What is a poker ICO?

Several potential CryptoCurrency based poker rooms are launching Initial Coin Offerings, Barry Carter explains what these are.

Ethereum
Lots of ICOs use the Ethereum Blockchain

An ICO is an alternative to an Initial Public Offering (IPO). Both are designed to raise money for a new venture, however there are a lot of differences, most notably around regulation. IPOs are heavily regulated, there are a lot of legal hoops to jump through and verification checks. In an IPO you also acquire stock in a company, which you hope will increase in value and may pay dividends.

By contrast, an ICO allows you to purchase a new currency early. In the case of a new CyptoCurrency it would be a new type of coin itself, and in the case of a new poker room it would likely be the new CryptoCurrency you play poker with. The hope with an ICO is that the coin, not the company, increases in value so it can be traded for a profit.

An ICO is not regulated, which makes it a much easier and quicker way for the company behind it to raise funds. You can even invest in some of them anonymously. Of course the concern here is that because it is not regulated, it may not actually be legal to invest in it in your country, and also means it is more vulnerable to scammers, most of whom are talking up the price to ‘pump and dump’ the money. 

Invest in the coin, not the company

Bitcoin Crash
Unregulated investments carry more risks

An ICO is also not an agreement of ownership rights, unlike an IPO where your initial investment would get you a stake in the company, as well as the potential for dividends or to cast a vote on boardroom decisions. Quite simply with an ICO, as an investor, you are hoping that the currency goes up in value (Like with standard CryptoCurrency) and/or you are such a fan of the potential product you put your money in early to make it more likely it will come to fruition (Like a Kickstarter campaign).

In most cases of poker ICOs the selling point is that the room will accept a CryptoCurrency and/or have blockchain based security. The coin you are purchasing is an in-house currency you can play poker with (Like a VPP) and in some cases uses an existing blockchain to power it (In many cases, using the robust Ethereum smart contracts).

If you are thinking of investing in an ICO it should be because you like the potential product, think it would become profitable and want to see it come to market. The key things to remember is that you do not therefore become a shareholder and you are risking your money in a regulatory grey area. While all types of investing are a risk, there are obviously more things that can go wrong when the thing you are investing in does not have to go through the same rigorous vetting process that something like a traditional IPO would have to. It is an exciting time for poker and the potential for CryptoCurrency, but as with anything as disruptive as this, the risks are high.

What do you think of a Crypto-based online poker room? Let us know in then comments:

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