The impact of brexit on betting

Brexit is reality. Time will tell whether the British made a good choice by ‘taking back control’. How the new political arena plays out for the gambling industry remains to be seen, but fact is that the world of regulations and licensing as we know it is about to shake up. Britain is the biggest gambling market in Europe, but many British gambling companies have offshore assets in Europe as well. Especially the importance of Malta for the UK economy can not be overstated. With an industry that appeals to almost half of the adult population in the United Kingdom and millions spending their pounds on European casinos and sports brands, a shift is inevitable. A shift in tax, in regulation, in access for players; enough to talk about!

Regulations and licensing

Too big to fail. Many regard the industry as thus important that they do not expect major implications. As this might be for the first period, legal changes might indirectly impact the gambling industry nevertheless. Unlike many industries, gambling is not governed centrally from Brussels, which suggests a status quo for most part. Although when European casinos require a new license (adjustment) from the UK Gambling Commission, post-Brexit gamblers might experience (temporarily) trouble accessing or withdrawing with their favourite casino. The patchwork of laws applying to all different facets of gambling became more complicated with the start of this new year, it is too early to see how much more complicated. The relationship between the UKGC and Malta and Gibraltar will appear crucial for a smooth transition. Once companies decide to move to another jurisdiction, Brexit can turn out to be a real game changer. And there is reason to believe they will:

The Gibraltar situation

The island of Gibraltar is a rock of controversy between Great Britain and Spain for quite some time. Brexit has not made things any more simple. While the population (over 98%) wants to remain a part of Great Britain, over 60% from the employees working on the Island in the gambling industry are believed to originate from Spain and travel daily. Now that the UK is no longer part of the EU, will all these people still be able to cross the border between Spain and Gibraltar so easily? The Spanish Government can apply pressure by making daily routine a bureaucratic nightmare.

After 2014, many of the tax privileges of companies in Gibraltar have been cut back. Since the need for a UKGC license, the companies had to adapt to the UK tax legislation to remain open. Still, thus far companies have preferred remaining on the island. The new situation of ‘closed’ borders might be the tipping point for them to look elsewhere; but that remains speculation for now.

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The current state of British Gambling

The British will enter this new phase with confidence, as the industry shows no signs of fatigue with an annual €18 billion revenue. Not only does the EU want to turn their back on these profitable companies, they will also not want to lose sight of the Premier League and tournaments like Wimbledon. The reality is that Britain is a market leader in the gambling industry and a driving force in innovation. You could say that in this case, Europe needs Britain more than the other way around. Although the potential number of customers in Europe is ever expanding and companies will like to see Brexit occurring as soft as possible. This seems likely as the EU has never shown much interest in the tax regulations of the individual member states.

They intervene when gambling becomes a social issue, but there is no reason to think Brexit will change anything about the status quo. As a matter of fact, the UK already had the strictest regulations since the Gambling Act of 2014 while the EU has no central policy. In other words: Brexit will not change the current state of affairs, but a decision to create a EU centralized policy in the future might.

Leaving the Single Market… And finding ways to re-enter

The biggest gain from the European Union has been the single market. Free movement of goods, services and people has benefits even if you operate solely online. Many bookmakers based in the UK (and its jurisdictions such as Gibraltar) have been able to utilize the single market to sell their product in EU countries without any additional tariffs, likewise EU based companies can operate in the UK (often from Gibraltar) with no additional costs beyond standard taxes that apply to all operators, wherever they are based in the EU. Especially hiring talent will be more challenging. Could this be an incentive for companies to relocate from Gibraltar to Malta? It is not unlikely to see Malta become even more the gambling hub than it already is. The shared history (Malta being a former English colony), makes it also culturally and linguistically attractive. Bet365 has already relocated a part of their business to Malta, while retaining their UK and Gibraltar operations.

Euro chasing Pounds

Before the Brexit referendum, the pound equaled roughly 1,32 Euros. At the time of writing, a pound will only get you 1.08 Euros. In an industry that exchanges billions, this adds up. Players will take the exchange rate into consideration if they are presented with one, as opposed to simply playing with Euros. Brand loyalty will be tested if companies fail to keep their players out of the disadvantages of the new bureaucracy.

Though of little importance on their own, there are many small adjustments that will influence how the market will react and evolve, from poker tournaments hosted in London (free movement of people) to playing online (new terms and conditions). All these small adjustments add up, but the bigger picture will remain the same. That is, for now.