(1) Kraken is way more likely to have the money but that's not what I mean by a rigged casino. Arbitrage bots ensure that prices remain in lockstep between the frauds and the more legitimate, so while they may be good for the payouts, the price action remains as rigged as ever. I believe it's this model that Bitfinex relies on when they buy BTC with fake Tether, as they can then move it into legitimate exchanges that arbitrage bots have brought into lockstep and sell for cash.

(2) A larger issue is that not everyone is in America but still require USD as is it is the most liquid exchange pair.

Sounds like what they need is more liquid exchange pairs in global currencies instead of fictitious money.