Australia's Northern Territory could soon see landmark cryptocurrency gambling regulations.

The Northern Territory Racing Commission (NTRC) in Australia is seeking feedback from gambling licensees about a possible plan to allow crypto wagering as part of regulated gambling.

For the most part, gambling in Australia is regulated by states and not by the federal government. The NTRC oversees all gambling and wagering companies that choose to be licensed in Northern Territory (NT), including global wagering companies such as Bet-fair, Entain Group, Draft Kings and Sportsbet.

As things now stand, the NTRC has distributed a private draft to licensees for comment and input on what the regulatory scenario may look like in order to launch crypto wagering in the NT.

Julian Hoskins, the principle advisor of one of Australia’s gambling law and regulatory firms Senet, has been given access to the private document that shows what the NTRC is looking for at this stage.

“What it provides for is a licensee, say a sports bookmaker who holds a license in the Northern Territory, who wants to accept cryptocurrency for striking or paying out wages, [is that they] need to apply for consent to be able to do that. And there’s certain conditions that attach to that.”

“It’s clear from the draft framework that they’re looking at wagering using cryptocurrency, and not exchanging into fiat,” he added. This means that punters will most likely need to place bets using both fiat currency and crypto separately on the one platform, as the two financial tools won’t be interchangeable with each other for gambling.

While the prospect of a cryptocurrency ban is hard to quantify at this time, Hoskins said that “given the popularity of crypto, I would imagine that this would be quite popular as an alternative to fiat. I believe it has the potential to be very significant.”

He added that if this model found success in the Northern Territory, other state gambling regulators would likely follow.

Hoskins also noted that stringent identification requirements have also been proposed to keep in line with Anti-Money Laundering (AML) regulations. As such, gamblers will most likely need to have their crypto wallet addresses verified, and any winnings will need to be withdrawn “back to the same wallet” that made the initial deposit.

Under the proposed framework, crypto wallets will need to be verified and registered to a customer’s identity. The customer must demonstrate they have control over the wallet.”

The NTRC has also suggested monthly crypto deposit restrictions of 2,000 Australian dollars, or about $1,300, for the first year and a maximum wager of 5,000 Australian dollars, or around $3,500 per month.

According to the gambling attorney, local gaming businesses will be obligated by law to maintain crypto wallets that have enough funds to collateralise customer wager amounts in the same way as fiat-based casinos do.

In terms of the tax consequences of using volatile cryptocurrency to gamble, Hoskins said he didn’t know “how that would be treated,” suggesting the NTRC is still discussing such issues.

Given that the NTRC previously ordered gambling businesses like Neds to “cease and desist” Bitcoin (BTC) wagering in 2018, it appears to have reversed course on crypto.

Jamie Nettleton, a partner at commercial law firm Addisons in Sydney, spoke about the move from the NTRC and its significance.

“The NTRC consultation paper is the first indication from an Australian gambling regulator that they are open to considering cryptocurrency use,” he stated.

“To date, any Australian wishing to utilise crypto in gambling must do so overseas with a party likely to do so illegally ( at least from the perspective of Australian gambling law.). This paper is a welcome change!”

The House of Representatives has passed a bill promoting Bitcoin. This is just days after the ALP, which won the latest Australian election, said it would regulate cryptocurrencies. Treasurer Jim Chalmers announced a “token mapping” process to help regulators “determine how crypto assets and related services should be regulated.”