In the latest edition of our series about the status of Bitcoin in various countries around the world, we are focusing on the United States of America. America has been a big player in the cryptocurrency’s growth, causing many official bodies to step up and formulate an official position.
What is the official position?
There have been several official statements on the status of Bitcoin in the United States. The US Treasury classifies Bitcoin as a convertible decentralised virtual currency, something it has done since 2013 while Commodity Futures Trading Commission (CFTC) labelled Bitcoin as a commodity in September 2015 and, in a landmark ruling in September 2016, US District judge Alison Nathan declared that Bitcoins are “funds”, stating: “Bitcoins can be accepted as a payment for goods and services or bought directly from an exchange with a bank account. They therefore function as pecuniary resources and are used as a medium of exchange and a means of payment.”
Following a request by the US Government Accountability Office to develop a guideline for the taxing of businesses which operate in Bitcoin, the Inland Revenue Service (IRS) announced in March 2014, in time for the deadline for 2013 tax returns, that “virtual currency is treated as property” and, as such, “General tax principles applicable to property transactions apply” to cryptocurrency transactions. Its guidelines also confirmed that any cryptocurrency income should be included when calculating income taxes.
There has been no shortage of official comment on the status of Bitcoin in the United States and most of it has been encouraging, showing a willingness to work with the cryptocurrency. The status of Bitcoin in the United States can be somewhat unclear as, until there is a final ruling at federal level, different states can develop their own positions, the most progressive of which is New York state which has advocated for the regulation of Bitcoin in the form of something known as a BitLicense. BitLicenses are awarded to Bitcoin businesses that can meet several criteria established by the New York State Department of Financial Services. These include providing transaction receipts, enforcing cybersecurity and following anti-money laundering regulations. At the time of writing, three BitLicenses have been awarded, to Circle, Ripple and Coinbase respectively.
What does this mean for US Bitcoin gamblers?
While Bitcoin’s acceptance in the United States is growing, the area of Bitcoin gambling is not so clear. Physical gambling is restricted in the United States and, similar to Bitcoin regulation, depends on the state you are in.
Additionally, the Federal Wire Act prohibits sports betting across telecommunication lines. This Act was published in 1961, long before the Internet was around, but a 2002 ruling suggested that it also covers the Internet, though it does not cover all types of online gambling, just those related to sports, such as sportsbook, and “games of chance” as opposed to “games of skill”. In September 2011, the Department of Justice reaffirmed this position and the US Fifth Circuit of Appeals has ruled similarly, though the Supreme Court is yet to rule on the Acts’ interpretation in the current climate of online gambling.
A further act, known as the Unlawful Internet Gambling Enforcement Act, forbids financial transactions between banks, credit card companies and online gambling websites. There have also been high-profile cases regarding online poker sites which have had their assets seized and have been indicted for unlawful Internet gambling. The definition of poker as a game of skill or chance is unclear.
The situation is a minefield and there is no clear-cut legislation. Add in the factor of a cryptocurrency which exists outside the traditional banking system and the situation becomes more complicated. Some online Bitcoin casinos advertise as “US friendly” and accept players with US IPs while others enforce geoblocking which denies access to American visitors.