Will Brexit Reshape the iGaming Industry As We Know It?

In iGaming by on September 15, 2016

The Brexit was a real shock, not only for the residents of the UK, but for Europe in general. Businesses, organizations, individuals, basically everyone were caught off guard by this ludicrous step the former prime minister James Cameron decided to make. According to the exit terms the effects will take a more definite shape within 2 years following the referendum, which took place on the 23rd of June.

Our prime concern is the igaming market and what implications will Brexit have over it. At this very moment, nothing is for certain. It can go either way. UK’s gaming market was valued at approximately £4bn per annum. This number will change for sure.

In order to stay on course, we’re going to take a look at the three online gaming havens in Europe and what will happen to them, including the UK, Malta and Gibraltar. Furthermore, we’re also going to take a look at the Isle of Man and how it can become the next center of online gaming.

United Kingdom – A Perfect Online Gaming Market Gone Bad

Besides having one of the most reputable igaming regulators, the UK Gambling Commission, the UK is one of the biggest gaming markets in the world. The British are fond of games, especially casino games. One thing is for certain, the casinos that weren’t licensed by the UK Gambling Commission still won’t be able to accept wagers from British players. Even before Brexit, all online casinos had to hold a UK license if they wanted to service UK players.

On the other hand, what will happen with online casinos that hold a UK license, but don’t have any other EU license? It goes both ways. The tables have turned for the Britons. In other words, they might get a taste of their own medicine. This is from the standpoint of view of both the casinos and the players. Sadly, EU residents might also not be able to access any UK licensed casinos.

The UK igaming industry is not that much affected by the access to the casinos as it is in regards to taxes, currencies, reporting and accounting. We’ll leave this topic for some other time. In short, operators might move away from the UK and position their headquarters elsewhere. This means loss of jobs, loss of many jobs.

Meanwhile, On the Beautiful Island of Malta

Malta is definitely going to be a priority for UK based operators. The exodus that might happen will end here. The Malta Gaming Authority is responsible for the regulation of the igaming industry on the grounds of Europe. It’s an operator favorite due to the favorable tax regime, access to skilled employees, and most importantly, it enables them to market themselves in the biggest EU markets and a few other outside of Europe.

They can end up as the sole winner out of this mess. It’s going to be a juicy injection of additional revenue for the Maltese government and for the Malta Gaming Authority. The UK based casinos can keep the UK license, but they can move their operations in Malta. This step guarantees their survival, their profitability and security. A lot of businesses will move out of the UK to ensure they will be positioned in a stable market, that won’t make radical legislative changes and they will benefit from favorable tax regimes.

If we take a look beyond logics and apply common sense, it’s easy to come to a conclusion that Brexit could possibly mean a reduction in disposable income among UK players. All operators, including sports betting, casino and poker rooms, that were focused only on the UK market will have to look for profitable customers elsewhere. Key operators like Ladbrokes and Paddy Power might have to start targeting Swedish, Norwegian and German customers if they want to keep up the current profit ratio.

Things get even more interesting if we consider the “bridge” that’s under Britain’s dependency, Gibraltar.

The Former Tax Haven Gibraltar Hangs On A Thread

The UK is a big enough market to function on its own, but what about the tiny Gibraltar? Big sportsbook and casino operators have positioned here since the time the taxes were more favorable than they are now. Regardless, Brexit will make Gibraltar distant from the UK. It will definitely ruin the igaming industry there. All operators will have to move their servers to Spain as the closest EU jurisdiction, but this will mean that the Spanish tax law will apply to them. Furthermore, Spain has a rather limited number of licenses to give. Some will be cut out. Malta will be the only jurisdiction where they can settle down.

Brexit also puts Gibraltar in a rather unenviable position from a political standpoint of view. That said, the Spaniards were always fond of acquiring “the Rock” because of its strategic position. Nevertheless, an invasion is not an option, but an economical and political battle is at hand.

Since the taxes were evened to those in the UK a few years ago, operators don’t have a reason to stay in Gibraltar. Brexit is just the push they need to get out of there, and get out fast. It seems like Spain may become one of the most important igaming jurisdictions in the EU.

Isle of Man – A Wild Card for Online Casino and Sportsbook Operators

Let’s not forget that this little island is a financial center big time companies. There are a couple of operators, but their size is nowhere near to those from Gibraltar. In other words, it’s a viable exit option. The taxes are fine, it puts them close to the UK market. Most importantly, it keeps them far away from the Spanish-Gibraltarian issues.

The EU May Offer an Olive Branch

There were occasions when the government needed the business more than the business needed the government. The igaming market was OK as it was. This turmoil will definitely change the market. However, the governments have to lower their heads and settle this situation as the igaming industry brings taxes.

We can already see the UK and the EU meeting halfway and resolving this situation. Nevertheless, the limbo will last. At least for a some period of time. Maybe operators will reconsider their strategic options and come up with a different solution. Malta is a stable market which makes it a priority to troubled operators. In the meantime, we can only watch from a distance and see what’s going to happen.