The bubble machine: gambling goes crazy for ICOs
While a degree of scepticism towards the nascent initial coin offering (ICO) market is understandable, esports-only betting company Unikrn’s announcement it hopes to raise a whopping $100m from the sale of its Ethereum-backed tokens is still a signal moment for the gambling sector, writes Chris North, chief executive at GamCrowd.
The latest news from Unikrn about its soon-to-launch token offering is the perfect illustration of why many in the gambling sector are getting very excited about the potential held out by initial coin offerings or ICOs.
After initially announcing that it would be offering Ethereum-backed Unikoin Gold tokens earlier in the summer, it emerged in August that the esports-only betting company – which counts Tabcorp among its shareholders – hoped to raise a whopping $100m via the sale in late September.
Tipped to take part in the coin offering is Dallas Mavericks owner and renowned venture capitalist Mark Cuban, who already owns an equity slice of Unikrn.
The proposed $100m token raise is a huge amount of cash for what remains a startup business. Bearing in mind what we know about the average funding round for startups in the gambling sector – where most funding occurs in the single-digit million pound or dollar range, and often much less – this figure is genuinely mind-boggling.
It eclipses even the Funfair.io token sale which otherwise stood out earlier this summer as the high-water mark of gambling-related taken sale activity when it raised $26m via its FUN token sale in June.
Seeing the amount being raised by Unikrn, it must be likely that Funfair – founded by ex-PKR founder Jez San and promising to change the world of casino gaming provision via the blockchain – will return to the ICO market sooner rather than later.
It is understandable why there is scepticism with regard to the ICO market. It has – comparatively – come out of nowhere and to say that many of the token offerings are speculative is truly to underestimate the nascent nature of both the businesses and the technology they are dependent on.
This isn’t to say that blockchain isn’t an exciting technology. However, for all the talk about provably fair and trustless technology, we have yet see any of the potential use cases in action.
Although bitcoin-only casinos have been with us for some time, they have been bedevilled by the issues affecting the wider crypto-currency market, namely that of transaction bandwidth.
The debate regarding ICOs was opened up further after the US Securities and Exchange Commission (SEC) issued an investor bulletin in late July.
It noted that such activities “may provide fair and lawful investment opportunities”. However, the bulletin also cautioned: “However, new technologies and financial products, such as those associated with ICOs, can be used improperly to entice investors with the promise of high returns in a new investment space.”
The bulletin added that depending on the circumstances of each individual ICO, the virtual coins or tokens that are offered or sold “may be securities”. “If they are securities, the offer and sale of these virtual coins or tokens in an ICO are subject to the federal securities laws.”
“This ruling will likely have a chilling effect on future ICOs,” Emin Gün Sirer told the Financial Times, an expert in cryptocurrencies and adviser to Tezos, a virtual organisation whose own ICO raised $230m in July.
Despite the intervention in the following month the market paid little heed to official worries. Looking at the TokenMarket.com website, it can be seen that the new ICOs are still racking up – and raising some tremendous sums.
It is impossible at this stage in the development of the market to call what happens next to the rest of the market but I think it is safe to say the Unikrn/Unikoin Gold offering will represent a signal moment for the gambling sector.
The money raised will be unlike anything raised by what is still effectively a startup in the sector. That Unikrn also happens to be an esports-only betting operator makes the move all the more intriguing.
Rahul Sood, chief executive at Unikrn, is certainly excited by the confluence of opportunities. He made the point in a posting on Medium.com that what set Unikrn apart from others in the ICO market was that it was “tokenising an existing business.”
“This isn’t an investment,” he added. “It’s a purchase of a product that we developed that has utility on our platform and ours users love and demand.”
That could be truly disruptive.
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