UK Mulls Clampdown on Crypto-Asset ‘Gambling Craze’

Posted on: January 4, 2022, 12:39h. 

Last updated on: January 4, 2022, 01:39h.

UK lawmakers have said they want digital trading products to be included within the scope of an ongoing review into the country’s gambling laws, The Telegraph reports.

crypto assets
The British government says it is “taking action” on crypto assets like bitcoin, NFTs, FTPs, and other digital financial instruments. (Image: Yahoo Finance)

The calls come amid concerns such products could be harmful to young people and should be regulated as stringently as gambling and other financial instruments.

The crypto-asset market is completely unregulated in the UK, as is the case in most jurisdictions around the world.

Currently, the only UK agency taking an active stance against crypto is the Advertising Standards Authority. It focuses on potentially fraudulent marketing and has limited powers to penalize bad actors.

UK financial regulator the Financial Conduct Authority (FCA) is eager to have greater powers to police the crypto space. At the moment, the agency only has authority to intervene where there is evidence of potential money laundering or terrorist financing.

No Fan of Fan Tokens

Meanwhile, crypto is permeating mainstream culture, not least the country’s national sport.

Faced with the threat of losing revenue streams from expected curbs on gambling advertising, many professional soccer teams are striking commercial crypto deals to offset the hit.

These include fan token partnerships (FTPs). These purport to give fans a say in the running of certain aspects of a team by purchasing tokens.

But critics say FTPs are a cynical attempt to exploit fans by monetizing trivial matters that could easily be solved by an online poll. Instead, they’re creating financial barriers to fan engagement.

The ASA has reprimanded Arsenal for marketing its fan tokens in a way that was misleading and didn’t explain the risks.

Meanwhile, in November, EPL champion Manchester City was forced to suspend its partnership with crypto start-up 3Key when its executives were discovered not to have a digital presence.

Tech Outpacing Regulators

There are also concerns about the rise of brokerage apps, like Robinhood. These platforms make investing and trading easier and more affordable for consumers. But they also borrow elements from the gambling and social gaming industries.

Meanwhile, the red-hot market in NFTs, or non-fungible tokens, is so new regulators have barely figured out what they are, yet alone how to regulate them.

For the uninitiated, NFTs are blockchain-based digital tokens that can represent ownership of a virtual item, like collectible sports trading cards or a work of art. 

The UK Gambling Commission recently warned the public that fantasy sports and NFT soccer trading platform Sorare is operating without a license. The regulator is currently investigating whether it actually needs one.

‘Financial Wild West’

Meanwhile, UK Treasury spokesperson told The Telegraph this week the department was “taking action to protect consumers in response to the development of certain crypto-assets.”

This includes consulting on proposals to ensure crypto-asset promotions are fair, clear, and not misleading, and that crypto assets meet the same high standards expected of other payment methods,” the spokesperson added.

But for some, that’s not enough.

“It is the Wild West, this grey area between highly leveraged financial investments on the one hand, and these products which could quite easily and sensibly be considered to be gambling,” Conservative MP Richard Holden told iNews. “There needs to be a clear differentiation there in order to protect people.”