DraftKings is preparing to introduce a new way for customers in several U.S. states to fund online sports betting accounts, allowing cryptocurrency to be converted into cash before being deposited. The rollout, discussed publicly during a recent Massachusetts Gaming Commission meeting, highlights how state regulators continue to take different approaches to digital currency use in regulated wagering.

At the meeting, Chief of the Division of Sports Wagering Carrie Torrisi told commissioners that DraftKings plans to launch the new deposit option in four states in the coming weeks. Commission Chair Jordan Maynard identified those jurisdictions as Illinois, Kentucky, New Hampshire, and Vermont. While the feature involves cryptocurrency, DraftKings emphasized that it does not involve directly accepting crypto for wagers. Instead, digital assets would be converted into U.S. dollars before entering a sportsbook account.

States Diverge on Crypto Acceptance

Regulatory positions on cryptocurrency vary widely across the United States. Some jurisdictions have been open to its use in regulated sports betting, while others remain cautious. Wyoming was among the first to allow cryptocurrency as a funding method in 2021. Colorado and Virginia followed in 2022 by permitting crypto conversions for sportsbook deposits, rather than direct acceptance.

Kentucky regulators confirmed that their rules already accommodate such funding methods. “Kentucky’s sports wagering regulations directly contemplate the use of digital, crypto and virtual currencies,” Kentucky Horse Racing & Gaming Corporation Director of Sports Wagering Hannah Simms said. “Sports wagers may be made using forms of payment approved by Kentucky Horse Racing & Gaming including ‘cash equivalents converted to cash.’ The definition of ‘cash equivalent’ includes ‘digital, crypto and virtual currencies.’”

Simms added that regulators conducted a full review before approving the DraftKings proposal. “KHRG staff worked with DraftKings to evaluate their proposal. This included a full product walkthrough, review of any vendors involved and confirmation that the system underwent appropriate testing. Following that process, KHRG approved the method for use in Kentucky as it satisfies our regulatory requirements.”

Vermont officials echoed that position. Hannah Chauvin, director of communications and legal affairs at the Vermont Department of Liquor and Lottery, said the agency defines crypto and virtual currencies as cash equivalents and permits their use to fund sports wagering accounts.

Massachusetts was initially expected to be part of the test group but reversed course late last year. Following a regulatory review, the state updated its rules to prohibit crypto converted to cash as a funding source for sports betting accounts, effective December 19. The restriction mirrors the state’s ban on credit cards and applies even when converted crypto originates from another jurisdiction.

At a December meeting, regulators raised concerns about oversight and financial risks tied to digital assets. “We believe, basically, crypto is not ready for primetime,” said Caitlin Monahan, director of the Massachusetts Gaming Commission’s Investigations and Enforcement Bureau, according to SBC Americas. “We really don’t think at this moment in time, in this regulatory structure, it is a funding source that is ready to be incorporated and that we want to be encouraging.”

Monahan pointed to limited regulatory controls and the potential for money laundering as key issues. She also noted that none of the state’s licensed sportsbooks were offering crypto-to-cash deposits at the time. DraftKings Legal Director Pete Harrington clarified during the meeting that the company was not seeking to accept cryptocurrency directly, but rather to explore the use of converted digital assets under regulatory oversight.

Credit Cards, Crypto, and Shifting Payment Rules

The crypto-to-cash rollout comes months after DraftKings stopped accepting credit cards for sports betting deposits. Credit card restrictions are now common across the U.S., with bans or limits in states including Illinois, Iowa, Massachusetts, New Hampshire, Rhode Island, Tennessee, and Vermont. Virginia lawmakers recently passed similar legislation.

Illinois regulators confirmed that their rules allow crypto conversion under specific conditions. Illinois Gaming Board Director of Communications Beth Kaufman said sportsbooks in the state cannot directly accept cryptocurrency, but may accept funds converted into U.S. dollars through money transmitters licensed by the Illinois Department of Professional Regulation.

DraftKings continues to offer other deposit options, including debit cards, Apple Pay, bank wires, and cash deposits at select retail locations. The company has previously signaled interest in cryptocurrency as a funding tool, while acknowledging regulatory resistance. Wyoming remains the only state where sportsbooks can directly accept crypto.

For customers, converting cryptocurrency to cash carries tax consequences. Each conversion triggers a taxable event under federal law. “When you sell virtual currency, you must recognize any capital gain or loss on the sale, subject to any limitations on the deductibility of capital losses,” according to the IRS.

Short-term capital gains on cryptocurrencies can be taxed at rates ranging from 10% to 37%, while long-term gains are taxed at rates up to 20%. As DraftKings prepares to roll out the feature, bettors in participating states will need to consider those obligations alongside the convenience of using digital assets to fund wagers.