The crypto and iGaming industries are often compared to each. In recent times both industries have found even more connections: a growing interest among consumers, gambling with cryptocurrencies, and the rise in regulations. In this episode, we will discuss the similarities between crypto and iGaming.

The iGaming Show, presented by Paramount Commerce, is a podcast that will analyze gaming industry trends with experts from various gaming organizations.

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Full episode transcript:

Varad Mehta: Hello everyone. Happy 2023 and welcome to the 8th episode of The iGaming Show presented by Paramount Commerce. I’m your host, Varad Mehta and in this podcast, we analyze gaming industry trends with experts from various gaming organizations. In today’s episode, we will discuss the similarities between the crypto and iGaming industries with Justin Hartzman, the CEO of Coinsmart. So without further ado, let’s get the show rolling. So Justin, we begin this podcast with a few fun questions for our guests. So, keeping that tradition going, I did a little bit of digging on your socials and I found a few things that I wanted answers to. Maybe just one question. I don’t know why I stated it that way. But are you a fan of the Dave Matthews Band?

Justin Hartzman: I am. Good searching around. I’ve been a big fan my entire life. I’ve been to probably 20-plus of their concerts so far. I go every year and got my wife and kids into it, actually.

VM: Okay, cool. So my first question was about that. What is one song by them that you would absolutely recommend to someone who isn’t familiar with the Dave Matthews Band?

JH: I think a great entry song and something that I listen to a lot, especially when traveling is the song “Two Step”. Part of the story. It’s kind of a story of life and a little bit about the actual biblical story of Noah and the ark and the animals going to the ark and how life exists out of all that sort of stuff. So it’s a pretty interesting tune.

VM: Okay, so there you have an official song recommendation from a 20-plus years fan of that band. So I’m going to trust you with that, Justin.

JH: All right, nice.

VM: Second fun question is if you could have a ring name, like they have in wrestling or boxing or MMA, what would it be?

JH: Which sport would I choose?

VM: No, like your ring name. Like I had a ring name.

JH: What’s your ring name? Start there. I’ve never thought that’s a good question.

VM: So for you I picked a famous Canadian wrestler. So I went with Justin “The Hitman” Hartzman. Shout out to Bret Hart.

JH: Bret Hart. Classic. I like that. I think I’ll go with that. But something my dad used to call me as a kid. I don’t know why, but he called me Jake the Snake from WWF. So both of those are good. I like them.

VM: Okay, perfect. And lastly, if you could swap lives with a fictional character for a day, who would you pick?

JH: I think for a day. You’re asking good, tough questions. Fictional character can be anything for one day. I would like to be for one day I think it would be fun to be Walter White.

VM: Walter White, that’s a good choice. Is it like deep within when he has transformed into another side of the business?

JH: I think it’s in that transitional time. I think it’s right during that period, not beforehand. A little boring not after all downhill from there, but right at the height. And then the good part of it all just seems like so much interesting stuff going on. Never the same thing. And that’s kind of my life right now. Every day is something different and that’s what really drives me as an individual, not doing the same thing over and over and over again.

VM: I love that. I would’ve never guessed Walter White. I was like, think something like Harry Potter or something like superhero.

JH: I was going to go with Garfield because lasagna for a day sounds nice, but went another direction.

VM: I love that. So, going from the fun questions into the topic that we’re here to discuss about crypto and iGaming, but I wanted to start off with your journey. As you mentioned, you’re busy right now, there’s a lot of stuff happening. Can you just start with how you got into crypto?

JH: Yeah, I would love to. I hope I don’t bore anyone. And it cut me off if I go too long here. But myself and my two co-founders, we’ve known each other since we were about six years old. We went to camp together as children and we’ve grown up together and we’ve had multiple business. Actually had four-ish exits so far together, which is a pretty good run and a good team. And what was happening in about 2005, sorry, 2015, we were running another quite large startup in the city. It was all about social media, advertising and marketing through artificial intelligence, natural language processing, and I wasn’t making a lot of money from that. And I was focused on it 24 hours a day. My wife said to me, Justin, you really need a hobby. I think it’s healthy for you at this time. And I said, okay, but like what? I’m not interested in learning to play the guitar. I tried that for one day, I was done with that. It was way too difficult, time consuming for me. Take up this or that. And I thought back, what’s something I could do to make money at the same time that really interests me? Back in the day, and a while back, I was doing a lot of day trading, but crypto was really starting to pick back up again in 2016, 2017. And I thought back to 2010 when a client, we owned another company, he couldn’t afford to pay us for an iPhone app that we built for him on his phone. He came to us and said, guys, I can pay you in bitcoin. They’re worth a dollar right now. I’ll send you 5000 bitcoin. And we were like, well, if you can’t pay us, we might as well do something. Who knows what it might be worth something one day. And so we did. And I see the email trail of him saying they’re sent and we saying, thank you, received. And I have no clue where those went. So maybe one day I’ll find them. But the point was, I knew about it and I was interested in it, but I never really dabbled in it properly. As the market was coming back in 2016, 2017, and starting to really take off, I felt that was a good place to get in this nascent market, that I could take a little bit of capital that I want to risk at that time, and right time, right place, the market went nuts. That turned, it multiplied a few times, exponentially grew, and it went really well for me. But what I was finding was it was really difficult to get on an exchange, to get verified. When I sent the money, it could get lost for two weeks. You miss a market that you’re hoping for, it comes back and it’s too late, you don’t want to make that investment at that time. And I felt there was just a better way of doing it. And everything that I’ve done in our past together, we always look for those holes in the market or where we can take some of the big boy tools that aren’t working properly and bring them to everybody. And we knew we could do it better. So the three of us, we said, let’s start a pet project to see where it goes. That pet project, end of 2017, we started. We actually incorporated 2018 because we couldn’t get a bank account in crypto until that time. Raised a million and a half dollars on a $5 million valuation on an app idea. I had a couple of friends, we went out and created Coinsmart, and the rest is history, I guess. And maybe we’ll talk a little bit more about that as we move forward. But that was my forte into the actual business of cryptocurrency and how I got into it.

VM: A similar rise that has happened and that we were talking about today, apart from crypto, is the iGaming industry. It has grown a lot in prominence recently. Many states in the U.S. have launched regulated markets, in Ontario.

JH: Sorry to interrupt. If you see right over my finger. That is a Wyoming gaming license that we have. First crypto company who’s licensed out of Wyoming to offer cryptocurrency payments for all the iGaming companies that are registered in that state. So we’re right there with you, for sure.

VM: That was my question. What are your thoughts on the rise of the iGaming industry as well? I’m sure you might have some great insights about that.

JH: This has always been here, but it’s always been kind of where crypto is, kind of like that taboo, and no one really knew what position it sit in. And I think it’s been solidified that this is something that’s important to millions and millions and millions of people worldwide. And the rationale is, if we can regulate it and do it right, this is an opportunity for everyone to participate in a smart, safe, and transparent way. So I think it’s a market that’s going to continue to grow. I think that there’s going to be a lot of consolidation that happens. We see a lot of players coming out there today trying to get market share, but I think we’ll have some big winners or some groups come together to offer some incredible new product. I think everyone’s stepping up their game. You know, this isn’t just your blackjack anymore. There’s new novel games out there. There’s the sports betting. There’s everything that comes around it. So it’s really exciting. Especially here where you and I are in Ontario, as we see it legalized here and licenses rolling out. The unfortunate piece that we have today, which I think will change over time. And we really worked hard towards that ourselves working with the regulators and government is to provide crypto within iGaming. So I think that’s a sector because and I don’t want to get ahead of myself, but it’s needed. And I’ll give you one stat. Right now, 30% worldwide of inflows of capital into iGaming companies is done within crypto. And in Ontario and Canada that’s zero right now, regulatory wise.

VM: No, I think we’ll touch upon that for sure. Because I really wanted to ask you about that because there is this really nice collaboration happening or like a rising collaboration happening between the crypto and iGaming world where you see crypto gambling or crypto casinos on the rise right now, where crypto is a payment form for sure. But before we get into that, do you see any similarities between the two industries as both are growing? I guess regulation would be a good place to start.

JH: They both come from this place where they’ve had them battered and bruised and had a couple of black eyes in different ways for a long history. So I definitely do see a lot of similarities. To be honest with you, not fully one to one, but there’s a lot of similarities between the user base of one and the other as well. These are people who are a little more risk hungry or less risk-averse than others. They have disposable income to go after and people are looking to at some point this is not a good thing or a bad thing, look for ways to make money in alternative forms in an everyday way. So we just have to manage that risk appropriately. And it’s something we do by us assessing our customers and making sure they fall within a risk profile that makes sense to be within crypto like you would any other investment in the world. I think they’re going a long way on the iGaming side to do that as well, to ensure that people are playing within their limits, that people are only doing what they can and should be doing and that we’re operating in the right way that’s safe and supportive to everyone who’s part of that community. So a lot of overlaps. Definitely I see these both rising and they’re rising at a very similar time in a very interesting path.

VM: Yeah, I think regulations and as you said, battered and bruised. Good analogy for sure. There’s another similarity that both industries share, which has a really important component, which is payments. So could you tell us why having a good payment system for a crypto exchange and even an iGaming site is very important?

JH: To open up why crypto payments are important and it fits right into why iGaming needs it is we’re still getting traditional industries over the stigma of these industries and it’s unfortunate that they exist as we talked about, but they do. Whether it’s just the ingrained history and who’s run the government or whatever it may have been in the past, but we see that changing. So what crypto does and why we built a crypto-specific payment product, that’s growing immensely right now, is because we eliminate that. There are no more chargebacks, there are no more limits. You’re not paying 8 to 25%to use your credit card to do so. You’re playing within the limits that you have and you’re not taking credit to do this. On the iGaming side of things, they reduce their amount of risk on the other side as well and their costs that they can pass back to their players in the way of bonuses or other things to go and do that. So it’s a very vital aspect.

VM: For sure. Another similarity is that having a smooth pay-in and pay-out process is really important for both industries. So can you maybe tell us what you look for in a payment provider and how this impacts the user experience?

JH: Well, I think you mentioned it’s like a frictionless environment that makes it easy to understand is really what’s going on. And this comes back to why we created Coinsmart and I talked about earlier is what are the least amount of clicks to get done, what it is that we’re looking for. So if I’m a player and I’m coming in, I want to send in $1,000. I don’t want to go to the site, asked to do that, get sent to another site to do it, then I get an email to verify it and then it goes to the bank. I have to go through all the banking hurdles to do it and then it actually ends up there 30 minutes to three days later. That’s just tough. The fact that you can come in and use crypto and say you choose your amount. We put up a QR code, you scan the QR code, you press send and you see the money instantly hitting on the other side. You know it’s there, it’s been verified and now the experience has been so smooth and it’s the same in reverse. I want to withdraw, here’s my address, press the button, we tell you it’s processing, has been processed and now you see it on the other side. So just eliminating all the guessing and the worry and that’s a big thing in any industry, but specifically in crypto and in gaming is where is my money, my capital? I need to know where it is at all time because I’m worried about it. And we can eliminate that for them by using blockchain to show all those pieces.

VM: Going to maybe the regulation aspect of things. Do you think the increase in regulation and regulatory oversight of both crypto and iGaming markets will increase the collaboration between the two industries? Because right now, maybe not in North America but maybe in European countries, you see crypto casinos on the rise. So do you see if there’s more regulation passed that these two will somehow team up together?

JH: I think so, and that’s something that I will continue to fight for so I can say I hope so and I think we will get there over time. Not a fight it’s more of how we can help regulators understand, we have to teach them. These regulators come from traditional markets which are very complex and now they have a completely new market that’s even more novel for them to come in and how do they fit that into current framework. So they don’t have an easy job. I’m not saying they’re moving fast enough, in my opinion, but with collaboration with the industry players on both sides crypto specific, iGaming specific and coming together, I think we can put in place the knowledge they need to make the right decisions to protect, ultimately, the Canadian customer and consumer, which is what we’re all trying to do here. And while regulation does get cumbersome and it does stop innovation, there’s no question about it, it also does protect and I think that’s something that needs to be noted the fact is that we see all this craziness happening right now it’s called FTX in the crypto market. That’s because regulation didn’t exist for them. They played regulatory arbitrage, moving into places where they didn’t have to follow the letter of the law like we have to do here in Canada. So they’re offering innovative products that were great, but without regulatory oversight and that’s what got them ultimately into huge amounts of trouble. So the fact that the regulators told me I can’t or I can’t right now, I’ll say, while disappointing and wasn’t just an okay but a fight back to them, they did save other people who may have been doing some not so savory items or not doing things in a risk-averse way from getting into trouble here in Canada. So they did do what they’re supposed to do. I think they need some recognition for that. So I play both sides of the fence unfortunately, while in this decentralized world and why I’m in crypto and believe in the ethos of it, I also understand why we need to protect ourselves and all those around us from mistakes that can happen or fraud or all those things. So I’m on both sides and maybe.

VM: Continuing on that thought, what do you think is the future of crypto? Maybe taking into account what is happening right now and maybe what your predictions are for both industries, crypto and iGaming?

JH: Yeah, I think that we’re going to have a period of time right now where it’s a real build phase. We’re building better products that are more battle-tested before we’re just going to mass market with them across the board. I think regulators are going to be enforcing that. We see MiCA happening in Europe, which is an overarching platform for all European nations right now. They’re spread out a little bit without passport across all of them. So really unifying a really great regime that makes sense, but also allows others to prosper. So companies like ours and others iGaming companies to prosper within those regulatory frameworks is what we’ll continue to see moving forward. It won’t get less than now and it’s going to be a lot more. It’s how hard, it’s just not how hard, but how much we collaborate with all those places. And for us, we’re a multinational company, so we work with the regulators in Canada, we work with regulators in the U.S., we work with regulators in Europe. And what we can do there is also help in our own little way. And hopefully it’s a bigger way than I’m saying here, and I’m sure it is, that we can bring some of what’s really working in each of all those places and help educate the others so that we have a more unified, worldwide way of doing this that at the end of the day, offers customers what they want, but also in a safe manner.

VM: For sure. And maybe my last question has to be, and I’d love to know, besides from enjoying your holidays, what is next for you and the Coinsmart team?

JH: Well, we’re really busy. We’re focused on a couple of different parts of our business and a lot has to do around payment. So an actual physical card with credit, with the ability to use your crypto balances, which is interesting, instead of just paying it off with crypto. So a novel product that we’re doing there. Our payments product that we’re integrating to emerging companies, into iGaming, into large-scale e-commerce platforms and websites out. There is a big piece for us. And really what we’re trying to do is diversify from being just an exchange that offer a spot services and OTC desk that gets fluctuated by market conditions to really even that out with a whole breadth of products that people need. Because I think what’s next in crypto for taking it to the next level and for the longevity of it is how we take this to the mass market and use it on a given day, not only speculate with it for fast profit. So I really believe that that’s where we’re going and that’s kind of the North Star that I’m taking here at Coinsmart to follow along with that and ensure that we’re setup for the long haul.

VM: For sure. And I really want to thank you, Justin, for joining us today and providing expertise. It’s always good to hear it directly from the expert, whether it’s in crypto or iGaming. It was wonderful to speak with you. I hope whoever listens to this podcast can take a lot of information and understand what the trends and what the topics are within crypto and iGaming and what Justin has so nicely explained for us. So thank you so much, Justin. Happy holidays. Hope you have a wonderful holiday season. And thank you so much.

JH: Varad thank you very much for having me, I appreciate it. Happy to come back whenever and I wish you some great holidays as well. Take care.

VM: Thank you so much. Whether it is the growing interest amongst consumers, gaming with cryptocurrencies, or the change in regulations, there are a lot of similarities between the iGaming and crypto industries. I want to thank our guest, Justin Hartzman, the CEO of Coinsmart, for joining us today and providing his expertise. If you have any questions for us or Justin, then please do comment them down below. Don’t forget to like, share and subscribe to our YouTube channel. And as always, thank you so much for tuning in to The iGaming Show presented by Paramount Commerce. I’m your host, Varad Mehta. And until next time, keep gaming.