Early last year, CryptoGamblingNews ran a story highlighting how “criminally undervalued” the crypto gambling sector was. When you consider the larger market capitalisation of many projects topping ranking lists, such as CoinMarketCap‘s, you have to wonder how some of their prices are supported. Gambling, on the other hand, has emerged to be one of, if not the, prime use cases for cryptocurrency and blockchain gambling.
Backing up white paper claims and going live is where so many ICOs and similar projects have failed in the blockchain boom. Saying that, many, yet to launch, viable products, who remain on testnet environments are still clinging on to high ranking spots and market caps in the hundreds of million dollars. On the other hand, crypto gambling projects have launched, iterated and adapted to a live user base in the same period, but are yet to see the valuation of projects in other industries.
So, is it still fair to say that the crypto gambling sector is still “criminally undervalued”, or has the past year shown a power shift in the blockchain space to other industries? Are gambling altcoins failing to build on their initial promise or has mismanagement or simple lack of demand left them crowded out? We'll look into this now, but from what we've seen from the sector of late, an undervaluation still remains and it looks like a significant one at that.
The traditional igaming sector has continued its rapid growth in recent years, leveraging a mobile-first generation to take premium casino content to the masses. The estimated global gambling market is set to hit a massive $565 billion in 2022, ticking up by a very healthy rate of 5.9% per year. Though this figure contains the land-based sector, it still only reflects the regulated industry. And although regulation is rolling out at pace to the likes of major populations such as Brazil and USA, there's still huge revenues unaccounted for on the black and dark grey markets that command huge numbers.
The gambling industry has continued apace as technology takes it to new players in developing regions of the world, such as Africa and East Asia, and there appears to be no sign of slowing down anytime soon. This has coincided with the rise of cryptocurrency and blockchain over the past ten years, with the igaming sector being firmly in the cross hairs of various crypto projects ever since.
Blockchain's inherent benefits across the board include transparency and neutrality. It is these tenets that tie in consistently with what's tarnished the traditional casino space in recent years, with untold stories of corruption, manipulation and downright scamming.
It's for this reason that we saw a boom in projects such as FunFair Technologies, CasinoCoin, Wagerr and many more, trying to bring a new and better practice, built on blockchain, to the gambling industry.
Similarly, cryptocurrency and its borderless transactions have led to a massive increase in the potential player base. Blacklisted countries no longer have the same power to restrict online gambling to their citizens. These players now have more of a choice than ever about where to gamble, what to gamble on, and which cryptocurrency to gamble with. Most importantly, it seems like they're jumping at the opportunity.
It's these two pillars, of the proven use case and potential player demand, that frame our discussion around the crypto gambling sector's undervaluation, and the same two pillars that fail to coincide with many other industries that we consistently see rise above gambling projects market capitalisation.
PARALLELS IN THE STOCK MARKETS
In the traditional fiat environment, numerous stock markets support industries in different regions, and despite their geographic and demographic differences, they all prominently feature companies from the land-based and igaming sectors.
The UK's FTSE 100 sees GVC Holdings sit at 88 at time of writing. The multi-vertical group consists of huge names such as Ladbrokes Coral, partypoker and Foxy Bingo, and expects revenues of $877m to be confirmed for 2019. Significantly, it has reported that year-on-year rises are down to its online brands, as opposed to high street footprint. Similarly, 888 Holdings, Rank Group and William Hill Group fall consistently in the extended FTSE 250.
North American markets have several casino and gambling entertainment brands in their higher echelons. The global gaming supplier SG Games is found on the NASDAQ, alongside numerous land-based casino empires such as Penn and Caesars. DraftKings, one of the success stories of late since the States' relaxation of sports betting laws, is seeing huge valuations that dwarf those casinos previously listed. In fact, Diamond Eagle Acquisition, which holds the brand's equity, has a current market value of around $13bn. Looking further afield at the Stockholm Stock Exchange, you'll also find a mass of game developers like NetEnt, and established sportsbook suppliers, such as Kambi.
It's clear that these mature stock markets have established a rarely shifting establishment of key industries that deliver huge value to end users and financial partners alike. Is it the same when we look at cryptocurrency market caps? It wouldn't appear so, and this could be damning for those who claim that the crypto establishment has earned the recognition of global financial institutions, as opposed to just a handful of tech-savvy, but maybe not overly rational, partisans.
Not translating to crypto
Indeed, trackers seem to have missed out gambling project tokens altogether until you land on Ethereum-based supplier FunFair Technologies in 168th position. Its FUN token currently commands over $20m in value. Next, you'll find a TRON TRC-20 token, WIN, in 185th, with almost $17m in market cap. This proprietary token of TRON-based casino WINk.org is seeing major dividend payouts every month, and the noises coming out of the casino itself are that revenues are unprecedented on the network.
There we have two contrasting business models – one a supplier and one an operator – both claiming success now, but also keeping one eye on the lucrative potential of mass adoption a few years down the line. But neither can land anywhere near the top of crypto ranking lists, as they're eked out by promising, yet fledgling, projects in perhaps more ‘suitable' or ‘fashionable' industries.
Are they undervalued?
Immaturity will always be used as an excuse, or a brush to tarn tokenomics and crypto financials for a few years yet. It's clear that mass adoption of blockchain and cryptocurrency's penetration of daily life has not come at the pace some would have hoped. Saying that, the majority of successful blockchain businesses now communicate more realistically on the future potential of their products, while they prime for usability and future adoption. So, has the market adjusted to the shift from ICO hype to actual serviceable product?
Crypto gambling projects have launched to the general public in various capacities across a number of verticals, arguably far more effectively than other industries have using the blockchain. So, are traders still waiting to see something more tangible, such as daily active users in the thousands rather than the hundreds? Or are they aware of the potential growth, but scared off by other factors such as reputation and uncertainty?
The current landscape
It's hard to say. But what we can say is that in the immediate climate, with COVID-19 hanging over us and social distancing keeping land-based casinos closed and players further apart, we've seen a glimpse of potentially the future of a more remote, digital world that seems far more suited to gambling online, and with cryptocurrency at that. Projects such as Wagerr and Bitcasino have shown their diversity in the challenging climate by prioritising esports, and other casinos including mBit Casino have shown faith in crypto by dropping fiat payments altogether.
And we haven't even touched on regulation which has crept slowly but surely towards a positive conclusion for crypto firms. While the SEC gets tangled up in the complexity of DeFi, gambling operations may have the luxury of more isolated regulatory frameworks led by respected organisations in the Isle of Man and Malta, for example. Should these jurisdictions look to crypto gaming as a significant boon in changing the reputation of the gambling industry for the better, then expect valuations to rocket.
There's so many moving parts to this debate and we'll see how they play out in the coming months and years. For us though, something isn't quite right in the valuations of crypto gambling projects, particularly when you consider what they may become in a mature marketplace with a broader audience of investors and users. And as with all things crypto, it's going to be a waiting game, probably slower than we may like.
But one thing is for sure, crypto igaming projects are making some of the right moves and are becoming increasingly adept at doing so, so watch this space.