Home » SBO Weekly » Reason.com: Bitcoin-based Augur Poised to Restructure Online Gambling

Reason.com: Bitcoin-based Augur Poised to Restructure Online Gambling

August 13, 2015

Reason.com checked in yesterday with what the liberal news-opinions cites as the probable “next big thing” in online sports betting: Augur, a low-vig, Bitcoin-based setting system that internally arbitrages all bets placed within the mathematical mechanism (the “blockchain”) that identifies each Bitcoin transaction itself.  Not only does the Augur system offer the possibility of erasing the middleman, it does so in a way that could make most such Augur-based transactions invisible to outsiders.

ScreenHunter_48 Aug. 12 20.11If Augur takes off in the way that its developers envision, it’s sure to draw huge attention from national and international financial regulators around the globe.  The reason is that an Augur-based system poses a Bitcoin-based threat to fiat (nation-issued currencies) in a way that no smaller-scale online-gambling operations have done to date.

Augur could very easily become the Silk Road of the underground, online gambling biz, and if that happens, the wise bet is that various online authorities will attempt to find ways to stamp it out in a hurry.

First, the tale of Augur itself.  Per the excellent Reason.com piece, the futures-market startup “will allow participants to wager money on any future event of their choosing. Software will set the odds, collect the bets, and disperse the winnings.”  And, as the piece goes on to note, the margins will draw the ire of traditional gambling markets, from casinos to stock exchanges: “The price alone should give Nevada sportsbook operators pause; an estimated one percent of every pot will go to keep the system running. The average vig today is about 10 times that.”

It’s a little less than that online, on average, but Augur stands poised to undercut “the house” by an order of magnitude once its system goes live.

When that live date is remains a bit uncertain.  Augur is set to debut sometime this fall, created by a high-tech team of US West Coast types, including tech-startup wiz Joe Costello.  Augur is envisioned as a “decentralized peer-to-peer marketplace” based on Ethereum, a crowd-funded platform that is described by its developers as being “how the Internet was supposed to work.”  At least in terms of bets between consenting adults, that involves the free exchange of information regarding the outcome of events — in other words, cutting out the middleman and most of that house vig.

As the Reason.com feature explores in part, that’s sure to bring war cries from the established gambling industry around the globe.  Augur could be employed by large, underground sports betting syndicates, in the process giving plenty of fuel to those who claim that the gambling industry is rife with money-laundering purpose.  In Augur’s case the “money” will be virtual, in the form of Bitcoins and other pseudo-currencies, but the impact and perceived threat -will- be exactly the same.

And thus, though the Reason piece sounds several optimistic notes about the presumed legality of Augur, and the expected difficulties all nations should expect to encounter in identifying Augur’s users, expect that a consortium of nations led by the United States will quickly pick up that fight.

It’s going to be interesting.  Augur could truly be the “wild wild West” of online futures markets, in particular sports betting, with all the risks and rewards that entails. But exactly how, one might wonder, will the Earth’s nations, and its multi-billion-dollar global gaming industry, combat such a threat?

The beauty of virtual currency, of course, is that it’s based on mathematics.  However, no currency carries an inherent value: one can’t eat money.  Nation-issued currencies are guaranteed in various ways by the countries that do the issuing, but pseudo-currencies such as Bitcoin carry no such guarantee.  A Bitcoin is only worth what someone else will pay for it at that instant.

Though not explored in the Reason feature, that’s the avenue that the established global gaming industry, plus all the national governments it enlists in its expected fight, will pursue against Augur.  The platform itself is a self-contained bit of mathematical perfection, but the demand for the betting medium — the Bitcoins used to fund the process — can be fickle indeed.  Expect national and multi-national authorities to crack down very hard on Augur users within two years of the platform going live, with massive seizures of the online currencies involved.  It’ll all be part of a public attempt to paint the use of Augur as a very high-risk, low-reward proposition, the aim being to prevent Augur from garnering much mainstream acceptance.

As to how successful that will be, who knows?  My crystal ball only sees into the future so far.  What’s clear, though, is that a successful and popular rollout of Augur will be perceived as a serious threat to existing financial and power structures, including the many governments around the globe who derive tax revenue from gambling.  It doesn’t really matter that, as Reason correctly notes, a wager between two consenting adults really shouldn’t be taxed.  What does matter is that in most places around the world, gambling activity -is- taxed, and governments have come to expect their cut.

That means that Augur will be attacked, sooner rather than later.  Good idea or not, that outcome is inevitable.

  • Augur
  • Bitcoin
  • Ethereum
  • futures
  • Online gambling
  • Reason.com
  • sports betting

    About the author

    Eric Roberts
    Eric Roberts

    Sports Journalist

    Eric has been a sports journalist for over 20 years and has travelled the world covering top sporting events for a number of publications. He also has a passion for betting and uses his in-depth knowledge of the sports world to pinpoint outstanding odds and value betting opportunities.