we need to be getting on with it.

Joe Streeter (28:59.222)
Yeah, that's a fantastic call to action and an important call to action to, to close the show as well. Chris, thank you so much for your time. I've, really enjoyed this discussion. I hope everybody listening has enjoyed it too. Really insightful. yeah, some fantastic insights, Chris. thanks ever so much. And yeah, if you want to tell the audience where, where they can reach you, that would be great.

Chris Elliott (29:22.161)
Yeah, so I say it's Chris Elliott. So we're at Wigan. You can find us online, LinkedIn, anywhere, anywhere you want to. So yeah, just give us a bit of a search. We're very happy to reach out.

Joe Streeter (29:32.952)
Brilliant. Thanks, Chris. And we'll see you all tomorrow.

Chris Elliott (29:36.283)
Thanks Joe.