DraftKings Clears Hurdle for Crypto Betting Funds in Four States, While Massachusetts Holds Firm

In a move that highlights the fragmented regulatory landscape for digital assets in U.S. gambling, DraftKings is preparing to roll out a service allowing customers to convert cryptocurrency into U.S. dollars to fund sports betting accounts. The initial launch will target four states: Illinois, Kentucky, New Hampshire, and Vermont. Notably absent from the list is Massachusetts, where regulators have drawn a firm line against the practice for now.

The plan came to light during recent Massachusetts Gaming Commission (MGC) meetings. Despite a 5-0 vote in December to remove language from regulations that would have permitted crypto conversion, the commission later granted DraftKings a temporary waiver. This waiver, passed 4-1 on January 29, protects the company from potential violations as it works to technologically separate Massachusetts-based digital wallets from those in states allowing the new deposit method.

"We would literally be keeping those states from getting the revenue and doing what they are going to allow anyway," MGC Chair Jordan Maynard remarked, explaining the rationale for the waiver that runs through April.

The development underscores the delicate balance gambling operators and lawmakers are trying to strike: attracting a tech-savvy, often younger demographic familiar with digital assets, while navigating significant concerns over money laundering, responsible gambling, and consumer protection. Wyoming remains the only state to have explicitly legalized cryptocurrency for gambling funding, having done so in 2021.

Officials in the launch states emphasized that DraftKings itself will not hold cryptocurrency. "At no point will DraftKings accept cryptocurrency or hold it in player wallets," clarified Maura McCann, New Hampshire Lottery Director of Marketing. The process will involve third-party platforms converting crypto to cash before it enters the regulated betting ecosystem.

For users, the convenience may come with a tax implication. The IRS treats the conversion of cryptocurrency into U.S. dollars as a taxable event, potentially incurring capital gains taxes.

The debate in Massachusetts reflects broader caution. In December, Investigations and Enforcement Bureau Director Caitlin Monahan called cryptocurrency "not ready for prime time" for gambling funding. DraftKings executives have argued their planned system, involving rigorous "know your customer" checks through regulated crypto market networks, would exceed current standards for tracking traditional deposits.

User Reactions:

Marcus T., a sports analytics consultant in Chicago: "This is a logical, incremental step. It meets customers where they are and formalizes a process that was likely happening unofficially anyway. The tax note is crucial for bettors to understand."

Linda Rodriguez, a financial compliance officer in Boston: "Massachusetts got it right. We're moving too fast on integrating volatile, complex assets into gambling. The waiver is a loophole that undermines their own December vote. It sets a worrying precedent of tech outpacing regulation."

Devon Carter, a crypto enthusiast and fantasy sports player in Burlington: "Finally! It's about time the industry caught up. Using my crypto earnings to place a bet should be as easy as using a debit card. Massachusetts is just leaving money on the table and pushing users toward less regulated platforms."

Sarah P., a responsible gambling advocate: "The focus should remain on harm reduction. Adding crypto, with its price swings and complexity, introduces new risks for problematic gambling behavior. I hope the launch states have robust safeguards in place."