Online Gambling in Gibraltar - Industry Growth and Potential Challenges

Author: Matthew Haynes

As we discussed in Part 1 of Gibraltar Online Gambling, the Rock surprised a lot of operators with its quick rise to success. We will continue right where we left off.

Following the Brexit negotiations, which saw bet365 become vulnerable to the immediate short-term effects, it led to a scramble for top talent, with many firms holding recruitment fairs in Gibraltar.

On the topic, Gibraltar Betting & Gaming Association (GBGA) representative Paul Foster explained: “There are a lot of vacancies because Gibraltar has been suffering, particularly since Brexit negotiations began, in obtaining talent, and it has left open a number of job opportunities. Without a shadow of a doubt, the market will easily absorb every single person wanting to stay.”

Albert Isola, Minister for Business and responsible for Gaming, also insisted: “Gibraltar remains the best jurisdiction in the world from which to do well-regulated, reputable online gaming business.”

Meanwhile, in the two weeks following bet365’s move to Malta, we saw Gamesys - the UK-based omnichannel online gambling operator and games developer formed in 2001, establish a new UK sports betting site, Virgin Bet.

Gibraltar’s online gambling firms employ in excess of 3,800 people (the largest industry on the Rock, after local government) and, in total, contribute around 25% to the local economy. Minister Isola added: “The sector continues to make a very significant contribution to the economy in terms of corporation tax, PAYE, and gambling charges and fees.”

Despite the swift exit of some employees, there was still a significant amount of confidence in the online gambling industry in Gibraltar, with many investment opportunities appearing to be attractive.

“There continues to be a lot of consolidation in this industry”, Partner specializing in iGaming at Hassans law firm, Peter Montegriffo, noted: “I have evidence of significant private venture capital funds looking to invest in existing gaming operations in Gibraltar and elsewhere; there is still a keen appetite for growth in this area and to chase opportunities as they open up.”

Gibraltar's Focus on Collaboration and Commercial Understanding

At a time when a certain amount of compliance was being introduced in the iGaming industry, there appeared to be no rush to push this through in Gibraltar, instead allowing almost for a natural integration.

A spokesperson from the Gibraltar Gambling Commission (GGC) maintained: “Gibraltar, essentially, is a compliance-based regime, and we work on the basis of the lowest form of intervention to achieve the objective, which means I don’t want to rush to enforce action – though I couldn’t rule it out.”

Through structured site visits to operators, Gibraltar Gambling Commissioner Andrew Lyman is discussing standards and identifies areas where improvement is needed. “For example, companies have been very focused on the UK, but international business is also being done from here, not just within the EU, and I need to ensure that similar standards are applied across the entire business.”

Meanwhile, GBGA’s Foster commented: “The current regime is a very blunt instrument, and we don’t like it as an industry. We believe there’s no point in having rules if nothing happens when they are broken, and if we want to build a better regulatory framework, then we need reasonable and proportionate enforcement.”

Furthermore, Andrea Lazenby, Lottoland’s compliance director, suggested: “In the last year, there has been a sea change – a new appetite to collaborate and discuss the agenda for future action in relation to RG. Customers are savvier today and are asking what we are doing.”

Despite this, Sarah Hanratty, deputy chief executive of Senet, an independent RG standards UK industry body, insisted: “If there is collaboration, there needs to be tangible change. From my experience with the alcohol industry, collaboration needs to be done quickly; it will come about only when industry chief executives meet to give the subject focus.”

As a result, Ian Ince, Playtech’s head of regulation and compliance, suggested: “Regulators also need to collaborate more on standards required – some have a less generous approach to the industry. Media and public agencies are prompting regulators to take action that is not well-researched and with a knee-jerk reaction. The risk is that regulators are more interested in what the Guardian or Daily Mail newspapers are saying, rather than listen to the industry about what really is happening.”

One source who chose not to be identified claimed: “It’s very strict in the UK in terms of investigations and not working with the industry, whereas in Gibraltar, it’s more a case of working with the industry to find solutions.”

While pointing to a similarity of regulatory approach in the UK and Gibraltar, Lyman (who was involved in the establishment of the United Kingdom Gambling Commission (UKGC)) conceded: “The UKGC works in a difficult political and media environment, as I have found also with other European regulators, and still has been effective in raising regulatory standards.

There is however, collaboration based on commercial understanding between the Gibraltar regulator and licensees on compliance and policy”, Lyman suggested: “The UK GC will continue to take its approach, but that will not stop me being collaborative in Gibraltar.”

Current Online Gambling Status of the Rock

Despite all of the events of the last few years, Gibraltar’s online gambling industry has shown tough mettle, not too dissimilar in character to the Rock it was built on. Companies are still reporting encouraging growth.

Lyman reflected on how Gibraltar has changed and survived over the last few years, explaining: “This will be a UK/EU Treaty, but nothing can be agreed without the government of Gibraltar being at the heart of negotiations and agreeing on the details, and its parliament legislating for it.”

He continued: “The ‘win-win’ is the continued shared prosperity between Gibraltar and the ‘campo’ in which some 15,000 workers live in Spain but work in Gibraltar. Their ranks are swelled by gambling and financial services industry workers. Some 10,000 of these are Spanish cross-frontier workers.

Gibraltar's Role in Mergers and Acquisitions

Over the last couple of decades, the online gambling industry as a whole has been affected by merger and acquisition activity, though Gibraltar was, for many years, considered to be right at the heart of this.

Especially when considering that GVC Holdings (now Entain), was involved in a series of deals that sent numerous shockwaves through the industry.

Following a merger between Coral and Ladbrokes in 2016, GVC Holdings then acquired both one year later for £4 billion - the largest online gambling deal at the time.

GVC Holdings CEO Kenneth Alexander revealed at the time: “The creation of one of the world’s largest listed sports betting companies, combining a portfolio of established brands, proven technology and leading market positions in multiple geographies, is a truly exciting prospect.

It was a move that, for all intents and purposes, made sense for Entain at the time - it already had over 20 brands that were based in Gibraltar, including bwin.

Meanwhile, Lyman explained that M&A activity would likely continue to have a major effect on the online gambling industry in Gibraltar: “To be honest, M&A activity is more likely to have an impact on the structure of the Gibraltar gambling industry than the repercussions of Brexit. The government of Gibraltar has demonstrated how it works constructively with business during the COVID-19 crisis”, he explained.

Is the High Interest in the US Market a Threat for the Rock?

Over the last couple of years, we have seen the US emerge as a major contender to take the crown as the largest online gambling market in the world, with numerous states passing legislation as a way to try and generate income for them.

This has effectively made the rest of the industry sit up and take notice, with three major US-based operators, Flutter Entertainment-owned FanDuel, DraftKings, and also BetMGM, with the latter ironically a joint-venture between Gibraltar-based Entain and MGM Resorts International, starting to challenge the ‘status quo’.

The momentum that the US online gambling market is experiencing illustrates the potential the US has, though many of Europe’s iGaming firms still have strongholds in Gibraltar. Indeed, numerous of these have started to make inroads in the US, partnering with local land-based casinos to facilitate this.

To gain a share of the wider US market is certainly going to be a challenge for any European-based operator. However, an entity such as Entain may be able to leverage three or four of its brands to help take market share away from US-based operators.

Certainly, their partial ownership of BetMGM helps the group ensure its profit margins stay high, though solely relying on this brand in the US market could become counter-productive, especially with FanDuel on the rise.

Interestingly, speaking in 2013, Gibraltar’s chief minister, Fabian Picardo spoke about the potential of the US market, while on a trip to Washington, predicting: “Gibraltar is the largest and most successful in the provision of online gaming jurisdiction in the world.

Online gaming is a burgeoning part of e-commerce and Gibraltar is at the forefront of that. We believe that Gibraltar’s in pole position to demonstrate to each of the states of the US that we have been respectful of its laws and that this demonstrates how regulated the industry is in Gibraltar”, Picardo concluded.

The conduct of Gibraltar-based online gambling companies in the US so far has been exemplary, respecting licensing laws in each state, in addition to marketing and advertising restrictions.

From humble beginnings in the late nineties, Gibraltar has effectively undergone a transformation, with Victor Chandler almost single-handedly responsible for motivating an upward surge in the jurisdiction’s fortunes. Not just introducing the start of the online gambling industry but sparking the growth of others to accommodate them.

To this day, Gibraltar remains an attraction for online gambling companies, in addition to employees from far and wide, with many operators now requiring personnel who can speak many different languages. And with all that being said, we can conclude that Gibraltar is still an online gambling stronghold.