For several months now, BREXIT has been one of the most important news on a global scale. In fact, a great number of professional analysts still do not believe that the citizens of the UK would prefer to leave the European Union in spite of the fact that almost 52% of the voters clearly declared that on June 23rd this year.
The UK is actually the first country to leave the European Union, so it has created a precedent. Normally, it would take up to a couple of years for the country to complete all the procedures required in order for this to happen. Also, the country would have to go through a number of both political and economic changes in order to break away from the EU policies. However, until the Government and responsible authorities and institutions make their decisions, the residents of the UK are expected to see many aspects of their everyday life hit by the situation’s influence.
Although poker, and more specifically, the online poker industry, may not be among the issues that have been subjected to the BREXIT political debates, but the UK citizens’ vote could have a massive influence on certain matters. In fact, legislation and regulatory requirements, gaming taxes as well as online poker liquidity could be seriously affected by the country’s decision to leave the European Union. Some market experts even predict that a large number of operators may make a decision to relocate their operations into other countries, no matter if they are members of the EU or not.
Political Impact
As already mentioned above, literally all aspects of UK residents’ lives would probably be changed in case that the country chooses to follow the path of leaving the European Union. However, the BREXIT is also associated with a great number of political changes and grave impact not only on various institutions, but also on parts of the UK.
Over the last few months, Scotland has announced that it could consider the idea of withdrawing from the UK and eventually remaining within the European Union. At the time of the referendum on June 23rd, the Scottish voters in fact chose to stay in the EU, so it is likely for a new referendum to take place in order to let them decide if they are to stay within the UK or leave it.
What is more, the same path could be chosen by North Ireland, too, so it is yet to be seen if an eventual referendum at this part of the country will take place.
Another important issue to be considered is the fate of Gibraltar, which is officially part of the British Overseas Territories. As such, it is under the responsibility and authority of the UK, but still, it has a certain level of independence. At this point, it seems that Gibraltar would like to remain both as a British territory and as part of the European Union, but Spain has showed some interest to negotiate with the territory.
In terms of the changes that would probably happen as a result of the BREXIT, the EU Count of Justice is also threatened. Over the last few years, it has tightened the legal pressure on the members of the EU to make them comply with the treaty provisions of the Union. Some of these regulatory requirements refer to online poker as well. According to the Court of Justice, specific legislation could be created in terms of online poker activities, but the regulation could be considered as legally sustainable under some certain circumstances.
A number of trade restrictions have been imposed under such requirements, although the UK Court of Justice has ordered there must be consumer protection grounds for such restrictions to be allowed. In addition, the countries that leave the UK are most likely to find some difficulties with the implementation of the online gambling regulation. Without any doubt, the BREXIT would certainly influence on the future EU Court of Justice’s decisions.
Poker Liquidity
As a member of the European Union, the UK has always been backing free trade, no matter if it comes to the one carried out within the EU, or overseas.
Currently, a great part of the EU members have demonstrated a strong political will to protect their home industries, which basically means that a free market is allowed only within the borders of the European Union. Even in this case only certain market sectors had been included in the free market policy.
With the UK leaving the EU, the latter is expected to bet even more on the protectionism as a policy to restrain free trade between the countries. This policy of protectionism is also expected to remain in place for literally all markets within the Union, including for the online poker market, which is expected to remain isolated from the rest of the world.
In terms of liquidity, the UK has recently been involved with a series of negotiations with the US state of New Jersey over an agreement to share liquidity. Such an agreement allowing an overseas jurisdictional collaboration between the two counterparts would still involve some regulatory issues, including player ID, geolocation and tax rates, and despite the fact that they are still in the early stages of the negotiations process, such a deal would make a great difference for both parties.
BREXIT Effects on the UKGC
The UK Gabling Commission (UKGC) was established under the Gambling Act of 2005. Its major function is to oversee and bear the responsibility for most form of gambling operations on the territory of the UK, including traditional casino games, slots machines, bingo and arcade games, sports betting and lotteries.
Currently, both land-based and online gambling operations are within the hold of the UKGC, which also has responsibilities in terms of regulation and customer protection, no matter if it comes to online players or the ones who prefer to place their bet in a real casino/betting shop. Considering the fact that online gambling has been becoming more and more popular over the last few years, online gambling operations are also scrutinized by the UKGC.
A major change in the remote gambling laws concerning the inclusion of a 15% point-of-consumption tax was incorporated in the UK gambling legislation in 2014. In addition, operating licenses were required to be obtained by casino and betting operators, while the UKGC was responsible for monitoring, reporting and controlling the companies in the sector.
Up to date, online poker websites which operate under a license issued by the UKGC are allowed to exist in the same international liquidity pool as the rest of the countries worldwide. This basically means that they are provided with access even to the biggest prizes featured by poker tournaments on the Internet.
In addition, UK gambling legislation adds some common sense in the overall gambling regulation of the EU thanks to the work of UKGC. The Commission has insisted on imposing tax levels that would push customers to using regulated poker rooms instead of cheaper overseas alternatives. The Gambling Commission has also put some efforts to allow international poker liquidity and treat the customers fairly.
On the other hand, the model of regulation used by the European Union is more didactic and is based on some principles without clearly defining them and their limits. In addition, the regulatory authorities in the EU are primarily focused on supporting their licensees. As mentioned earlier, the UK gambling regulatory model is considered as the one that brings is some good sense within the EU and with the BREXIT, its influence on the European regulation related to online poker operations as well as its good practices will basically disappear.
BREXIT Effects on Other Regulatory Jurisdictions
General Impact
As a matter of fact, there are several jurisdictions that are currently set under the control of the UK that are expected to be affected by the BREXIT. Probably, the most severe impact of the country’s withdrawal will be felt in regard to the British Overseas Territories, and more specifically on the Isle of Man and Gibraltar.
To date, the UK has 12 overseas territories. Bermuda is also included in these territories and it has is own gambling regulation which, however, is not related to online gambling activities. Currently, there are six jurisdictions that serve as online gambling regulators on the territory of the UK.
First, the UK itself regulates on the online gambling market and casino, gaming, betting and poker activities through the UKGC. Then, it is the Gibraltar Regulatory Authority, which serves on the territory of Gibraltar, as well as the Gambling Supervision Commission in the Isle of Man. In addition, there are three more regulatory jurisdictions which are to be influenced by the BREXIT.
In Alderney, there is the Alderney Gambling Control Commission. The Guernsey Gambling Control Commission is the regulatory authority in Guernsey, while the regulatory functions in Jersey are within the hold of the Jersey Gambling Commission.
Isle of Man
The Isle of Man is popular for being home to some of the largest gaming companies who also hold a license in the UK and operate on a number of other European markets, too. The worst part for the territory is that the customers’ free access to the EU gaming markets may be endangered, or at least until a certain decision about the BREXIT is made by the UK and the European Union.
The combination of free access to other EU markets and low taxes has proved itself to be one of the key reasons why a lot of gaming operators have preferred to locate their headquarters on this British Overseas Territory.
The Isle of Man is probably best known as the home of PokerStars, which operates within the territory of the EU through a license granted by the Malta Gambling Authorities, but it has its headquarters based here. In the light of recent events, PokerStars’ current corporate structure may be retained, but a relocation to other jurisdiction that would offer it free access to the rest of the EU markets is also possible.
Gibraltar
Gibraltar has always been an interesting issue when it comes to gambling regulation and legislation matters. The territory is tightly connected to the UK, but it also hosts a large number of online poker companies. The future of Gibraltar within the borders of the European Union is yet unclear in the light of the future BREXIT, but it would undoubtedly affect the Gibraltar Regulatory Authority and all the companies that run web-based gaming operations on the island.
When the 2005 Gambling Act was deployed, Gibraltar was probably the British Overseas Territory to benefit the most. Over the years, it has become home of more than a dozen companies offering various online gambling operations.
What is important is the fact that Gibraltar is not an individual member of the European Union. The historical background of the place, as well as the fact that it is closely bound to the UK has brought it special treatment. As a British Overseas Territory, Gibraltar has been granted with certain EU membership rights mostly related to the free trade. However, is not subjected to other aspects of EU legislation. It is also excluded of the EU customs union and VAT area. It is also not subjected to the Common Agricultural Policy of the Union.
BREXIT Effects on Poker Taxes
One of the most serious issues that has been argued on in relation to the BREXIT matters has recently been the ones associated with economical situation. The supporters of the BREXIT claim that there will be multiple financial benefits for the UK after the country leaves the European Union. On the other hand, the ones who support the membership in the EU predict disastrous consequences for the country.
The truth is that in case the economic conditions in the UK truly decline after the BREXIT, the political pressure for gambling taxes increase will grow for sure. After the vote on June 23rd, a survey was published by the Organisation for Economic Co-operation and Development (OECD), which showed that the GDP would probably decline by 3%.
The OECD described the economic consequences of the BREXIT with the term “a permanent BREXIT tax” imposed on the UK households. It the data presented in the survey turns out to be true, then gaming taxes are very likely to be boosted in order for them to be used for filling the budget gaps.
BREXIT Effects on UK Gambling Operators
General Impacts
More than a decade ago, a massive withdrawal of gaming operators, including ones that held their online operations on the territory of the UK, was registered after the 2005 Gambling Act was brought into action. A large number of companies chose to leave the country in order to avoid the newly-implemented gambling taxes and moved to other countries and British Overseas Territories which offered them better conditions.
The casino, betting and gaming operators who have left the country were not brought back with the new legislation that came into effect in November 2014. The BREXIT decision could make things even worse, as most online gambling regulations of the European Union have a specific requirement for license applicants, saying that the latter need to be members of the Union or part of the European Economic Area.
bet365
As already mentioned in the previous paragraph, after the implementation of the Gambling Act of 2005, most web-based gambling operators based in the UK left the country and moved to other territories in order to avoid the new gambling taxes.
The fate of bet365 was considered as the notable exception of this common trend, as the gambling company, which is currently among the leaders in the online gambling world, maintained its corporate headquarters in Stoke-on-Trent. Unfortunately, bet365 may find itself outside both the European Union and the European Economic Area, so it would probably be forced to move its headquarters to another country in order to retain its operations within the European Union.
Ladbrokes-Coral Merger
The merger between the two companies ha been long awaited by both the UK and the global players on the sports betting arena. The £2-billion merger was officially announced at the beginning of July 2016.
Both companies have been facing some difficulties lately, and it is exactly the merger which is considered able to give them the opportunity to bolster their positions. Of course, the deal is a subject of regulatory approval, not to mention the Competition and Markets Authority has encouraged the two operators to dispose of between 350 and 400 land-based betting shops in order to allow them to proceed with the deal.
At the time of the merger is finalised, the two companies are expected to have a market share amounting to about 70%, leaving only 30% to their competitors. This inevitably raised some concerns over the competition matters, and regulatory watchdogs raised their voices against the deal. Now, with the BREXIT ahead, the situation is expected to become even tougher for the companies, especially considering tighter regulation and increased taxes.
BREXIT Effects on UK Players
The players who are citizens of the UK will also be affected by the future BREXIT. Currently, a large number of the newly-implemented gambling regulation of the EU sets some restrictions not only on companies who are licensed within the countries who are members of the Union, but also to the residents of these countries.
Up to date UK-based players are restricted from playing and placing their bets in websites based on certain jurisdictions of the European Union due to the fact that gambling operators cannot afford to be subjected to several sets of gaming taxes imposed by those jurisdictions.
Still, UK citizens are allowed to access gambling websites based either in the UK or in other countries that are part of the European Union. However, with the BREXIT awaiting, local players would probably find themselves unable to reach some online poker rooms located on the territories of other EU markets. This impact of the UK leaving the Union may not be considered as large as the rest of the issues associated with the BREXIT, but it will still affect a certain number of players.
Conclusion
Whatever the BREXIT effects on the online poker industry will be, the process will certainly take some time before more detailed answers are given to some of the multiple questions associated with it. Still, the official timeline for the entire process to be finalised is two years, but the truth is that a great number of citizens and institutions within the European Union would like to see UK facing some consequences for its decision immediately.
One thing is certain – there will hardly be any changes until some negotiations regarding the BREXIT are given the green light. The new relationship of the country with the European Union will also be required to take a certain form, and this process would probably take years to be finalised. Another “minor” detail that should be taken into account is the fact that the Government may not act on the BREXIT, despite there was a citizens’ vote for the country’s withdrawal.
- Author
Daniel Williams
