SatoshiDice launched in April 2012. As of January 2013, it had taken in approximately $15 million in bets. During 2012, SatoshiDice reported profits of over $500,000 in US dollars. However, in May 2013, SatoshiDice moved to block all US-based IP addresses, citing potential legal issues. SatoshiDice’s servers are based out of Dublin, Ireland.
In August 2012, Erik Voorhees, founder of SatoshiDice launched a “prospectus” for SatoshiDice, aiming to attract investors. The offering was not registered with the Securities and Exchange Commission, and was conducted in Bitcoin through the website MPEx, based in Romania. SatoshiDice was described as an “unregistered corporation” represented by Voorhees, with the investment agreement stating that it may “not be modified by third parties, irrespective if said parties should style themselves “court of law”, “judge” or otherwise.” As of January 2013, SatoshiDice shares were valued at $8.9 million.
Satoshi Dice Tribute, Classic and Legacy
On October 31, 2013 the SatoshiDice Tribute game was launched, only to be shut down a month later after being plagued by slow performance, DDos attacks and other user related issues.  As of 2014, the Classic verion of the website is still available in a not fully functional state.
The term satoshi defined within SatoshiDice as 0.00000001 BTC. For certain transactions, the loser of a bet is paid “1 satoshi.”
September 2, 2014 Why Bitcoin’s Gambling Boom is Only Just Getting Started
Gambling is big business, and online gambling represents a significant and growing proportion of that business – about 8% currently.
Research company H2 Gambling Capital, which values the online gambling market in terms of gross winnings, put the global market value at €21.73bn ($28.54bn) in 2012. Furthermore, the firm expects a 9.13% compound annual growth rate through 2015.
In his book, The Anatomy of a Money-like Informational Commodity, Tim Swanson points out that half the transactions on the bitcoin network were being used to transmit bets to SatoshiDice, one of the earliest bitcoin betting sites, created by Eric Voorhees.
Ivan Montik, CEO at SoftSwiss, provides online casino software for entrepreneurs, and its solutions support fiat and bitcoin gambling. “We’ve got about 400 requests for the launch of a bitcoin casino in the last six months,” he said. “We constantly have three to five casinos in the set-up phase, and could have had more if we had more resources.”
Not all bitcoin bets are low in value. Montik said that there are some high rollers in crypto-land:
“On one client website, launched just about a year ago, there are single wagers reaching 200–400 BTC. The total amount of bitcoins wagered on all of the sites operating with the SoftSwiss platform is equal to $10m per month.”
The regulation challenge
SatoshiDice doesn’t operate in the US market, because of the strict gambling laws encountered there.
Bitcoin, however, has emboldened some entrepreneurs, who are openly allowing US players to gamble using the cryptocurrency. One of these is Seals with Clubs, managed by seasoned poker player Bryan Micon.
“It would be trivial to circumvent some ban. Seals is open to the world. There’s no banking at all done on the site. It’s a pure bitcoin poker site, so this is a totally brand new thing,” said Micon. ”It’s only been a few years for the legal world and there’s nothing at all that says anything about this protocol.”
Slowly, then, things seem to be opening up in the US, which is creating a more positive environment for cryptocurrency gambling sites that are already operating there, anyway.
Adrian Scholz, founder of SatoshiBet.com, argued that the ‘dice’ gaming model on which sites like SatoshiDice were built is an example of such an innovation.
“This game did not exist in online casinos before bitcoin, yet it turns out to be more popular then games like roulette and blackjack.”
There are other breakthroughs that came from the crypto gambling community. “Take Provably Fair, which created a trustless shuffling system,” he said. “Take HTML5. Most of the classic online casinos run games still require Flash or Java plugins.”
“Take investing! Just-dice introduced the concept of allowing players to be part of the bank, which turned out to be pretty much the ultimate marketing vehicle,” he concluded.
There are other areas of innovation, too. In particular, mobile gaming is becoming increasingly important.
Cloudbet, formed in 2013, is a sportsbook and casino environment where players can deposit instantly, bet, and withdraw again as soon as bets are graded. The firm recently launched a mobile casino, and is preparing a mobile sportsbook.
Micon also highlighted security as an issue:
“It’s about keeping the bitcoin safe. That’s not just about securing cold storage – it goes beyond that. It’s about looking after issues such as automated cash-outs, to help sites scale without allowing criminals to take advantage of poorly configured scripts.
Seals with Clubs was hacked last December, and lost 42,000 passwords in the process. Micon explained that the team behind the site learned a lot from a security perspective. “No one lost their coins. We were able to drastically improve up to and beyond industry standards for our password table,” he said.
Perhaps the biggest challenge for cryptocurrency gambling sites, though, is the uptake of bitcoin itself.
Cloudbet’s Rossi said:
“There is still a high educational barrier to entry. People can transact with Visa and MasterCard without understanding how the payment network works, but to transact with bitcoin there is still a requirement of technical knowledge.”
The good news for bitcoin gambling sites is that they are still early in the process, meaning that there is lots of room for disruption, said Micon:
“Some kid is going to come up with some bitcoin gambling game. They will be 12 years old and they’ll make $480,000. That’s just what’s possible.”
September 11, 2014 Spain Cracks Down on Bitcoin Gambling Loopholes
The Spanish government agency that oversees matters of finance and taxation has issued a new ruling stating that bitcoin should be treated as an electronic payment system, a decision that could have a far-ranging impact on Spain’s bitcoin economy.
With its response, El Ministerio de Hacienda found that bitcoin-based online gambling companies in Spain must now apply for licenses. Further, the ruling, coupled with new statements from Congress, suggests that bitcoin transactions involving a business may be subject to existing laws that impose a cap on cash transactions of €2,500 or more.
Coinffeine CTO and co-founder Ximo Guanter told CoinDesk that the rulings represent a significant development in terms of how bitcoin is being regulated globally.
He told CoinDesk:
“The ‘big-theme’ news here is that Spain is starting to treat bitcoin more like a currency than as an asset, which is the inverse of what the US has done.”
Guanter told CoinDesk:
“The interpretation of our lawyer was: if the Ministerio de Hacienda considers bitcoin an electronic payment system for the purpose of gambling law, then that same definition applies for other laws, and therefore the €2,500 law and the AML laws apply.”
El Ministerio de Hacienda shed light on this issue, asserting that bitcoin cannot be considered legal tender or electronic money.
The agency further stated that bitcoin can’t be considered an “economically accessible object” as it functions as a medium of exchange.
Its statement reads:
“Ultimately, bitcoin is a convertible virtual currency that can be exchanged between users and converted into dollars, euros or other currency of real or virtual legal tender.”
Clarity for gambling sites
The impact on Spain’s bitcoin gambling industry is far more certain, and adds to the growing regional differences globally on the issue. For example, the US government’s crackdown on online gambling has lead many gambling platforms to embrace bitcoin. Still others have avoided the market due to uncertainty.
All Spain-based gambling sites, even those that operate only in bitcoin, will be subject to the ruling. El Ministerio de Hacienda stated that it is now mandatory for these businesses to obtain a general betting license as well as the corresponding individual license.
El Confidencial stated in its report that online gambling with bitcoin is becoming increasingly popular in Spain as the sector had previously been able to use bitcoin to avoid the country’s Gambling Act.
However, el Ministerio de Hacienda indicated that all game activities are governed that involve “amounts of money or economically valuable objects in any form”, a definition it said includes bitcoin.
The agency’s formal response states (via an informal translation):
“In consideration of the foregoing, betting activity with bitcoins is included within the definition of gambling.”
Cryptocurrency payment processor GoCoin has teamed up with iGaming operator Cozy Games to deliver bitcoin, litecoin and dogecoin payments on its platform.
The companies said the move will make Cozy Games the first regulated iGaming operator in the world to accept cryptocurrencies.
GoCoin said recent gambling tax reforms, such as UK’s proposed Point of Consumption Tax (POC), have forced gaming sites to actively seek lower cost payment alternatives. Digital currencies are one such option and they could help gaming platforms improve their margins.
Lower cost alternative
GoCoin said Cozy Games will enjoy “a dramatic reduction” in transaction costs, chargebacks and cross-border fees. The company also pointed out that its e-commerce platform is designed to process cryptocurrency transactions for international gaming operators considered “high risk” by traditional payment networks.
“By accepting cryptocurrencies through the GoCoin payment platform, regulated online gambling operators can engage new markets like the underbanked that are historically difficult to reach,” said Steve Beauregard, co-founder and CEO of GoCoin.
Handling potential cryptocurrency issues
GoCoin stressed that Cozy Games, and indeed other potential clients, do not have to worry about security, volatility or complexity of handling digital currency directly. The platform insulates merchants from these risks by allowing them to settle transactions in the currency of their choosing. All risks associated with digital currency are effectively outsourced to GoCoin.
GoCoin integrates its Know Your Customer (KYC) procedures with the operator’s platform, thus ensuring that each player can be identified, while at the same time guaranteeing privacy.
Sreeram Reddy, CEO of Cozy Games, explained:
“GoCoin’s solution is adaptable and compliant with Internet gaming law, allowing us to safely adopt the latest payment innovations while focusing on our core strength of delivering an excellent online experience for our players.”
Reddy described GoCoin as the frontrunner in bringing cryptocurrency expertise to regulated iGaming platforms, which is why Cozy Games decided to choose the company’s crypto payment platform.
Bitcoin gaming still holds promise
Cozy Games currently operates more than 90 different games, which is quite a bit more than most bitcoin gambling sites. However, unlike most bitcoin gaming sites, it is not new – the company was founded in 2005 and already has an extensive user base.
GoCoin pointed out that gambling currently accounts for approximately half of all bitcoin transactions. However, it should be noted that most of these transactions are small, so they account for about 5% of total transaction value.
The idea of using bitcoin for gambling is anything but new, but although the concept looks promising on paper, it has not taken off just yet.
One of the earliest bitcoin gambling sites – and arguably the first truly popular crypto gaming site – was SatoshiDice, created by Eric Voorhees. Over the past few years SatoshiDice was joined by Seals with Clubs, SatoshiBet.com, Cloudbet and many others.
Now a big, regulated gaming operator can be added to the list of crypto-friendly gambling sites.
Popular bitcoin gambling site SatoshiBet has announced that it will now restrict US customers from accessing its platform
SatoshiBet said its legal team advised it to avoid the US market entirely to reduce potential legal exposure, adding:
“This does not mean SatoshiBet or gambling with or without cryptocurrencies is illegal in the US. The definition by US courts is as of yet highly unclear, adding cryptocurrencies to the equation only further clouds a definite judgement.”
The company explained:
“To be clear, we have not been in contact with any government institutions, this is solely a proactive measure as a reaction to the fast moving regulatory landscape of cryptocurrencies.”
He added that SatoshiBet could one day return to the US market, but such a move would only happen if enough legal security is established in the future.
“We of course hope that at some point in time sufficient clarity is established by lawmakers, that perhaps allows us to reenter the market,” Scholz said.
Online gambling has long been a driving force behind the bitcoin economy, though one that remains both shrouded in secrecy and hampered by a lack of regulatory clarity.
Breakout Gaming, announced on 16th September, boasts former World Series of Poker champions Johnny Chan and Huck Seed as marketing partners and will be powered by its own decentralized cryptocurrency, breakout coin (BRO). Gaming pros Jennifer Harman, Ted Forrest, Todd Brunson and Vladimir Shchemelev have also signed on to support the platform.
The project completed its first initial coin offering (ICO) period this week, raising just 387 BTC (roughly $136,000 at press time) toward its 1,000 BTC ($350,000) goal. The ICO began on 21st October and formally ended at midnight on 19th November.
Perroni and Chung said:
“When we first launched our crowdsale, bitcoin was in a free fall, which cast a chill with potential purchasers – not only for our project but for the crypto community in general.”
Unlike past cryptocurrencies aimed at specific verticals, like potcoin for the marijuana industry or titcoin for adult entertainment, Perroni suggested that the Breakout Gaming ecosystem will add value to its preferred currency by providing a built-in marketplace.
“The difference is that we’re building a gaming property whose sole purpose is to support the value of the coin. What will make the coin successful is if the gaming is successful, and what makes the gaming successful is the fact that we have a blend of excellent products and very, very good experienced personnel.”
The platform will accept breakout coin, bitcoin and fiat currencies for breakout chips – the individual tokens that enable gaming on its platform.
Emphasis on gaming
Breakout Gaming intends to use 7m BRO to incentivize new players to its games, which will include real-money and free poker and casino gaming, fantasy sports leagues for major US sports and fantasy games for electronic sports (eSports) like League of Legends and Defense of the Ancients (DotA).
These games, Perroni argues, would give the platform an edge, even if it wasn’t focused on promoting the platform through an online currency.
“There’s no one who’s running the traditional poker and casino and also blending that in with fantasy e-sports,” he said.
The platform will also feature a unique ‘fantasy crypto’ property that will allow players to pit whole lineups of cryptocurrencies against one another.
The firm’s 7m BRO will be distributed to customers over two years, Perroni explained, through a series of giveaways and guaranteed prize pools that he hopes will entice new players into Breakout Gaming and, by extension, the digital currency space.
“Breakout coin will give a lot of people the opportunity to being able to use a cryptocurrency, people who may not have had the opportunity or the trust to find out what this is all about,” he added.
Poker stars back bitcoin
Some like Huck Seed were more deeply familiar with the technology. Seed cited his background in computer programming as the key to his early interest, but reported that he has become more engaged as the ecosystem has evolved.
Others such as professional poker player Ted Forrest hinted at some of the complications that may have so far prevented the project from reaching its ICO goal.
“Unless people are familiar and comfortable with how to buy cryptocurrency, they are finding the process of first buying bitcoin and then buying BRO coin somewhat cumbersome to the point that too many just give up in frustration,” he said. “As we all know, the attention span of most gamblers is not the longest.”
In defense of altcoins
Forrest hints at yet another complicating factor for the platform, its native currency. When asked why Breakout Gaming elected to introduce its own coin, Perroni said the decision was made in the interest of enabling the platform to best entice new users.
Describing the altcoin as his firm’s “competitive edge”, Perroni said breakout coin and its pre-sale were ways to ensure the gaming platform had a loyal and incentivized user base.
Perroni also indicated that he saw an inherent way to add value to breakout coin: since it is a decentralized currency, Breakout Gaming must purchase the coins it needs from the open market.
“We’re required to make sure that we have enough coins to cover any chips that are in play. If someone buys $100-worth of breakout chips, we then have to buy $100-worth of breakout coin ourselves from the decentralized market in order to cover that,” he explained.
The limit on the number of coins mined per year, along with this built-in market for the altcoin, are supporting factors, Perroni suggested.
Project future uncertain
Issues with the ICO aside, Breakout Gaming’s team is still refining its global market strategy.
Perroni voiced Breakout Gaming’s intent to pursue licensing in Kahnawake, Canada, which he said would allow it to position its gaming properties differently in its target markets, though he said this process hasn’t been completed.
In the US, he said he expects residents will likely be able to play its gambling properties for free, while competing in its fantasy sports offerings. By comparison, Perroni indicated that licensing in Canada would allow the company to offer a full suite of services both there and the UK.
“We’ll be able to provide some form of gaming experience in every country, whether it’s free only or a blend of free and real-money gaming,” Perroni said.
Breakout Gaming reported that it intends to launch a second phase of the ICO, though specific dates have yet to be announced.