The Financial Times recently reported on the remarkable growth of Stake.com, an online gambling site that almost exclusively relies on various cryptocurrencies for customer deposits and withdrawals. Citing Regulus Partners estimates, the FT reported that Stake’s gross gaming revenue approached $2.6 billion in 2022, around twice the sum generated in 2021 and nearly 25x higher than in 2020.
Stake built its business on catering to VIPs and ‘super’ VIPs, including the likes of hip-hop artist Drake, whose fondness for gambling is well known. It helps if celebrity gamblers are also (like Drake) fans of digital currencies, which led Stake.com to partner with him one year ago. This partnership has seen Drake livestream some of his Stake gambling sessions, including a memorable episode last year in which he distributed 35 BTC tokens to viewers.
Cryptocurrency and gambling have a long history, going back to the 2012 debut of SatoshiDice, which almost immediately became the source of half of all BTC transactions. That surge was partly a reflection of the fact that there was precious little merchant adoption of BTC at the time.
It’s a fitting testament to the technical flaws underpinning Bitcoin pretenders such as BTC that, despite their vaunted market cap and stranglehold on the mainstream media spotlight, they haven’t progressed much in the 11 years since SatoshiDice’s debut.
Like other digital assets that followed Bitcoin’s arrival, BTC serves little practical purpose other than financial speculation, known elsewhere as gambling. In other words, you’ve come a long way, baby (not really).
Stake currently accepts 18 digital assets, including BTC, ETH, LTC, DOGE, XRP, TRX, BCH, EOS, APE, LINK, SAND, SHIB, UNI, and Binance’s in-house token BNB. The controversial Binance is also represented by its BUSD stablecoin (although for how much longer it’s hard to say), while other Stake-approved stablecoins include USDT (Tether), USDC, and DAI.
Much like SatoshiDice before it, Stake claims an outsized share of blockchain transactions, including nearly 6% of BTC transactions, 12.3% of Doge, and 15.1% of Litecoin.
Dan the man
The entrepreneurs behind Stake—Ed Craven and Bijan Tehrani—started their crypto gambling in 2013 with a Satoshidice knockoff called Primedice that’s still active today. However, 2017 saw the launch of Stake, which offers a full slate of online casino games (both random-number-generated and live-action) as well as sports betting.
The FT detailed how Craven and Tehrani sought advice from Dan Friedberg before Stake’s launch. More than a decade prior, Friedberg had helped launch the online poker site Ultimate Bet (UB). In 2008, he helped orchestrate the cover-up of an insider cheating scandal that stole millions of dollars from UB’s players.
In 2013, an audio conversation of Friedberg discussing the cover-up with other UB principals was leaked online. Friedberg can be heard trying to lowball the compensation the site offered its impacted players while also suggesting they pin the blame on a former staffer who’d had no role in the cheating.
(The FT erred in calling Friedberg a Canadian, as he’s based in Washington State. They may have confused him with Stuart Hoegner, a former co-worker at UB’s parent company. Hoegner currently handles legal duties for the notoriously sketchy company that produces Tether.)
The FT reported that Friedberg “worked largely on Primedice,” but Craven added that “a lot of [the work to set up Stake] was ran past” Friedberg. Craven said Friedberg “took on the position of trying to analyze…what the legal landscape looked like, and he tried to give us the best advice possible on what is legal and what was not.”
Having second thoughts regarding his partner’s decision to paint Friedberg as an authority on coloring within the legal lines, Tehrani had a representative contact the FT to claim that Friedberg had provided only “passing advice” on Primedice and the Stake co-founders “only ever had a few conversations” with Friedberg.
Spending is reassuring
Following UB’s scandalous collapse in 2011, Friedberg became enamored with all things crypto and switched his focus to crypto gambling law. He ended up as chief compliance/regulatory officer at FTX, which collapsed under its own scandalous circumstances last November. Friedberg has so far managed to evade criminal charges by reportedly agreeing to cooperate with U.S. federal authorities in prosecuting FTX founder Sam Bankman-Fried (SBF).
Interestingly, FTX and Stake share more than soliciting advice from legally questionable characters. Both companies also shared a penchant for spending big to align themselves with celebrities and sports entities.
While Stake has Drake and Argentine footballer Sergio Aguero, FTX had Shaquille O’Neal, Tom Brady, Steph Curry, and others. Stake has a shirt deal with Premier League footballers Everton, an official betting partnership with mixed martial artist giants UFC, and a deal with Alfa Romeo’s F1 team. FTX had deals with F1 team Mercedes-AMG Petronas, the NBA’s Golden State Warriors and Miami Heat (whose arena for a time bore a giant FTX logo), and basically every pro team in Washington, D.C.
The FT quoted Stake’s Craven saying these visibly pricey marketing efforts “helped reassure customers that … these guys are not going to run off with my $50.” No doubt, FTX customers at one time felt reassured by the ubiquity of SBF’s corporate logo.
To be clear, nobody’s suggesting that Stake is engaged in anything remotely resembling the antics that led to FTX’s downfall. But there are some things that gamblers may choose to keep in mind before bookmarking Stake’s website or downloading its app.
License and registration
For one thing, Stake’s primary gaming license was issued in Curacao, the notoriously lax ‘regulator’ that is the first stop for fly-by-night online casinos. Obtaining a Curacao gaming license is about as easy as filling out a form and paying the fee, after which one can generally operate with impunity and without scrutiny.
Stake’s parent company EasyGo is based in Australia, so Curacao’s reputation cannot have gone unnoticed. Online casinos are illegal in Australia, and Curacao-licensed sites account for the vast bulk of gambling domains currently blocked by the Australian Communications and Media Authority (ACMA). Asked about Curacao, Craven told the FT: “They go about things in a different manner.”
Stake is also licensed to operate in the U.K. but only via a ‘white label’ deal with U.K. Gambling Commission (UKGC) licensee TGP Europe. The U.K. doesn’t permit crypto-based gambling, so Stake runs a U.K.-specific site that requires gamblers to fund their accounts with sterling.
Sports partnerships require a UKGC license, so white label deals of this type are common for companies who could care less about the U.K. but want their brands noticed by betting-mad footie fans in markets such as China. For instance, Stake’s Everton announcement made one reference to the U.K.-specific gambling site while listing Stake.com no less than ten times. (Everton called it the “highest value” shirt deal in the club’s history, but the partnership has already had a few hiccups.)
Despite that domain disconnect, U.K. users can easily access Stake.com via a virtual private network (VPN), and a former associate of Stake’s co-founders says such activities are more common than the company lets on.
Hell hath no fury like an investor scorned
Last year, a civil suit in the Southern District of New York was filed by Christopher Freeman, who claims to have come up with the ideas for both Primedice and Stake but was muscled out of a 20% stake in their operations. The Florida-based Freeman seeks $400 million in damages from his former partners over his allegedly lost opportunity.
Craven and Tehrani’s response was that Freeman’s contributions to Primedice were “fleeting” and that Freeman himself passed on taking part in Stake. The pair further claimed that Freeman treated Primedice’s cold wallet as his “personal piggy bank” and unlawfully transferred tens of millions of dollars in digital assets to his personal account on U.S. exchange Coinbase (NASDAQ: COIN).
Putting aside the merits of these respective claims, Freeman also accused Craven and Tehrani of actively encouraging U.S. citizens to use VPNs to access Stake in violation of local restrictions. The suit accuses Stake of being “apparently unconcerned with taunting regulators who want to prevent illegal online gambling in the United States.”
In December 2021, the Sydney Morning Herald reported that its reporters found it “relatively easy” to access Stake from Australia using a VPN and providing a “ludicrously silly home address.” There are also numerous sites actively promoting the use of VPNs for accessing Stake from prohibited jurisdictions such as the U.S.
Stake’s response to Freeman’s lawsuit stated, “customers who attempt to use VPNs to evade geoblocks would be prevented from depositing funds under [know your customer] requirements.”
Craven told the FT that it “would obviously be naive to assume that we have absolutely zero customers in the United States, but I can safely say that we do not have a presence there of any significance [and] we actively work to remove any customers from the United States.”
For the record, Stake’s Terms of Service includes the U.S. in its list of prohibited jurisdictions. And yet the site’s languages section states:
“Stake services the English speaking world for countries such as Canada, New Zealand, Continental America, Europe and more.” (Emphasis added.)
Not so gently down the stream
In 2021, Stake came under fire when a Texas-based Twitch streamer named Tyler ‘Trainwrecks’ Niknam played Stake’s online slots for hours, winning some monster jackpots without ever seeming to go bust. Niknam was using a VPN to access Stake, but shortly thereafter moved to Canada, where gambling-related enforcement was less strict, telling another streamer, “Canada needs to happen asap.”
Last October, Twitch banned “streaming of gambling sites that include slots, roulette or dice games that aren’t licensed either in the U.S. or other jurisdictions,” singling out Stake as one of the sites on its naughty list. Last December, Niknam announced he was transferring his slots-sharing videos to Kick.com, a new streaming platform, where Niknam remains a top streamer promoting Stake.
Niknam later confirmed that Craven was an investor in Kick, but Kick told the Washington Post that Stake (the company) wasn’t an investor. Muddying the waters further, LinkedIn job postings claimed Kick was “a new venture created by the founders of Easygo and Stake.com.”
Niknam has claimed he’s paid over $1 million monthly to stream his gambling exploits on Stake. In essence, Niknam is Stake’s affiliate marketing partner, offering promo codes for online casino bonuses to those watching his stream—a group that undoubtedly includes many U.S. residents.
A lot at Stake
It’s worth remembering that UB, the online gambling site at which Dan Friedberg orchestrated that cover-up, ultimately collapsed in 2011 after the U.S. government decided it had had enough of the site offering prohibited services to U.S. residents.
This week, U.S. authorities dropped a major legal bomb on Binance, having evidently reached their limits with the exchange encouraging VPN use by U.S. residents looking to access Binance’s forbidden fruit. Given the extent of the digital surveillance contained in the civil suit, criminal RICO charges against Binance boss Changpeng ‘CZ’ Zhao are almost certain to follow.
Stake’s revenue growth over the past two years has been remarkable, something other gambling operators will likely be interested in mirroring and more than a little curious to learn how Stake did it. If Craven, Tehrani, and Stake have indeed been diligent in preventing U.S. gamblers from accessing the site, good on ya. If they haven’t?
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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