Cryptocurrency Gambling and Taxes: What You Need to Know

Despite being one of the fastest growing trends to emerge in the cryptocurrency and blockchain industry over the past few years, cryptocurrency gambling is still causing confusion for many investors. The current market is estimated to reach $90 billion by the end of 2024, with data from SOFTSWISS showing a 116% increase in cryptocurrency betting from 2021 to 2022. However, cryptocurrency users are not always sure of the tax implications of their activities. They are participating.

It’s easy to see where the confusion arises. The lack of consistent global regulation means that there is no unified approach to legislating all types of cryptocurrency activity, including cryptocurrency gambling. Even major gaming regions have adopted widely varying positions on the use, purchase, and trading of cryptocurrencies. This is in sharp contrast to the seeming prevalence of platforms and websites offering gaming and betting via cryptocurrency options.

This fragmented environment can make it difficult for you as a cryptocurrency enthusiast to know where you stand, especially if you want to gamble with digital assets. In this article, we will guide you through the current tax environment and share the best tips for protection when engaging in online gambling activities.

What are the benefits of cryptocurrency gambling?

Cryptocurrency gambling has some interesting potential advantages over traditional online gambling. First of all, cryptocurrency trading only uses your wallet address and not your personal information, providing more privacy and anonymity. This means you can gamble without handing over any identifying data to the site or company.

It also increases security and reduces risks like identity theft since no single entity holds your money or information. The decentralized nature of cryptocurrencies is a huge advantage that attracts millions of gamblers to cryptocurrencies as a secure payment method.

Moreover, there are various financial incentives for cryptocurrency-only gamblers, making the entire gambling experience more profitable and interesting. For example, many platforms reward those who play for real money with cryptocurrency through cryptocurrency deposit welcome bonuses, with 9 lucrative welcome bonuses for every 9 deposits on the platform. There is also a cryptocurrency membership where players can enjoy additional benefits along with a welcome bonus.

Where is the cryptocurrency bill?

Conscientious cryptocurrency investors are well aware of the fissures in the regulatory environment when it comes to the use of decentralized currencies, and this also applies to cryptocurrency gambling. Confusingly, the situation tends to vary from country to country. This means there are no simple answers to questions about the state of the sector.

At the time of this writing, several organizations around the world are planning or in the process of launching new standards for digital assets, including the Basel Committee on Banking Supervision and the Financial Stability Board.

For example, the EU is in the final stages of preparing its new Market for Cryptocurrency Asset Regulations (MiCA) for launch in 2024, which will introduce a comprehensive set of rules that will regulate the management of the sector in member states. What this will mean for individual cryptocurrency users is yet to be seen, but any business wishing to offer cryptocurrency services in the EU will need approval from one of the bloc’s 27 national financial regulators.

The UK government aims to bring cryptocurrencies and blockchain into the wider financial industry by announcing regulations classifying crypto assets as financial instruments in 2024, and as national legislation on digital assets progresses, the US Similar movements are underway across the country. .

Are my winnings taxable?

When engaging in cryptocurrency gambling, there is always a chance that the amount you bet will win. So how are your winnings taxed? Given that industry regulation is very fluid, we are still awaiting specific guidance on how cryptocurrency gambling winnings will be taxed in major jurisdictions. There is currently no global standard in place, so depending on where you live, you could end up with a larger tax bill or face restrictions if you choose to trade your gaming profits later.

Sticking with the United States for a moment, any cryptocurrency winnings generated by its residents are subject to federal and state income taxes. However, in the UK and Canada, actual winnings are not taxed. On the other hand, using cryptocurrency to play games or place bets may be considered a purchase of goods or services in all three countries and may therefore be subject to capital gains tax, but since there is no guaranteed outcome, these transactions can effectively be written off. there is.

Trading and selling your winnings is another story, but again with greater complexity, thanks to capital gains taxes.

Capital gains tax applies to the difference in value between when an asset is acquired and when it is sold. Once its value reaches a certain amount, you will have to pay a percentage of tax based on your cost basis. However, it could be argued that since the cost basis of cryptocurrency gambling winnings is zero, the entire pot could potentially be subject to capital gains tax.

A smart way to use cryptocurrency

There are many reasons why you might want to participate in cryptocurrency gambling. This is very convenient, often comes with low or non-existent fees, and can provide additional transparency (and therefore security) to your transactions. It’s clear that any iGaming activity you engage in must strictly comply with the laws of the country you reside in, but there are also a few things you should keep in mind to get the most out of your cryptocurrency gambling experience.

Firstly, new projects are being released all the time, so it is always better to play with a licensed and reputable operator. Instead of joining a new cryptocurrency casino, look for a more established brand that has made inroads into the field of accepting decentralized currencies.

Additionally, cryptocurrency gambling is just as volatile as any other market in this industry, so never bet or play more than you can afford to lose. Additionally, to make the most of your potential wins, choose your payout in a major currency, whether it’s Bitcoin or popular altcoins like Ethereum and Tether.

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