I keep seeing people say "SatoshiDice can't be involved in laundering coins because every payout transaction is linked to the bet". Yeah, so what? Here's how they could/are launder coins very easily: laundry customer creates two wallets, puts one clean BTC in one wallet and 1,000 dirty BTC in the other. The customer then signs a huge pile of bet transactions from both of these wallets but does not release them into the network; instead they send the transactions to SatoshiDice out-of-band. Since SatoshiDice knows the day's secret, it knows which of these bets are winning bets and which aren't. It then releases into the network some subset of the bets such that the customer's net profit is zero (before fees), but such that all the losing bets come from the dirty wallet and all the winning bets come from the clean wallet. The customer then spends the money out of the clean wallet so SatoshiDice can't use the unreleased transactions. If SatoshiDice isn't doing this already, they ought to. It would be immensely profitable. Almost as profitable as they claim running a betting website is!

You got it all wrong. My proposed laundering protocol does not work that way. Read again my post and try to understand.If the customer sends a big pile of transactions to SatoshiDice,SatoshiDice knows the secret number, and they have the transactions, so they can perform hmac_sha512(secret,txid:out_idx) on these transactions, check the result, and then only release certain transactions into the network.I don't think you understand the difference between sending a transaction to SatoshiDice out-of-band and releasing the transaction into the network.

- snip - It then releases into the network some subset of the bets such that the customer's net profit is zero (before fees), but such that all the losing bets come from the dirty wallet and all the winning bets come from the clean wallet. - snip -

You go to the bank and tell them "here is my deposit of 100000 dollars" and they will say "where did you get it and why you didn't pay taxes?" and you say: "I win it on SatoshiDice". Well, maybe it's true, but maybe this money comes from a legal business (fro example, selling hardware) and you didn't pay the taxes for that business. Then you say you get it from betting. That is money laundry.

Nope, because they select the bets to be released such that the laundry customer's net profit before fees (and the house "take") is exactly zero. That's what you'd expect in the long run from true randomness.There is no bias in the overall win/loss ratios. The only bias is inwallets win and which lose, but you can't detect that, especially if the customer provides multiple clean wallets and multiple dirty wallets.

Or I guess you could launder your coins through us, we do not link payouts to bets satoshidice styleThat definitely would explain the occasional floods of bets we see on 'low payout high winning chance' bets.SatoshiDice doing the big 250 bitcoin bets does make it more attractive to a money launderer but why not just use the blockchain.info service as it would most likely be the cheapest.