Gambling ICO guide

Contents

    Executive summary

    Amazing industry-changing gambling apps will be funded and built from ICOs. Some people will make fortunes from gambling ICOs, however, those will be the outliers.

    At present the majority of the ICO market consists of scams, vaporware and amateurs seeking easy money, with no ability and/or desire to create value for investors or deliver on their promises. Anyone participating in ICOs is painted with that same brush.

    However, the huge return on investments already realized and the game changing potential of some of the notable gambling ICOs means this space should not be ignored.

    What is a gambling ICO?

    Initial coin offerings (ICOs) are a way to raise funds by selling cryptographic tokens. These tokens relate to the platform that funds are being raised for. They can take the form of

    • Tokens that give the holders ownership rights and/or dividend rights and/or voting rights (similar to shares).
    • Tokens that can be used on the platform that the ICO is raising funds for. For example, in game credits or access tokens. Sometimes referred to as “app-coins”.
    • A new digital currency with some other relation to the platform that the ICO is raising funds for. Indeed, the ICO can be raising funds to launch the new digital currency itself, with no other platform or app.

    Fundraisers

    Anyone who wants to raise funds can launch an ICO. Typical fundraisers include

    • Startups.
    • Existing businesses.
    • Investment funds.
    • Non-profits.
    • Technologist looking to launch a new technology.

    Investors

    Anyone can invest in an ICO. The only pre-requisite is that the buyer holds the asset that the fundraiser chooses to accept in exchange for their token. Most ICO tokens are sold for cryptos like bitcoin and ether, so in those cases the buyer must first hold bitcoin or ether.

    A fundraiser could attempt to limit who can buy their ICO token. For example, not selling ICO tokens to people with a US IP address, or creating a whitelist of approved investors for which the fundraiser collects know-your-customer and anti-money-laundering (KYC/AML) information. Whitelists may help with legal compliance but have the following disadvantages

    • Require a central authority to validate buyers. This authority could misuse the information it collects or make other mistakes.
    • Costly and difficult to enforce.
    • Reduces many of the advantages of ICOs detailed below, including liquidity.

    Advantages for gambling operators

    Access to investors

    It’s difficult for fundraisers to convince traditional investment channels, such as banks or Venture Capitalists (VCs), to invest large sums of money. However, with an ICO it might be easier for the same fundraisers to convince thousands of people to each invest a small amount.

    Crowdfunding platforms like Kickstarter have a narrower field of potential investors than ICOs. For example, most crowdfunding platforms require funders and fundraisers

    • Be over 18.
    • Have access to top tier banking services like credit/debit cards.
    • Verify their identity.
    • Be based in a country that the platform serves.

    Crowdfunding platforms are a centralized authority that charge fees and can place limitations on every aspect of the fundraising, including what the fundraiser can offer investors and if fundraising for gambling projects is allowed.

    No such gate-keepers capable of censorship exist with ICOs.

    Due to the negative legal and reputational risk of gambling projects, it is even harder for them to raise funds through conventional means, for example

    • Banks or VCs based in jurisdictions where gambling is illegal are less likely to invest in gambling projects.
    • Many of the biggest crowdfunding platforms, including Kickstarter, do not allow gambling projects.

    As such access to investors and the lack of censorship afforded by ICOs are important advantages for crypto gambling projects.

    Investors become users and advocates and form a community

    If a fundraiser can convince 5000 people to invest in their ICO, then the project is not only bootstrapped in terms of funds, it is also bootstrapped with an initial user base, marketing list, social media marketing team and word-of-mouth engine of 5000 people!

    Token distribution may not just be about raising funds; it can also create a community around a project or topic of interests.

    One of the most difficult things for new gambling sites is to get new depositors betting on the site.

    One of the most difficult things for existing gambling sites is to get existing users to share and recommend the site. This is because many people consider gambling private and potentially in bad taste to publicly post about on social media.

    As such gaining a large number of likely users and social media advocates is an important advantage for gambling ICOs.

    Liquidity

    The tokens sold in ICOs can be extremely liquid. If it is a popular token that is listed on major token exchanges then investors can buy or sell tokens quickly, easily and anonymously with low fees at any time.

    Whereas to buy or sell shares in a company the following points of friction may exist

    • An individual investor may need a broker with high fees.
    • There may be minimum and maximum trade amounts.
    • Checks and restrictions may be in place for things like insider trading and tax compliance.

    Liquidity also makes it possible for the fundraiser to increase (by issuing more tokens) or decrease (by buying tokens back from the market or burning tokens) the number of tokens available and what percentage of the tokens they control.

    Disadvantages of gambling ICOs

    Scammers, spammers and empty hype

    There is little to no regulation in the ICO market and transactions are irreversible. These 2 factors leave investors with no recourse if they buy into a scam or incompetent ICO.

    Because of this the ICO industry has a reputation of being riddled with scammers, spammers and empty hype. Many ICOs have been launched with no product or vaporware by immature teams that are not ready to deliver on their promises or provide value to investors.

    Even the more legitimate ICOs have an undertone of get-rich-quick, fast and easy money grabbing, from both the fundraisers and investors.

    This environment and reputation taints all participants in the market including any new participant entering the market.

    Legal uncertainty

    Investors and users are under no legal risk by investing in and using gambling ICOs. If Authorities go after anyone it will be fundraisers and gambling operators, not individual gamblers or investors.

    There is still a financial risk for investors and users in that legal action against a fundraiser or gambling operator could reduce the value of their token.

    The current legal status of ICOs is detailed here, however this could change with short, notice in any jurisdiction. The reactive and controlling nature of governments means that any change is likely to be more limiting, more burdensome and make the fundraiser less able to realize the advantages of ICOs listed above.

    Market manipulation and conflicts of interest

    Usually the people running the platform are the same people in charge of the ICO and also own a significant share of the tokens. All in an environment with no effective regulation and anonymous trading. As such the opportunities for market manipulation and conflict of interest abound.

    The most obvious cases would be typical insider trading or pump and dumps. For example

    • People inside the organization may sell their tokens after becoming aware of news which will negatively affect the value of the token, before the market is aware of the news.
    • Parties could manipulate the value of tokens higher with fake news, then sell their tokens at the top, before the market has realized the price rise was based on fake news.

    Current, upcoming and past gambling ICOs

    The best way to find current gambling ICOs is in our own gambling ICO spotlights and you can try visiting

    and control-f “gambl” and “bet”. For upcoming ICOs do the same at

    For closed ICOs do the same at

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