Why investing in the bank of a centralized cryptocurrency casino is a bad idea

In this text I will use:

operators with the meaning of founders/developers of such casinos

scams with the meaning of centralized online cryptocurrency casinos

The titles specifies “centralized” because I believe that, in contrast, decentralized casinos (where your balance stays in a smart contract) can be a tremendous investment. An example of a decentralized casino would be etheroll.com, but – for other reasons – this one is not a good investment either.

 

So… what are the issues with such investments?

  • Tax evasion risks – most of these scams are not registered companies. They do not pay taxes. For this reason, their operators risk getting huge fees or even prison time through their national tax agencies. BitDice.me is an exception because “2014-2017 BitDice Casino S.L.R. Costa Rica Registration ID# 3-102-696267”. MoneyPot.com seem to pretend that they’re a Canadian company, which in their case I see as an added risk because they don’t comply with too much of what real companies actually do. If someone says to me “But wait, cryptocurrencies are assets! They’re not governed by the same tax rules!”, I’ll respond ‘Then why do you call them cryptocurrencies?”.
  • Regulatory risks – gambling is regulated in most locations on earth; none of the current scams has an online casino license, and you can be sure that some operators are at risk of being brought to justice because of this. Some people say that BitDice is a “licensed casino”, but really, in Costa Rica there’s no regulatory framework governing online gambling, therefore they wouldn’t need it.
  • Money laundering risks – some evil individuals might launder money through certain casinos, and then their operators might get in trouble. It wouldn’t be big trouble though; I think they’d probably only need to help trace the transactions.

Regarding the first three points, do know that I couldn’t give a rat’s ass about tax evasion, gambling licenses and money laundering. It’s just that centralized entities are at risk because of this, and decentralized entities will solve the not caring part, meaning that bureaucratic entities won’t be able to do anything about it – and as an investor you won’t care. Which is GREAT. Gambling licenses are just a legal scam, taxes can be paid by investors in decentralized casinos on an individual basis, and money laundering is something that can’t be stopped, yet all the good guys suffer because governments try to stop the bad guys from doing it.

OK, let’s go on with the list. The next point is huge:

  • There’s no damn insurance for the funds of the investors.

Scams get hacked? You’re fucked.

Scams fake getting hacked? You’re fucked.

Scams decide to play against the bank since they know both the client seed and the server seed? You’re fucked.

Operators face tax evasion charges? You’re fucked.

Operators face operating without a gambling license charges? You’re fucked.

Operators face enabling money laundering charges? You’re fucked.

Private key to the cold wallet is lost (because the operator dies or whatever)? You’re fucked.

[…]

Operators simply decide to walk away with your funds? They have fun in The Bahamas until they die? You’re fucked.

You’d think that at least BitDice.me has insurance. They’re the only registered company after all. The first thing that I did was to read their Terms Of Service (I linked here to a May 22, 2017, unchangeable copy). By the way, it’s copied after PokerStars’s TOS. I know because they forgot to change “Rational Social is not able to verify the legality of the …” to “BitDice Casino S.L.R. is not able to verify the legality of the …”. Go to the TOS that I linked and skim it a bit. There’s no insurance. It’s also nicely formatted, except this part:

I decided to format it in a readable way, and it basically says that not just the company itself, but anyone tangent to it can do anything to you, without being liable:

In no event shall Bitdice Casino s.L.R., its officers, directors, employees, agents, and all third party service providers, be liable to you or any other person or entity for any direct, indirect, incidental, special, punitive, or consequential damages whatsoever, including any that may result from

  1.  the accuracy, completeness, or content of this site,
  2. the accuracy, completeness, or content of any sites linked (through hyperlinks, banner advertising or otherwise) to this site,
  3. the services found at this site or any sites linked (through hyperlinks, banner advertising or otherwise) to this site,
  4. personal injury or property damage of any nature whatsoever,
  5. third-party conduct of any nature whatsoever,
  6. any unauthorized access to or use of our servers and/or any and all content, personal information, financial information or other information and data stored therein,
  7. any interruption or cessation of services to or from this site or any sites linked (through hyperlinks, banner advertising or otherwise) to this site,
  8. any viruses, worms, bugs, trojan horses, or the like, which may be transmitted to or from this site or any sites linked (through hyperlinks, banner advertising or otherwise) to this site,
  9. any user content or content that is defamatory, harassing, abusive, harmful to minors or any protected class, pornographic, “x-rated”, obscene or otherwise objectionable, and/ or
  10. any loss or damage of any kind incurred as a result of your use of this site or the services found at this site, whether based on warranty, contract, tort, or any other legal or equitable theory, and whether or not manakins is advised of the possibility of such damages. In addition, you specifically acknowledge and agree that any cause of action arising out of or related to this site or the services found at this site must be commenced within one year after the cause of action accrues, otherwise such cause of action shall be permanently barred.

In addition, you specifically acknowledge and agree that in no event shall bitdice casino s. L. R. ’s total aggregate liability exceed the total amount paid by you for the particular services that are the subject of the cause of action. The foregoing limitation of liability shall apply to the fullest extent permitted by law, and shall survive any termination or expiration of this agreement or your use of this site or the services found at this site.

I have no idea why some companies believe that in order for them to win, the customer must lose. This is not what capitalism means.

Anyway, let’s keep going with reasons why investing in scams is a bad idea:

  • Luck is a lot more important than you think. 1% seems to be the standard edge, and it’s reasonable, both for investors and bettors. But let me tell you something: the median bet amount is below one cent! The huge majority of players on such casinos bet with $nothingness. The big bettors are rare, and the difference between their bet sizes and the median bet size is equal to the distance between Dogecoin and moon (that’s a really big number). This means that if a small casino has 3 big bettors in a week and two of them make a profit, you’re fucked. Especially if you’re at the beginning and you’ve just started your 2x Kelly staking. You’ll spend the next year getting back to 100%. Your investment window better be long and the bank turnover better be frequent, because if it has more whale winners than losers inside it, you’re fucked.

Funny story: smart dude who knows math, made a journal in a shitty forum where he tracked his investments across the top 9 Bitcoin gambling investments sites. I quote his results:

13 months after our investment we stopped the comparison. These were the results:

3 sites stolen our full investment in exit scams.
1 site closed and returned our investment.
1 site stopped offering investment.
1 site was for sale.
1 site had no turnover.
2 sites were operating normally but giving very small returns.
We lost 32% of our investment overall.

Two more people are tracking now their results on the same forum (and their own websites: [1] [2]), but they’re probably doing it also because it’s a good method to push affiliate links.


This is the first draft of this article. I will edit it and maybe add more reasons in the future.

2 comments

  • Interesting article, thanks for posting. I’ve been getting interested in putting some money into one of these casinos, but I’m concerned with the issues that you’ve brought up here. Some of the payouts of the casino are pretty good once you’ve got a large number of BTC/LTC/whatever invested, however, it seems super risky. I’ve also invested in etheroll, curious why you think it’s not a good investment?

    • Main issue I see with Etheroll is gameplay. Not fun at all, too slow. Hopefully they’ll fix it by creating a payment channel with each bettor.

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