Now that Bitcoin has entered the mainstream, so to speak, it has received a good bit more attention and use. In recent years, the gambling industry has evolved to make Bitcoin a centerpiece and a banking option at most sites, big or small.
In order to utilize a Bitcoin gambling site, the user is required to utilize a Bitcoin wallet of some sort, and most people choose Coinbase as their preferred wallet. In terms of Bitcoin and the cryptocurrency world, Coinbase is to wallets as PayPal is to traditional e-wallets; it reigns supreme. Using Coinbase to facilitate withdrawals and deposits is easy and convenient, but most people would be surprised to know that it is in direct violation of Coinbase’s terms of service. What’s more, users who are caught may face consequences that they have probably never considered.
Account Violation Warnings Aplenty
For most people who are utilizing Coinbase to transfer money to or from a Bitcoin gambling site, they experience no problems whatsoever. More frequently, however, users have been receiving emails from Coinbase staff informing them that they are aware of their illegal activity and will shut down their Coinbase account if the illegal activity persists.
If you are wondering why the word “illegal” is being used, that’s because utilizing Coinbase to transfer gambling funds is, according to the letter of the law, illegal. The reason for this is often cited by Coinbase in the email warnings they send to their users.
Though Bitcoin is not officially recognized as a currency by the US government, Coinbase is recognized as an official financial institution and falls under the regulations of the US Treasury, amongst other gubernatorial organizations. Unless you have been blissfully unaware of the legality of online gambling in the US and the funds utilized within that sphere, you know full well that financial institutions do not want to so much as touch gambling money. Coinbase is no different in this regard, even if they do police a bit more loosely than, say, Bank of America.
Different From Other Exchanges
Coinbase is often referred to as a Bitcoin exchange, but to refer to them as solely that would be an error. Unlike other exchanges, which simply match buyer and seller of Bitcoin, Coinbase acts as both the buyer and seller of Bitcoin. Rather than matching you up with another random user located somewhere in the world, the purchase and sale of Bitcoin is a transaction that takes place between you and Coinbase. More importantly, the transaction in question more than often involves a bank account.
Because you are dealing with a regulated financial company that is based in the United States, US laws govern every transaction you make. This means that when you use Coinbase to turn your sports betting winnings into fiat currency you will then deposit into a bank account, you are utilizing Coinbase to violate US Federal law. As you might expect, this is not something Coinbase appreciates, and is something that they are actively attempting to squash.
In most cases, if your account does end up being frozen by Coinbase, they will not lock your account such that you are unable to access your funds. Instead, Coinbase will allow you to access the funds in the account, but not allow you to make any further transactions regardless of whether you are dealing with a gambling institution or a retail site.