The Australian company is using a lawful sleight of hand to get British clients gambling with crypto despite a statutory ban.
LONDON— It is illegal to gamble with cryptocurrency in the UK but Melbourne-based digital casino giant Stake.com is urging the British public to do just that through various promotions, with impunity.
The techniques range from classic ploys such as sponsoring Premier League teams and using celebrity endorsement, to using arms-length marketing tactics to induce users into circumventing the rules.
In at least one case, this aggressive use of loopholes has left the lives of a gambling addict and his employer badly affected, facing bankruptcy, career destruction and mental health breakdown, as detailed further down.
The reason for the UK ban is simple: under money laundering regulations governing gambling operations, the source of funds held in cryptocurrency cannot be proven, due to how easy it is to carry out anonymous transactions or use false identities for products such as bitcoin, Ethereum and the like.
In practice, British regulation against the use of cryptoassets for gambling is rendered irrelevant by the widespread use of Virtual Private Networks (VPNs) software which reroutes a user’s traffic through foreign countries that have more permissive regimes. What is more, as of July 2022 Stake.com was paying at least 14 websites that promoted the use of VPNs to access its website, through so-called affiliate links, which are web addresses personalised to pay the publisher each time a user clicks on them.
The UK government is set to propose tougher regulations guarding gamblers against unaffordable losses, but they would not shield users accessing foreign sites via VPNs.
Meanwhile, a campaigner warns that the use of VPNs to evade so-called geofencing, that is designed to keep those based in the UK from accessing Stake.com and other prohibited websites, may also serve as a means of tax avoidance for the Australian firm and the gambling industry in general. Geofencing is a voluntary measure adopted by the company, not imposed by the state, and it consists of redirecting a user based on the country his computer’s IP address is assigned. VPNs camouflage the IP and reassign a foreign one, rerouting web traffic.
Stake.com (not to be confused with unrelated similarly-named companies operating in real estate, securities trading and IT), is licensed in the UK through TGP Europe Limited, an Isle of Man company. Also known as Stake Casino, the firm is working with US rapper Drake to promote its services, among other celebrities and sport stars.
Stake bills itself as a “leading crypto betting platform” in advertising campaigns and on social media — but its U.K. license precludes it from offering cryptocurrency gambling. Hence the glaring omission of this fact from its description on the website of Premier League team Everton, whose T-shirt sponsor it became in June, after a previous partnership with now-relegated Watford FC.
TGP Europe is a so-called white-label provider of regulation-compliant betting websites, a controversial practice in itself that the sports news website The Athletic has documented at length.
While Stake Casino enjoys a UK license, allowing it to promote its brand in the country, its licensed website (stake.uk.com) does not allow gambling with cryptocurrency, nor is this website often mentioned in the myriad expensive campaigns that Stake is running to attract the relatively well-off British consumer.
While the firm’s main website is ostensibly blocked in the UK (stake.com automatically redirects to stake.uk.com through the process of geofencing) it is the former which appears on all promotional materials including Everton’s game day t-shirts. Meanwhile, Stake.com is licensed in Curaçao, a Dutch-governed Caribbean island which does not restrict against crypto transactions. It also uses Cypriot company Medium Rare Limited for payment processing, according to its website.
Reporter made multiple attempts to contact Stake and its executives with detailed questions and a right to reply ahead of publication via email and LinkedIn but has had no response.
Given its flagship website is technically inaccessible in the U.K., where its games are illegal, why would Stake Casino spend millions promoting the site and brand to a British audience?
One answer based on publicly available data may be that it pays other sites that instruct users to easily get around the block and gamble all the cryptocurrency they can get their hands on.
A machine-learning software analysis carried out for Reporter by specialist IT firm ComplEye Tech found at least 14 such websites telling readers how to access Stake.com from restrictive jurisdictions such as the UK and US, while on the same page carrying “affiliate links,” paid for by Stake.
Of course, VPNs are not illegal and can be useful in getting around country-specific bans on general interest websites, such as, most notoriously, those instituted by Russia and China against Western-based social networks. But VPNs are also helpful in getting around gambling bans, and Stake.com has an official policy against allowing them.
“The attempt to manipulate your real location through the use of VPNs, proxy, or similar services or through the provision of incorrect or misleading information about your place of residence, with the intent to circumvent geo-blocking or jurisdiction restrictions, constitutes a breach of this Terms of Service,” Stake.com says on its website. Its actions, however, run in clear contradiction.
Licensing conditions and tax take
Stake is walking on thin ice by paying for content such as that on casino.guide, a website which carries pages about using VPNs in the US and UK specifically in order to access Stake.com, a leading campaigner told Reporter. This site, in a typical example of how the system works, includes affiliated links sponsored by Stake on these pages, and also says the quiet part out loud regarding the use of VPNs. “[F]rom our experience, Stake is particularly relaxed on that end and makes little effort to enforce it … However, in case you cannot access Stake from your location – whether it is the US, the UK, or anywhere else – and despite the [terms and conditions], you actually can use a VPNs to enjoy the full Stake offering.” This is one example of the 14 found by Reporter and ComplEye Tech, which use strikingly similar wording.
This type of promotion could cost Stake its U.K. license, according to Matt Zarb-Cousin, who runs a campaign called Clean Up Gambling. That’s because the licensed company is responsible for the content of promotions published in its name by contracted third parties, he explained.
“Licensed operators are responsible for the content of their affiliates, so subject to sanctions from the [Gambling Commission] for breaching advertising codes as this would also amount to a breach of license conditions,” said Zarb-Cousin, adding that enforcement of the matter has so far been lax. “If there are affiliates that are clients of licensed entities that are promoting illegal sites then these affiliates should be closed down and the licensed entities responsible for this content sanctioned. This is not currently happening.”
“The Gambling Commission needs to be aware that [Stake] are encouraging people to use VPNs to gamble with crypto as well as promoting the use of VPNs through affiliated content,” he said. “The trouble with VPNs is they route revenue through other jurisdictions, potentially also raising tax avoidance questions for HMRC,” Zarb-Cousin added, referring to Her Majesty’s Revenue and Customs, the British tax authority.
The UK tax code demands online casino firms pay a “remote gaming duty” of 21 percent on bets made by their UK-based customers.
In a clear indication that Stake is not worried about advertising its global website while ostensibly following UK gambling regulations, its press release when it announced a partnership with then-Premier League team Watford FC read:
“To commemorate the beginning of the partnership, Stake will be running crypto-themed initiatives, including a 10 million Dogecoin giveaway on their international platform. In addition to this, UK audiences can expect multiple other promotions and giveaways as Stake launch their UK website, Stake.co.uk.”
It added: “Founded in 2017, Stake.com is one of the leaders in its industry, with over 30 billion transactions per year accounting for over five per cent of Bitcoin transactions worldwide.”
In the same vein, the PR puff released alongside Stake’s sponsorship of Everton FC is rife with references to Stake.com (not “.uk.com”, importantly).
In at least one case Reporter has learned about, the cavalier approach to VPNs crypto-gambling in a country where it should be illegal has had serious consequences for a business and one individual employed by it.
Legal letter
A U.K. cryptocurrency trading house has been nearly bankrupted — and is preparing to sue Stake to recover its losses. One prominent London law firm is preparing a case against Stake, with a letter seen by Reporter alleging that the Melbourne-based company accepted some 350k in the cryptoasset Ethereum that was essentially the proceeds of theft. The firm employed a trader who turned out to be a gambling addict, and he used the company’s funds on Stake.com without authorisation. The valuation of £350,000 is based on the market price of Ethereum at the time the loss was registered and the company in question is seeking the return of the lost Ethereum, not its equivalent value in official currency, according to the letter. The lawyer told Reporter the damaged employer is unlikely to make a formal complaint to the police in order to not further affect the ex-worker.
Reporter granted the firm’s request to remain anonymous so as not to jeopardize the ongoing investigation or future possible legal action.
“Our client has suffered significant financial losses, in the neighbourhood of £350,000, as a result of the unsafe and opportunistic business practices of Stake,” the lawyers said, threatening “to seek redress through the formal legal process.” The letter has been sent to several British members of parliament, the lawyer told Reporter.
The loss, the letter says, happened because “one member of staff has a continuing and unresolved gambling addiction,” which he is now under treatment for after he was dismissed from work.
“Our client finds itself in a position where it has suffered near-terminal financial losses and it is plain that the true cause of these losses is the total disregard for player protection with which Stake operates,” the letter continues, branding Stake’s UK website as “mere window-dressing.”
The letter draws MPs’ attention to what it calls “(a) the token nature of the UK website – Stake appears to have launched this platform to legitimise its entry into the UK market, and (b) Stake’s constant reference to its crypto activities when speaking to its UK audience,” as well as the fact that Stake does not appear to have registered with the Financial Conduct Authority as any cryptocurrency business is required to under UK law.
“Against this backdrop it is entirely understandable to see how our client’s former member of staff committed acts which amount to a personal tragedy that caused immense harm to themselves and significant financial harm to our client.”
The person lost the entire amount of cryptocurrency over 21 VPNs-enabled visits to Stake Casino between December 21, 2021 and February 2 this year, according to the lawyer who wrote the letter, although the employee shouldn’t have been able to pass even the most superficial source-of-funds check because the money didn’t belong to him. It belonged to the firm, and he only had access to the account because he was allowed to trade it, within strict limits, and only for the benefit of the company.
The £350,000 “is a staggering and life-destroying figure which it should not be possible to lose in such a short timeframe (or at all), and would not have been lost if adequate, or any player protection had been put in place,” the letter says, citing statistics showing that around 400 suicides every year in the UK are linked to gambling addiction, and that over 55,000 children in the country are thought to have gambling addiction.
(With thanks to E. M.and B.M. for their help editing this article.)
CORRECTION: The article was updated to reflect the fact that Watford FC was relegated from the Premier League.