DraftKings is preparing to allow sports bettors in four states to begin converting cryptocurrency into U.S. dollars to fund their sports betting accounts.
While the sportsbook/daily fantasy/iGaming giant has yet to make an official announcement, details of the plan became public knowledge in Massachusetts Gaming Commission (MGC) meetings where officials debated the introduction of a currency that Investigations and Enforcement Bureau (IEB) Director Caitlin Monahan deemed in a Dec. 4 meeting “not ready for prime time.”
At that meeting, the commission voted 5-0 to strike language from gaming regulations that would have allowed Boston-based DraftKings to eventually utilize crypto conversion there. The amended rule went into effect on Dec. 19.
But in a Jan. 29 session, the MGC voted 4-1 to grant a waiver through April that protected DraftKings from potential violations for failing to firewall Massachusetts digital wallets from other jurisdictions that allow crypto-conversion for funding. This would enable DraftKings to roll out crypto-conversion in four states — identified by MGC Chair Jordan Maynard as Illinois, Kentucky, New Hampshire, and Vermont.
DraftKings sought the Massachusetts waiver, according to Division of Sports Wagering Chief Carrie Torrisi, so it could move forward with its crypto plan while perfecting the technology to separate the universal digital wallets of patrons there from those in the four involved states.
“Before this language was removed from the commission’s regulations, DraftKings had been working towards the launch of a new deposit method that would allow patrons to deposit converted cryptocurrency via a third party platform,” Torissi said at the Jan. 29 meeting. “They will, of course, no longer be launching that in Massachusetts, but they do intend to launch in four other states with the first launch occurring in the coming weeks.”
Torissi recommended the granting of the waiver as long as DraftKings was able to provide a full accounting of any Massachusetts digital wallets that inadvertently received crypto-derived funds from another state.
Maynard said he didn’t want to “get in the way of their progress,” referring to the four states prepared to undertake the crypto conversion plan, and added that “there’s no purposeful intention to let a universal wallet like crypto into the Commonwealth, period.”
“We would literally be keeping those states from getting the revenue and doing what they are going to allow anyway,” Maynard told fellow commissioners.
The acceptance of cryptocurrency for gambling purposes has been a slow and heavily-debated process in state houses and board rooms. Wyoming is the only state that has legalized the practice for funding, in 2021.
CEO Jason Robins mentioned the possibility of accepting crypto payments in a Q4 earnings call in February 2025.
Hannah Chauvin, the director of communications and legal affairs for the Vermont Department of Liquor and Lottery confirmed to InGame that digital, crypto, and virtual currencies are considered “cash equivalents.” The state’s Enhanced Procedures — like its counterpart documents in Illinois, Kentucky, and New Hampshire — don’t define what digital currencies are permissible, presuming those states will leave that issue to the third-party conversion process.
DraftKings has not announced which digital currencies it will accept.
New Hampshire Lottery Director of Marketing Maura McCann told SBC Americas: “At no point will DraftKings accept cryptocurrency or hold it in player wallets, keeping all activity compliant with New Hampshire state requirements for deposits.”
The potential direct use of cryptocurrency has become a balance for lawmakers and gambling companies of protecting consumers, but targeting a coveted younger demographic of gamblers who are energized and monetized in regard to digital assets.
DraftKings stopped accepting credit cards for deposits in August, after the MGC fined it $450,000 because it struggled to keep credit card deposits from other states from mingling with funds in bettors’ Massachusetts wallets. After initially discovering that credit-card funds from other states had landed in Massachusetts wallets, DraftKings set out to fix the problem, but it took three tries, and additional incidents before it did.
Despite the granting of the waiver, a broader acceptance of cryptocurrency as a funding source remains a contentious matter at the MGC, with the board ruminating over anti-money laundering and responsible gambling aspects of its use in a December session. During that meeting, DraftKings Senior Director of Financial Crimes Operations Curtis Zapf, who then said the conversion plan was still just under consideration, attempted to assuage the concerns of commissioners by differentiating between the “wild west of unregulated cryptocurrency” and what his company envisioned.
“Within the regulated space … there are large financial money service businesses that are registered with and sent to complete regulatory filings, and are subject to fines and enforcement action based off of their AML programs,” he said. “Those sorts of organizations are maturing to a level that wouldn’t be responsible to lump in with that more Wild West personification of cryptocurrency that was the prevailing sentiment maybe more like six, seven years ago.”
Zapf said DraftKings would utilize a three-level “know your customer” (KYC) system by “tapping into the technical networks and payment networks set up between the regulated cryptocurrency market.” That, he asserted, would surpass current credit card information-sharing procedures, regarding the sources of funds.
“We would actually be able to trace that directly from a transaction and have this ability into that transaction to ask the customer and direct them to information that would give us comfort with where the funds are coming from,” he said. “versus a bank account transaction that maybe we have a question about and they say, ‘Hey, it’s actually crypto earnings.’”
Requiring that crypto would have to be converted to U.S. dollars before being deposited would alleviate concerns about the variability of its price. But it would come at a cost for users. Converting crypto into cash is considered a capital gain by the Internal Revenue Service and therefore taxable short term from 10%-37% or long-term up to 20%.