Brexit, igaming and the Gibraltar question

What will happen to UK betting and gaming operators if the UK votes to leaves the EU on 23 June? Probably nothing, writes Christina Thakor-Rankin, that is unless you happen to be in possession of a licence issued in one particular jurisdiction in the world.

Many residents in the UK recently took delivery of a leaflet published and distributed by Her Majesty’s Government, which gives the case for “Why the Government believes that voting to remain in the European Union is the best decision for the UK”.

Whilst the document gives some sound reasons for why citizens should vote to remain in the Union, there is a question as to how many of these reasons actually hold any sway with, or remain relevant to, today’s betting and gaming sector.

Reasons to remain?
The first argument in the ‘stay’ camp is a stronger economy. Europe is by far the UK’s biggest trading partner, with the leaflet citing a number of divergent industry sectors from aerospace to transport, and how being able to export goods and services creates and sustains jobs in the UK.

This is all good stuff, unless of course, you happen to be in the betting and gaming sector. In this sector, far from promoting the free movement of goods and services, European member states have unilaterally taken a position diametrically opposed to the ethos of a free market and closed their borders to betting and gaming services and goods from outside of their jurisdictions.

The European position on betting and gambling currently means that for the vast majority of operators, exporting goods and services into the heartlands of Europe directly from the UK is no longer an option. Those who do run the risk of financial penalties and prosecutions for contravening member state law.

The second argument is one of improving lives. Being in the European Union has helped bring down the cost of living and broken down barriers. Whilst adopting European practices may have had a positive influence in many areas of life, for the UK betting and gaming sector, the European example has actually had a negative impact.

Many still feel that it was Italy and France going down the road of unilateral regulation that prompted the Gambling Commission to do away with the White List and bring in the point-of-consumption tax – thereby increasing the cost for those trying to make a living from betting and gaming in the UK.

While the unprecedented level of freedom of movement and removal of jurisdictional barriers brought about by the internet and the world of .com has allowed the industry to flourish and become the global phenomenon it is today, the legislators have finally caught up and the introduction of geo-fenced regulation means that the borders are back.

The way in which regulation has evolved and spread across the European landscape over the last decade means that membership of the European Union is, for the greater part, now an irrelevancy for many operators in the UK and indeed across Europe.

Leave it
The leaflet goes on to ask what would happen ‘if we leave?’ For those UK betting and gambling operators with land-based operations only – the answer is most probably nothing. For those operators with a remote licence issued in, or by almost any regulatory jurisdiction in the world, bar one – again, the answer is probably nothing.

Based on the European landscape as it is today, it is difficult to see how the outcome of the referendum and the UK staying or leaving is likely to have any significant impact on UK operators.

Regulated jurisdictions will remain regulated; unregulated jurisdictions will remain unregulated until they regulate, at which time they are most likely to adopt the same geo-fenced position as their neighbours, and become just another regulated EU membership- agnostic territory.

And actually, even if the UK did vote to leave the European Union, many experts predict that nothing would actually change for a while – two years at the very least, which is how long it is estimated it would take to negotiate Britain’s new relationship. In a sector where things can change very, very quickly, two years is quite a long time.

Even then, the impact is likely to be minimal. Those UK operators who employ European staff can take comfort from the fact that not even UKIP is advocating repatriation, and the most likely outcome will be an indefinite leave to remain.

Whilst those operators who look forward to an annual cash boost from those who loyally, blindly and arguably tone-deafly support the UK and the tradition of ‘null points’ can take comfort from the fact that Eurovision is a cultural and geographical concept – not political.

The fact is that for the majority of UK betting and gaming operators, the 24 June 2016 is likely to be just another day. The only possible exception to this is those who have a footprint or presence in Gibraltar. For these operators, June 24 could turn out to be a very different day altogether.

In the cross-hairs
Gibraltar may be one of the jewels in the British dependencies crown, but for Spain it remains very much a thorn in its side. For many, the peace, stability, and subsequent success enjoyed by Gibraltar since the mid-1980s has been very much as a result of the European Union, and the fact that both the UK and Spain are fully signed-up members.

Despite Spain’s ongoing attempts to assert its claims to ‘the Rock’, invading the territory of another member state would clearly be going against the grain of why the European Union was established in the first place, after yet another pan-Europe war.

Any overtly aggressive move on the part of Spain could only cause a rift that the ‘European constitution’, based as it is on the concept of everyone politely getting along together, would be incapable of addressing, and thereby setting a precedent for other disputes to be settled by minor invasions and annexations. This would never do.

The fact that Spain has not been able to do anything overtly aggressive does not however mean that Spain has accepted the situation. If anything, events over the last few years, and most recently in 2013, when talk of an EU referendum in the UK started gaining momentum, would strongly suggest otherwise.

The suggestion of a €50 border crossing fee, a tax investigation into Gibraltarians owing property in Spain, and most tellingly, a suggestion that online gambling companies would need to locate servers in Spain, thereby bringing them under Spanish tax laws, all strongly suggest that the Spanish authorities have not just Gibraltar, but Gibraltar’s online gambling sector, specifically in their sights.

For a country still struggling to get its economy back on track, Gibraltar, if the suggestions of 2013 are anything to go by, allows the Spanish authorities a very easy means of generating revenue and plugging a deficit, fast.

Arguably, the only thing preventing Spain from doing anything other than thinking and talking about it is the UK’s membership of the European Union. If the UK decided it no longer wanted to be a member, that would surely, almost certainly, change.

This was made abundantly clear by Spain’s acting Foreign Minister, Jose Manuel García-Margallo, who in an interview in March of this year said that “we would be talking about Gibraltar the very next day”, if Britain votes to leave.

For those who have a presence in Gibraltar, Garcia-Margallo’s words must surely be a cause for concern. These concerns can only grow as the hype and rhetoric increases, and especially so if the gap between those voting to stay or leave narrows.

What do these operators do? Do they start making contingency plans now in anticipation of what the outcome of the vote might be and what Spain might do, or do they sit it out and see what happens in June?

Whilst for many it probably will be just another day, for those with a vested interest on the rock, 24 June might just turn out to be Gibraltar gaming’s darkest hour.