In the latest edition of his exclusive column for iGamingExpert, Consultant and former 888 Holdings CEO Itai Pazner asks why the likes of 1XBet, Stake and Yolo are embracing regulation and assesses their chances of success.
The iGaming industry continues to evolve at a startling rate with disruptive technologies such as cryptocurrencies, sweepstakes and prediction markets throwing lawmakers, regulators and lawyers into a funk in the US; while the rest of the world tries to figure out what on earth to do about the massive growth of black or grey markets.
Our industry has always thrived on disruption, with almost all new products and champion brands emerging from the grey zones of regulation, from online casinos and poker in the early 2000s in the US, to daily fantasy sports before PASPA was repealed in 2018, to the sweepstakes casinos that have been flourishing in the last three years and have been disrupting the online casino market Stateside.
Crypto casinos are no different. They emerged on the fringes, took massive risks, scaled at extraordinary speed, and in many cases generated billions in profit. But now, inevitably, the industry is entering its next phase: the long, complex, and often painful shift into regulated markets.
We are watching this transformation unfold in real time. Companies like Yolo Group recently announced the closure of flagship brands such as Sportsbet.io and Bitcasino.io, pivoting its focus towards the regulated sector. Others, like Stake, have built enormous global recognition through sponsorships and celebrity partnerships, and have entered regulated markets through a series of acquisitions.
Away from crypto, another world-leading brand 1XBet is emerging from the shadows to position itself as a champion of player protection. These are arguably brands that are too big to continue playing in grey zones – although Yolo acknowledged competitive pressure for its volte face. But for someone who’s been around as long as I have, it looks like a familiar playbook: disrupt first, then professionalise and regulate yourself later.
The evolution of risk
Every operator in iGaming has had to face this transition at some stage. PartyGaming, PokerStars, 888, and bet365 all began in territories before they were regulated. They scaled quickly, often taking on levels of risk that today they would deem unthinkable. Over time, as governments introduced licensing regimes, operators faced a choice: adapt or disappear.
What makes crypto casinos different is the extremity of the risk they embraced. Traditional online casinos might have tolerated high-roller bets of $10,000. Crypto casinos regularly process hundreds of thousands a hand in Bitcoin or Ethereum, with no KYC, no AML, and no source-of-funds checks. That’s not innovation, it’s calculated risk.
And that’s exactly why the pivot to regulation is so challenging. To move from a world where a player can bet hundreds of thousands per hand with complete anonymity into one where deposit limits, affordability checks, and responsible gaming tools are mandatory is not just an operational shift. It’s a complete reinvention of the business model.
When regulation arrives, everything changes
Regulated operators live by a set of rules: know your customer, track your transactions, verify your funds. Crypto casinos wanting to embrace regulation will be forced to follow the same rules. So if there is a deposit limit of $2,000, you will need to accept it. It means bonuses will shrink from 70% to 20%. It means games margins will move closer to 6% rather than the ultra-thin 2% many crypto platforms run on today.
A crypto casino can’t simply bolt regulation onto its current structure and expect the economics to hold, just like regulated operators can’t just bolt on crypto practices to theirs. They will need to redesign their models from the ground up – accepting lower volumes, lower bonuses, and lower margins. Many customers, particularly those who made fortunes in the crypto boom and are accustomed to the frictionless experience of unregulated platforms, will walk away. Others will migrate to operators still willing to play in the grey.
This isn’t new. It’s exactly what happened when the first wave of online poker and casino companies shifted from offshore havens into licensed markets. The difference is scale: crypto operators are making a far bigger leap, from the wild west of anonymous mega-wagers into one of the most tightly regulated industries in the world.
Why they’re doing it anyway
So why make the move at all? Longevity and peace of mind.
Founders who built billion-dollar businesses on the back of regulatory arbitrage eventually hit a wall. They face cease-and-desist letters, criminal indictments, and extradition risks. They might be unable to travel freely or to scale globally. At some point, the calculation changes: better to sacrifice short-term operational profits in order to build a sustainable, compliant, and globally recognised business.
And importantly, they have the war chest to do it. The profits made during the unregulated years give crypto operators the resources to invest in compliance teams, regulatory lobbying, brand building, and acquisitions. Some will even operate in dual mode – continuing to run crypto casinos in unregulated markets while launching white-label, fully regulated businesses in Europe or North America.
Where crypto operators have an edge
Despite the challenges, crypto operators bring something to the table that traditional casinos struggle to match: new modern platforms and product innovation.
For the past twenty years, online casinos have largely offered the same mix of slots and live dealer games. The UX has improved and games have evolved but the fundamentals haven’t changed. Crypto casinos, by contrast, were built for a younger, digitally native audience. Their products are faster, more engaging, more social. They embraced crash games, live streaming, and community play years before traditional operators even considered it.
This product DNA could become a major advantage once regulation is applied. If crypto operators can pair cutting-edge UX with compliance and player protection, they stand a real chance of capturing Gen Z and millennial audiences who find traditional online casinos outdated.
Another strength is brand. Stake, for example, has become a household name through aggressive sponsorships and high-profile partnerships with figures like rapper Drake. Even in markets where its product is blocked, the brand is recognised. That recognition can be leveraged in regulated markets far more effectively than a new brand starting from zero.
By contrast, Yolo faces a double challenge: not only must it reinvent its operating model, but in ditching its successful BitCasino.io and SportsBet.io brand in favour of the new Yolo.com it must also build a brand from scratch. In a market as competitive as gaming, that’s a tall order. Although, that said, YOLO (you only live once) is an acronym well-known to the digital generation. Interestingly, Drake was one of the first to popularise the term in his 2011 song The Motto. He could have made a good brand ambassador, if he wasn’t taken already.
Crypto gaming is standing at the same crossroads the wider industry faced during the last two decades . The pivot to regulation will not be smooth. If operators can combine the best of both worlds – the innovation, speed, and user-centric design of crypto with the trust, stability, and legitimacy of regulation – then they could change the game. Again.
