Gibraltar: Durability and Adaptability are the Key
Lyman: After nearly five years and hopefully for more time to come, Gibraltar is my adopted home. If I have learnt anything in that time, it is how durable and adaptable Gibraltar is in its approach to reinventing its economy and providing for the Gibraltarian people.
There have been many occasions when the doomsayers have written off the jurisdiction. From the historic closure of the frontier, through the closure of the naval dockyard to the apparent “end of the gambling industry” in Gibraltar, when the UK imposed point of consumption tax (Gibraltar companies pay c£450m/$563.8m in UK gambling taxes) and most recently Brexit.
It took vision to bring the online gambling sector to Gibraltar, but times change and with it the nature of the gambling industry. Brexit has seen a migration of EU business away from the jurisdiction and many operators are focused on North America, but Gibraltar sustains itself as a Tier 1 gambling hub for UK business and is building as a “rest-of-the-world” location of choice. There is continued interest in the jurisdiction, based on its reputation, from operators who are considering basing the hub of their multi-jurisdictional business in Gibraltar. There is appetite to licencs new and well-invested gambling businesses in Gibraltar that face into emerging and expanding markets.
The detractors would characterise Gibraltar as a less regulated “offshore jurisdiction,” but for UK facing firms there is dual regulation by both the Gibraltar Gambling Division and the GB Gambling Commission. In respect of other jurisdictions, Gibraltar expects its operators to maintain high standards in areas of social responsibility and anti-money laundering. Furthermore, the jurisdiction is committed to tax transparency and information sharing. Transparency and inter-jurisdictional cooperation is essential for the standing of Gibraltar and its ability to attract inwards investment. Gibraltar has also evidenced its ability to properly regulate distributed ledger technology for those entering the crypto space wanting a credible jurisdiction from which to conduct such business. There is strong cooperation between the Financial Services Commission and the gambling regulator, which delivers a solution-led approach to business propositions which crossover into both regulatory areas.
At the time of writing, a new draft gambling bill in the form of a command paper has been released to stakeholders for consultation. It is an enabling and modernising Act which will both attract new business to Gibraltar while ensuring that the regulatory regime meets best practice standards in social responsibility and anti-money laundering.
The key policy driver is to ensure that our multi-jurisdictional B2C operators want to remain here and others want to come here. Licensing will still hinge on having proportionate local substance but, while the Gibraltar proposition has always been framed around wider economic contribution, it also recognises the less centralised nature of the supply chain and the fact that some of that supply chain may have to be extra territorial.
The Bill also recognises the presence of wider gambling services businesses in Gibraltar and proposes the licensing of third-party marketing and affiliate marketing, as well as other gambling services. This will not extend to intra group services, consultancy per se or the provision of regulatory technology (unless processing customer data and compliance process is outsourced).
The new Bill also proposes a degree of greater Executive accountability through personal licensing and the licensing of Holding Companies that support gambling operations in other jurisdictions.
Consultation will be taking place in the three months to the end of August 2022, with the Bill expected to become law later in the year, or very early in 2023.
It is likely that as Gibraltar engages in the last two rounds of framework negotiations on a UK/EU Treaty concerning free movement of people and goods across the border with Spain, that the outcome will be favourable for both Gibraltar and the surrounding Spanish hinterland. The economic arguments for this, on both sides, are very strong.
Whatever the required solutions to dealing with Gibraltar leaving the EU, I have been here long enough to understand that even if there would be a no negotiated outcome, Gibraltar will still sustain as a gambling hub; and the industry will still make a valuable contribution to the economy. While “nothing is agreed until it is all agreed” there is cause for optimism.
A negotiated outcome to the discussions would not only mean Gibraltar simply enduring, but it would herald an exciting new era of shared prosperity and opportunity for Gibraltar’s gambling industry in a wider economic context.
Alderney: Diversifying operations
The online sector
Regarding regulations in the online gaming sector, businesses are craving consistency, reliability and a safe pair of hands. They want to be in line with industry best practice and for regulators to provide a steady steer while they navigate through these turbulent times. There have been many regulatory disruptions to the sector in recent times.
Global-facing businesses need solid regulation supporting them, not just as a nice-to-have, but for the knock-on-effect that poor regulatory frameworks can have on a businesses’ reputation, banking and payment processing services, and also for leverage and funding purposes. We are seeing the effects in real time on global businesses that are curtailed by a jurisdictions’ international reputation. As a result, we are seeing the trend of household-name global-facing listed entities bolstering their regulatory footprint by being licensed through us at Alderney.
While M&A and increased consolidation is still highly relevant, and media and technology partnerships continue to fuel business expansion, it’s the logistical and operational effects of the pandemic and global political environment that are having an impact on regulatory decisions for industry. Assessing concentration risk, balancing global teams, regulatory issues in certain jurisdictions and responding to new market opportunities are all affecting the licensing requirements of the businesses we deal with.
With the opening up of Ontario's market, we’ve seen fresh opportunities presented for Alderney licensees who can now apply for the Canadian licence through the Alderney Gambling Control Commission (AGCC)-licensed entity.
Safety in a pre-regulated market
For AGCC-licensed businesses entering the pre-regulated space, being regulated by a respected and first-tier regulator offers many advantages. For many, holding a licence is about ensuring that the business is demonstrating it is operating in line with global best practice, especially for global entities operating in multiple markets. Additionally, being licensed offers partnerships with other AGCC-licensed entities scope for M&A activity and access to payments and banking solutions, which simply aren’t available for unlicensed businesses or those licensed by problem-posing jurisdictions. Holding a consciously global-facing licence with the AGCC to enter the pre-regulated space provides an experienced hand to help navigate entry to these markets, under a trusted and well-respected regulatory framework.
Concentration risk vs diversification
Pre-Covid-19, larger businesses followed the trend towards creating a ‘global home’ - basing the majority of their operations in one jurisdiction. This worked for a while, with some mainstream jurisdictions providing a home for large amounts of iGaming companies.
However, as we have seen in recent years, putting all eggs in one basket has backfired for many.Political and regulatory instability within the home jurisdiction has made it harder for organisations to undertake the most essential business functions, such as obtaining banking solutions and raising finance.
It’s less a case of finding the right amount of diversification, and more about maximising the opportunities to thrive in the new post-Covid world. The physical base for global iGaming firms used to be largely tax driven, but with changes to the approach of the OECD regarding international tax leveling the playing field, businesses are no longer limited in scope. With more people now choosing to work from home, there’s a real opportunity to take advantage of a truly global pool of talent, without requiring staff to relocate. The opportunity for remote teams enables businesses to spread the concentration risk and provides flexibility of location, opening new licensing opportunities that support and enable growth. Well-established, politically stable jurisdiction, where the iGaming regulatory regime is globally recognised, are the natural choice for such businesses.
Spanners in the works: Brexit, Covid & Politics
The industry has been experiencing exponential growth and, as a result, ongoing disruption and evolution for the past decade. Adding Covid, Brexit and numerous political and regulatory reforms to the mix has led to a fundamental transformation in the way business is done, not just for operators and suppliers, but across the entire iGaming ecosystem, from banks and payment processors to advisors and conference organisers. Adapting brings a level of risk, of course, but it could also be argued that resisting change is equally risky.
Embracing so much change, in both the internal and external business environment, also necessitates a certain requirement for stability and consistency in areas where it can be sought. It’s Alderney’s business-focused, advisor-led, professional approach to licensing which has attracted global PLCs to choose the jurisdiction in recent years. In addition to the expertise at the AGCC, Alderney’s sister island of Guernsey is a global leader in structuring listed entities, so we know our licensees are in safe hands.
We’ve already seen so many businesses experience the positive knock-on effect from taking the opportunity to embrace change over recent times, and we’re looking forward to welcoming even more new global businesses in the months ahead.