Tokenomics in Gambling: How Crypto is Changing Everything in 2025

Tokenomics in Gambling: How Crypto Tokens are Revolutionizing Rewards and Payouts

In this original CoinBets.com article, we’ll introduce the principles of tokenomics, looking at its components and relevance in the context of the crypto space. We’ll then take a deep look at how tokenomics is transforming the gambling industry, including case studies of platforms that have successfully integrated tokenomics, highlighting their strategies, successes, and the challenges they encountered. Finally, we will gather expert opinions on the future of tokenomics in gambling, discussing potential regulatory hurdles, market risks, and emerging trends.

But, before we get to tokenomics, let’s consider where most online gambling platforms stand right now, i.e. using traditional rewards and payout systems.

Limitations of Traditional Rewards and Payout Systems

The online casino and sports betting industry has long used conventional fiat-based reward and payout systems. Essentially, they are digitized versions of those used at land-based casinos and betting shops. When a player wins, the funds are credited to their accounts as dollars, euros, pounds, or another fiat currency, and then they can be withdrawn to a bank, card, or e-wallet account. Rewards usually come in the form of comp points, bonuses, and other conventional incentives aimed at increasing engagement and retention.

However, as any casino player or operator will know, such systems are far from ideal. High transaction fees, slow withdrawal processes, and limited transparency often lead to frustration among players. And, these issues are being worsened by increasingly cumbersome KYC (Know Your Customer) regulations. For example, a quick look at casino reviews on the popular review site Trustpilot shows the level of frustration among players regarding identity verification processes.

Furthermore, the centralized nature of traditional online casinos and sportsbooks – even those licensed by strict regulators like the UK Gambling Commission (UKGC) and Malta Gaming Authority (MGA) – means players are forced to put a high degree of trust in operators. And, in the case of disputes, it can be difficult for players to achieve satisfactory resolutions. Plus, from the other side of the fence, operators are constantly fighting against fraud and bonus abuse.

Blockchain and Crypto Tokens Offer a New Way Forward

The advent of blockchain technology and cryptocurrencies has, however, sparked an ongoing transformation in the online gambling industry. Crypto tokens are now increasingly being integrated into online gambling platforms, allowing an entirely new approach to both rewards and payouts.

Underpinned by the principles of tokenomics, these digital assets are improving efficiency and opening up new opportunities for both gambling operators and players. Indeed, the integration of crypto tokens into gambling platforms is actually driving a fundamental shift in how value is created, distributed, and managed within these ecosystems.

For example, the use of blockchain technology can ensure real transparency, immutability, and fairness – as demonstrated by provably fair games. Meanwhile, crypto tokens allow for entirely new betting mechanics, loyalty programs, and payout structures.

Understanding Tokenomics

Before we get to how blockchain and crypto tokens are impacting the online gambling industry specifically, it’s important to understand the basic principles of tokenomics.

What is Tokenomics?

Tokenomics is a simple portmanteau of the words “token” and “economics,” and refers to the economic structure and design principles of a cryptocurrency or digital token. So, that’s how the tokens are created, distributed, and used within an ecosystem, along with the incentives to drive participation within that system. In a nutshell, tokenomics is the study of how value is generated and exchanged within a blockchain network – governed as it is by smart contracts and protocol architecture. Just like economics is the study of the production, consumption, and transfer of wealth in a broader context.

Getting tokenomics right is critically important for any blockchain-based project because it directly determines the engagement and behavior of participants. Hence, the sustainability and success of the entire ecosystem is dependent on it. This is true whether it’s a gambling platform, a massively multiplayer online role-playing game, a DeFi project, or anything else.

Components of Tokenomics

There are five key elements of tokenomics – each one playing an important role in the functioning of a blockchain ecosystem.

1. Token Supply: This is the total number of tokens that can ever be created. It includes both the circulating supply and those still to be minted. As with anything, if there is high demand, scarcity can have a significant impact on the token price.
2. Distribution Mechanisms: This refers to how tokens are initially and subsequently distributed and circulated within the project ecosystem. Methods can include things like Initial Coin Offerings (ICOs), airdrops, staking rewards, and mining. Accessible and fair distribution mechanisms are vital to encourage participation in a project.
3. Utility: A token’s utility simply refers to what it does, or its primary function within the ecosystem. For example, when it comes to gambling platforms, they may be used to place bets, participate in games, earn rewards, or gain access to specific features. Needless to say, real and clear utility can affect demand for it, and hence its market value.
4. Incentive Structures: For a project to gain traction and grow sustainably, people must be convinced to engage and behave in desired ways. To encourage this, incentive structures are designed into tokenomics. These can include rewarding participants for their loyalty, offering bonuses for referrals, and creating staking opportunities to help secure the network.
5. Governance: DeFi (Decentralized Finance) and DAO (Decentralized Autonomous Organizations) often issue tokens that provide holders with certain voting rights regarding decision-making processes. This can help build trust and a sense of ownership among the community.

Advantages of Tokenomics in Gambling

Compared to traditional systems, the integration of tokenomics into gambling platforms offers several compelling advantages:

Here are the principal ways crypto volatility affects gambling:

• Transparency: Because all transactions and token movements are recorded on immutable public ledgers, blockchain-based systems reduce the risk of fraud and increase player trust.
• Lower Transaction Costs: Traditional online gambling platforms rely on third-party payment processors, which can lead to high transaction costs. On the other hand, crypto tokens enable peer-to-peer transactions, significantly reducing costs for both operators and players.
• Faster Payouts: Traditional payout methods, especially withdrawals to banks, can be slow – often taking several business days for funds to reach a player’s account. Conversely, crypto token transactions can be virtually instant and aren’t restricted to bank business hours.
• Stability: Because gambling is classed as a “high-risk” industry, it is common for third-party payment service providers, like banks, to withdraw their services at short notice. In a similar vein, some card issuers will block gambling transactions. Peer-to-peer crypto transactions avoid these problems.
• Enhanced User Engagement: Gambling platforms can create more engaging experiences for players by incorporating tokens into reward systems and betting mechanics. For example, they can be used to unlock special features, exclusive games, or higher rewards.

Application of Tokenomics in Gambling Platforms

Now that we’ve covered the basic principles of tokenomics, let’s take a closer look at how they are actually being applied by online gambling platforms.

Betting Mechanics

On traditional gambling platforms, bets are usually placed using fiat currencies, with predetermined odds set by the house. However, crypto tokens have enabled entirely new formats and possibilities. For example, some platforms allow players to place bets directly in specific cryptocurrencies, each with different odds and potential payouts. Plus, some platforms now use decentralized oracles to set dynamic odds based on real-time data, creating a fairer, more dynamic betting environment.

Tokens can also be used to enable pooled betting. This allows players to combine tokens to place a collective bet, with any winnings automatically distributed proportionally based on each player’s contribution. In addition to increasing potential payouts, this also helps build a sense of community among players on the platform, further increasing loyalty and retention. And, speaking of community spirit, tokens also make social betting platforms possible. These allow players to create and participate in custom betting events, where they can set odds and rules.

Rewards and Loyalty Programs

Tokenomics is also revolutionizing how crypto casinos and sportsbooks reward their users. Instead of earning points that can only be redeemed for on-platform perks or free spins, earning crypto tokens in online casinos offers far more flexibility for the player. For example, crypto tokens earned as rewards for gameplay can also be traded on external exchanges or used in other crypto-enabled services. This provides a level of liquidity and value to rewards that far exceed anything offered by traditional comp points.

Using crypto rewards in online casinos and sportsbooks also makes it easier to create tiered loyalty programs. These enable players to access exclusive features, games, or events based on the number of tokens they hold or have wagered. These can be especially useful for retaining high-value players – a segment critical to the viability of many online gambling platforms.

Beyond standard crypto tokens, some gambling platforms have also been experimenting with using Non-Fungible Tokens (NFTs) in their loyalty programs. NFTs are digital tokens that can’t be divided and represent a unique digital asset. These can be awarded to players as special rewards, granting access to unique experiences, digital collectibles, or in-game items. And, again, because these NFTs can be traded or sold on third-party marketplaces, they add additional layers of value to the rewards ecosystem of a platform.

Payout Structures

The payout process is one of the most critical aspects of the online gambling experience. Unfortunately, reliance on third parties like card processors and banks, means traditional payout systems often suffer from delays, high fees, and withdrawal limits. This is why slow payouts are one of the biggest causes of complaints from players on review sites. Hence, fast, low-friction, low-cost payouts via crypto tokens in gambling are one of the most compelling benefits of tokenization.

Payouts made using crypto tokens can be transferred directly between the platform and players, without any third-party intermediaries. This means they can be processed almost instantly and at a very low cost (depending on the specific blockchain used of course – Ethereum, we’re looking at you). This is a win-win situation, making the experience better for the user and reducing costs for the operator.

Additionally, adopting tokenomics in online casinos and sportsbooks allows payouts to be structured in new ways. For example, a platform can give players the choice of receiving winnings in different cryptocurrencies and even offer staking rewards. The latter gives players the option to reinvest some of their winnings in the platform’s ecosystem, generating a passive income of more tokens.

On top of all these new possibilities, using crypto tokens in gambling allows for more transparent and verifiable payout processes. Because all transactions are recorded on a public blockchain, players can easily verify if their winnings have been paid correctly – building even more trust and loyalty.

Case Studies

Although tokenomics in online casinos and sportsbooks is still in its early stages, several platforms have already successfully implemented systems. So, let’s take a look at some real-world case studies of platforms that, at least for a time, managed to successfully integrate tokenomics.

Case Studies

Billing itself as the “World’s #1 Telegram Casino”, TG.Casino can be accessed via its website or completely anonymously via the popular Telegram app. Players betting with its native TGC token earn 25% cash back on all bets, and can also earn revenue-based staking rewards. The $5 million pre-sale of TGC sold out and the network launched on January 24, 2024. The casino also issued special High Roller NFTs which give holders even more perks, like staked tokens bonuses from buybacks, casino credits, rakeback on the house edge every week, and seasonal rewards.

Although TG.Casino itself has been operating successfully as a standard crypto casino for some time, it’s too early to tell whether its tokenomics model will be sustainable. The casino pitches itself directly against major crypto casino competitors like Stake, Roobet and BC.Game, and may well act as something of a barometer for the whole industry. However, the site could potentially run into regulatory headwinds in the very near future, particularly because of its association with Telegram – a platform that is itself under intense regulatory pressure due to its determination to protect user privacy.

FunFair (FUN Token)

A decentralized gambling platform built on the Ethereum network, FunFair is focused on providing players with provably fair gaming experiences. At the heart of FunFair’s ecosystem is its native FUN token, which is used for all transactions on the platform, including placing bets, paying for services, and receiving rewards. The platform’s tokenomics model is designed to be deflationary – with a small percentage of each transaction fee burned, continually reducing the overall supply of FUN tokens over time. This creates upward pressure on its value as demand increases.

Additionally, the FunFair platform also offers users unique reward mechanisms, including staking opportunities. This offers participants the chance to earn additional rewards for staking FUN tokens and helping to secure the network, and at the same time increases engagement, loyalty, and sustainability.

Although FunFair proved the technical viability of tokenization in online gambling, it has increasingly moved away from the space, pivoting towards general gaming in the metaverse. This has largely been due to regulatory challenges, which we’ll explore in depth later on.

Edgeless (EDG Token)

Another blockchain-based gambling platform that has successfully implemented tokenomics is the online casino Edgeless. The USP of the site is referenced in its name – there’s a 0% house edge. This means there’s no advantage to the house, so players have a genuinely fair chance of winning.

The native token of Edgeless is the EDG token. Again, this is used for all transactions on the platform, including placing bets and payouts. Edgeless is completely transparent, using smart contracts to verify all transactions, so players can easily check that payouts are accurate and fair. The platform also runs a loyalty program allowing players to earn EDG tokens based on their activity. The EDG tokens earned can be used to access exclusive games, features, and special events, enhancing the player experience and loyalty.

Although the Edegless website has proven the concept of tokenomics at an online casino, the project seems to have been on a hiatus for the past couple of years. Again, this is no doubt due to the repressive regulatory environment.

Wagerr (WGR Token)

This decentralized blockchain-based sports betting platform uses its native token, WGR, for all bets and payouts. To help ensure the long-term sustainability of the platform, a small fee is charged with each bet. A portion of each fee is also burned, to create deflationary pressure on the overall WGR token supply, and help maintain the token’s value over time.

However, Wagerr takes things further, giving player the opportunity to engage in peer-to-peer and event-based betting. This allows players to create their own betting events using WGR tokens, taking engagement to a whole new level. Again, despite proving itself and gaining a loyal following, the exact current status of the Wagerr project is unclear, with no social media posts for some time, and the website saying Wagerr V.5 is coming soon.

Lessons Learned

Other gambling operators that are considering implementing tokenomics in their platforms can learn several key lessons from platforms like TG.Casino, FunFair, Edgeless, and Wagerr.

1. Transparency is Key: The transparency offered by blockchain-based tokenomics, via leveraging smart contracts and decentralized ledgers, is very effective at building trust with users
2. Incentivize Engagement: By using crypto tokens and NFTs, tokenomics allows platforms to offer rewards with real utility and value to players. This is far better for encouraging long-term loyalty and engagement than traditional reward systems.
3. Manage Token Supply Carefully: Carefully managing token supply to avoid rapid inflation or deflation is critical to maintaining stability. Mechanisms like burning and staking can be used to do this.
4. Embrace Flexibility: Tokenomics gives operators the ability to be far more flexible in terms of betting formats, payout options, and reward structures. This flexibility is key to both attracting and retaining a diverse player base.
5. Regulatory Uncertainty is a Huge Hurdle: Many of the gambling sites that embraced tokenization early on, whilst proving the technical viability of concepts, ran into regulatory brick walls. Any new projects need to be hyper-aware of the uncertainties manifest in this field.

Expert Opinions and Future Insights

We’ve seen some examples of crypto tokenomics in online casinos to date, but what does the future hold, and what are industry experts saying?

Andrew Carl, recently appointed CTO of FunFair, stressed the need to combine anonymous transactions with verified identities in the gaming space, explaining:
“In the blockchain space, privacy and authentication are both crucial aspects. While they may seem like opposite sides of the same coin, individuals will likely need to utilize both anonymous transactions and authenticated identities. While this may not be directly related to GameFi, we can collaborate with our GameFi partners to help streamline access to privacy and authentication blockchains.”

Meanwhile, in May 2024, Steven Salz, CEO and Co-Founder of Rivalry, a gambling platform that recently announced the launch of its own crypto token, noted:
“Online gambling is the latest web-based consumer category being increasingly disrupted by blockchain technologies with greater speed, access and functionality than their legacy counterparts. Tech-savvy bettors are leading a behavioral shift towards more experiential and crypto-enabled gambling experiences that are taking wallet share from incumbents at an accelerated rate.”

And, in April 2024, Sim Harmon, CEO and Founder of social betting platform Kutt, pointed out the demand for tokenomics-based peer-to-peer social betting, saying:
“Betting has been a social activity for thousands of years, so it’s no surprise that consumers want the ability to facilitate and track wagers against their friends… If anything, bettors unquestionably prefer a more curated, social experience — they want to be part of a wider community and to be part of the conversation around sports, entertainment, and important events.”

Predictions: The Future of Tokenomics in Gambling

On the face of things, the future of tokenomics in the gambling sector seems bright, with several trends likely to continue.

1. Increased Decentralization: The increasing adoption of blockchain and crypto technologies will inevitably lead to more decentralization. As more gambling platforms go fully on-chain, players will gain greater control over their funds and data, significantly reducing the need to rely on third-party intermediaries, and thus increasing trust
2. Integration with DeFi: By integrating DeFi protocols, gambling platforms will expand their offerings to include financial products like lending, borrowing, and yield farming. This will continue to blur the lines between gambling and traditionally separate fields like trading and investment.
3. Regulatory Evolution and Pushback: As regulators become more familiar with blockchain technology, we can expect at least some of them to be more accommodating to token-based gambling platforms. This will likely catalyze innovation and the introduction of new products and services. However, if events up to this point are anything to go by, we’ll also see some regulators pushback against decentralized technologies.
4. Adoption of Stablecoins: As more platforms and players realize the ease of hedging against crypto volatility by using stablecoins, we can expect to see their use grow significantly.
5. Gamification and NFTs: The use of gamification and NFTs will continue to expand, with platforms offering more unique and engaging experiences for players. We should expect to see a host of novel new variations in this vein.

Challenges and Considerations

Despite tokenization already having proved itself in terms of improving efficiencies, guaranteeing transparency, and increasing engagement, it’s not all plain sailing ahead. Several major challenges remain – especially in certain countries.

Like Oil and Water: Decentralized Tech and Centralized Regulators

Like anything to do with decentralized technologies, one of the biggest challenges facing the adoption of tokenomics in online gambling is the complicated and uncertain regulatory landscape. Online gambling is already subject to a highly complicated patchwork of different regulations and laws, varying greatly from one jurisdiction to another. The introduction of crypto tokens in online casinos and sportsbooks adds yet another layer of complexity – one which many authorities are proving unable to even comprehend, let alone effectively regulate.

While regulators in some regions have at least attempted to embrace the potential of blockchain technology, even then, things have often delivered less than stellar results – a case in point being Malta. This Mediterranean island nation has long been a hub of the online gambling (iGaming) industry, and in the late 2010s embarked on a mission to become ‘Blockchain Island’. However, by late 2024, the dream had been shattered and despite remaining an iGaming hub, most Maltese-licensed online casinos and sportsbooks still don’t even accept crypto payments.

The Maltese experiment failed because regulators discovered that trying to dovetail existing centralized regulatory frameworks with the realities of the new decentralized technologies is almost impossible. This was probably best illustrated by the fact that Binance, the world’s largest crypto exchange, was ready to relocate to Malta, but eventually gave up because the licensing process took so long. Ultimately, only a handful of crypto businesses stuck around long enough to obtain a Maltese license.

Considering the Maltese government had been enthusiastic about all things blockchain and crypto, and still failed to provide a functional regulatory framework, it is not surprising that the challenges elsewhere are even more daunting. For example, despite the UK being a hub of blockchain innovation, the UK Gambling Commission (UKGC) has categorically banned licensees from even supporting crypto payments. Similarly, in the United States, the SEC (Securities and Exchange Commission) has been making life difficult for myriad crypto businesses, from Ripple to Coinbase and Kraken.

For example, in late July 2024, major US sports and fantasy sports gambling operator DraftKings announced it was downshutting its NFT marketplace following a class action lawsuit arguing the tokens were unregistered securities. The DraftKings NFT marketplace has been live since 2021, offering digital sports-themed collectibles on the Polygon blockchain. Later, the platform also launched an NFT-based daily fantasy sports game called Reignmakers, which gave customers the ability to win more digital collectibles. To try and assuage players who had invested time and money in the NFTs, DraftKings has said it will be willing to buy back digital assets from Reignmakers players, subject to certain conditions – a very costly endeavor.

Further illustrating that some governments are still wholesale anti-crypto, as recently as June 2024, Australia announced a ban on using cryptocurrencies for online gambling. Of course, the exclusive was player protection. While this may be justified in terms of the credit card ban that was announced at the same time (I mean, after all, you shouldn’t gamble with money you don’t actually have), it’s hard to see how banning the use of crypto does anything to “protect” players.

The KYC and AML Conundrum

In addition to issues caused by regulators not even being able to agree on what exactly crypto tokens should be classed as (i.e. commodities or securities), another huge problem is compliance with KYC (Know Your Customer) and AML (Anti-Money Laundering) rules. The entire point of these laws is to ensure that centralized authorities have a detailed picture of who is making every financial transaction, and where the funds originated. Quite obviously, this is ultimately incompatible with one of the core principles of cryptocurrencies; privacy.

Despite the fact that many argue that adhering to current KYC and AML regulations is vital for the long-term success and legitimacy of token-based gambling platforms, it’s hard to see how this will be possible. For example, if crypto transactions end up being checked and cleared by centralized third parties, then it will inevitably compromise privacy, and may even reintroduce the delays and frustrations that crypto tokens were intended to address in the first place.

Indeed, many suspect that governments around the world are already planning to force CBDCs(Central Bank Digital Currencies) on everyone in the not-too-distant future. These will be digitized versions of existing fiat currencies like the dollar, euro, and pound, and though they will use blockchain technology, they will be highly centralized. Furthermore, they will be programmable, enabling the authorities to easily monitor and control all transactions. One of the justifications for rolling out CBDCs will be that it’s the only way to effectively integrate digital currencies with the current regulatory systems.

Market Risks

Another challenge faced by every gambling platform integrating tokenomics is the market risks associated with cryptocurrencies. As demonstrated time and again for more than a decade, crypto can be very volatile. This volatility can pose significant risks to both players and platform operators. For example, a sharp drop in the value of a gambling token could mean big losses for players and the drying up of liquidity, and thus functionality, of a platform.

But, unlike the regulatory challenges, there are relatively easy things platforms can do to mitigate market risks. One of the most obvious is to adopt hedging strategies, like diversifying portfolios to include a variety of assets, especially stablecoins. Crypto casinos and sportsbooks may also let players choose to cash out winnings in major fiat currencies, further enhancing stability.

Something more difficult to address is the possibility that a project will simply fail to reach sufficient adoption to make it viable. If a platform’s native token doesn’t gain enough traction quickly enough, it can undermine its liquidity and cause a death spiral. Unfortunately, this is something that no project can really predict – they’ve just got to focus on building the strongest community of users and partners and try to give their token as much utility and value as possible.