Tony Alan reports on the latest updates

This year’s annual KPMG Gibraltar eSummit was held with exceptional timing on Thursday 12th June, the day after the announcement that the UK and and EU had agreed the core terms of a treaty in respect of Gibraltar.

It meant that delegates at the event were among the first to hear what this meant for Gibraltar – and the eGaming industry in particular – from Chief Minister Fabian Picardo who rearranged his schedule to make a surprise appearance and talk directly to the capacity audience at the Sunborn Yacht Hotel.

Border fluidity

Declaring that the sovereignty of Gibraltar had not “In any way been compromised”, the Chief Minister said the agreement offered “complete fluidity across the frontier”, for the two key elements that move across frontiers: people and goods.

The agreement achieved what the government had set out to do, he said: “To give you and your industry the ability to have people live on the other side of the frontier and come in and out of Gibraltar every day without having so much as to flash an ID card, let alone a passport.

Brexit chaos

“To give you the ability to recruit and retain the people you need not just to stay the way you are but to make you more successful in the future. To grow the business that you do in Gibraltar and grow the type of business we
can do in Gibraltar”.

After the chaos of Brexit, he added, he hoped delegates would see the terms of the agreement as “a hugely positive agreement” for Gibraltar, the region and, in particular, the gaming industry.

Tier 1 jurisdiction

Attendees at the event, which draws Gaming professionals from across Europe, had already heard from Trade and Justice Minister the Hon Nigel Feetham who was equally enthusiastic about terms of the Treaty and how it would help support Gibraltar’s position as a Tier 1 jurisdiction for the sector.

Explaining that no sector was “more important in terms of its economic contribution to Gibraltar than the gambling sector,” he said the agreement would provide stability and a “safeguard for our collective future”.

Gambling Act

Minister Feetham also said that the long- awaited update to the Gambling Act could now be progressed and indicated that Gibraltar was prepared to consider accepting market leading
operators in crypto gambling who wanted to move into the regulated space.

“As a jurisdiction, we must embrace growth in areas where technology is shaping the global landscape,” he added. “We simply cannot afford to be left behind”.

Gibraltar Gambling Commissioner Andrew Lyman reiterated that the new Gambling Act would address changes in the operational models of eGaming businesses and bring associated services such as marketing into scope. This would give greater flexibility and scope for multi-jurisdictional gaming operators and updated powers to the Gibraltar Gambling Commission to ensure Gibraltar maintained its strong reputation as a responsible and respected regulated territory.

Crypto currencies

Elsewhere at the conference, the Hon. Albert Isola KCB MP moderated a session on the use of crypto currencies in the sector while industry consultant Simon French reflected on capital market trends over the last 20 years followed by sessions on M&A activity from both operator and legal perspectives. Robin Chhabra from Tekkorp Capital hosted a discussion on opportunities in the Latin American market and Dan Waugh from Regulus Partners explored possible regulatory threats to the UK industry.

It was important for the industry to address this, he said, and reframe conversations. “Operators must focus and champion the best interests of their customers,” he warned, “Both in terms of enjoyment and harm prevention. The consumer is all too often by-passed in a debate that focuses instead on harm, taxation, jobs and the black market.”

ESG

A further panel session looked at the question of whether Environment, Social and Governance (ESG) is itself sustainable with various operators talking through the different activities their businesses were working on in this space. The panellists recognised that ESG initiatives were important not only to customers and shareholders, but also in attracting new talent to the sector.

With a simultaneous programme of short power presentations in the side rooms touching on many legal and regulatory points of interest, delegates had the opportunity to learn lessons from real life recent examples before re-joining the main room at the end of the day to hear reflections from some of the key operators in the gaming industry. The discussion covered a wide range of topics including cyber risks, the opportunities and threats of AI, regulation, industry collaboration and the value of diverse thinking.

Conclusion

Summing up at the end of the day Will Hawkley, KPMG Global Head of Leisure and Hospitality, said, “The KPMG Gibraltar eSummit has once again provided a fantastic opportunity for the industry both in Gibraltar and the wider world to take stock of the market, and the opportunities and threats it faces.

“We were delighted to have both the Chief Minister Fabian Picardo and the Hon Nigel Feetham MP join us on the day, reflecting the importance of the sector to Gibraltar’s economy. We also thank our other expert speakers for their time and reflections which are so valuable to understanding the future direction of the gaming industry.

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This years eSummit held at the Sunborn Hotel, brought together industry experts, Charlie Leach, Associate Director, KPMG, reports

Sustainability in Uncertain Times was the theme of this year’s 2023 KPMG eSummit, held on board the Sunborn in June.

Over 250 delegates from the eGaming and associated industries attended the event which brought together key operators, regulators and thoughtleaders to discuss developments, risks and opportunities in the sector.

Minister for Digital, Financial Services & Public Utilities, the Hon Albert Isola gave the opening address in which he remarked on the resilience of the Gibraltar eGaming industry in the face of successive shocks.

“When I came into politics 10 years ago, I never imagined in my wildest dreams that I would be facing Brexit, Covid, treaty negotiations, withdrawal agreements, and everything else that’s come through,” he said. “Yet you have to play the cards you’re dealt, and that’s what we’ve done relentlessly through this period. That is what has seen us through the biggest challenges our community has ever faced.

“The way that we managed to get through Covid together, the way we’ve managed to get through Brexit and the withdrawal agreement together: when you think that we lost the entirety of all of your European businesses, and yet the numbers today are as strong as they were before that happened in 2016. It’s remarkable, and a testament to your professionalism and your entrepreneurial spirit, which always will see us through when we work together,” he added.

Last year’s eSummit had been preceded by the unexpected announcement from the Financial Action Task Force (FATF) watchdog that Gibraltar was being placed on a grey-list, a move that Minister Isola described, in his view, as targeting the gaming industry “wholly unfairly”. The Minister said that much work had been done to address the points made by FATF and it was a case of “when” not “if” the jurisdiction was removed from the grey list.

as removed from the grey list. He also observed that there had been 13 new businesses applying for licences in the past year, with discussions ongoing on others. “It tells you that the confidence in our ability as a gaming jurisdiction, and our reputation, is untouched and we continue to punch above our weight,” he added.

The Minister also updated delegates on the progress of the Brexit withdrawal agreement and the planned treaty with Spain. The recent announcement of the Spanish elections meant there would be a delay to proceedings, he said, but the Gibraltar government is doing all it could in readiness for moving forward once the elections are completed.

Gambling Bill

Gibraltar Gaming Regulator Andrew Lyman addressed the conference with an update on the long-awaited Gambling Bill which is due to be released shortly and reflected on the increasingly multi-jurisdictional nature of the eGaming industry. Commenting on the interest in Gibraltar from overseas operators, he said the regulator’s responsibility was to provide pragmatic solutions whilst protecting the good name of the jurisdiction. “What we ask of our licensees is good faith, a shared objective in providing safer gambling, and a commitment to financial propriety and consumer protection,” he added.

The eSummit also heard from Sarah Gardner from the UK Gambling Commission who discussed the approach of the UK regulator to managing compliance with licensees and outlined the upcoming consultation processes around the UK’S White Paper for reform of legislation in the digital age.

KPMG Partner Nigel Hinchliffe led a discussion on markets, and two discussions on Mergers and Acquisitions (M&A), one from the viewpoint of operators and one from a legal perspective. Mr Hinchliffe observed that the eGaming M&A market had always been active and the past 12 months had been volatile, driven in part by external economic events such as the Russian / Ukraine war and inflationary environment, with deal values somewhat down on previous years. However, the sector had once again been more resilient than most and there were silver linings in the continued high growth potential and diversification of the industry.

A series of “Power Presentations”, short updates on subjects that varied from US Consumer Law Litigation to current AML Perspectives were delivered in the afternoon along with a fascinating glimpse into the potential of the Latin American market, particularly the “sports-mad” nation of Brazil.

There were also sessions on the UK market, research insights looking at the evidence behind regulatory change, evidence gaps and recent studies, plus a look back at the past 25 years of innovation from Continent 8 Chief Financial Officer Kristen Valenta.

The day finished in traditional style with a discussion panel made up of representatives from key operators who reflected on changes and key drivers in the sector alongside the main programme there was a series of presentations in breakout areas and the event was preceded by a KPMG Diversity, Equity and Inclusion seminar #WeAllWantToPlay led by KPMG Partner Global Gaming, Micky Swindale. This featured contributions from a wide variety of speakers about the drive for better diversity and inclusion across the industry.

Speaking after the event, Steph Beavis, Managing Director of KPMG Gibraltar, said it had once again been a great opportunity for anyone interested in the eGaming industry to get up to date and make new connections.

“We thank all the speakers and panellists for their participation and their insights which makes the day so valuable for everyone attending,” she said. “We also thank the sponsors for enabling the event to happen.”

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Despite taking place just days after the recent announcement that Gibraltar has become subject to increased monitoring by the Financial Action Task Force, the news did not deter this year’s KPMG Gibraltar eSummit for the gaming industry from looking ahead to a new era.

Held as usual on the Sunborn Yacht hotel, the 2022 eSummit attracted over 200 delegates to discuss all things in the gaming world. The latest in what has become an eagerly anticipated annual event, it offered an impressive line-up of speakers and panellists to discuss the new developments, trends and activity in the industry.

Opening the conference, Minister for Digital and Financial Services, Albert Isola, said the announcement that Gibraltar was subject to increased monitoring – being placed on a so-called “grey list” – was disappointing but that Gibraltar would get on with business and Government would commit to understanding the problems and working through them together with the industry.

“I have no hesitation in telling you that in 12 months we will be off the list,” he added, saying that the news should not “cloud the incredible work put in over recent years, especially by the Gibraltar Gaming Commission” which had worked very hard to get Gibraltar in a better place with regulations that are much better equipped for the future. Gibraltar Gambling Commissioner, Andrew Lyman, reiterated his own disappointment at the grey listing, especially considering that “the Gibraltar Gambling Commission has been the most active domestic regulator on sanctions” but also vowed to prove that regulated bodies were dealing with risk effectively and that sanctions, where appropriate, were proportionate.

He also updated delegates on the progress of the Gibraltar Gambling Act and an impending consultation period on the licensing framework and fees. Mr Lyman said the Government was working towards delivering a “modern and flexible Act for a new era” that would secure growth for the sector and “attract new business in a changing gambling landscape, which includes multi-jurisdictional location.”

Mr Lyman encouraged delegates based in Gibraltar to participate in the Needs Assessment being run by the Centre of Excellence for Responsible Gambling at the University of Gibraltar. Aimed at gauging the education, training and research and services needed to support gaming employees and players, the results of the assessment would provide a roadmap for CERG, the local industry and stakeholders in other jurisdictions, he said.

Gambling Act White Paper

KPMG Senior Advisor Bill Robinson spoke about the combined impact of the pandemic and inflation/cost of living crises, noting that high inflation is often a precursor to recession. While some of the conditions for an extended period of inflation are in place, the outcomes would be influenced by how Governments reacted, he said. The good news for the gaming industry is that it has historically been very resilient and gambling spend tended to be a very consistent proportion of customers’ budgets.

Also highly topical was the session on the UK Gambling Act White Paper led by Seamus McGowan and a panel that included Wes Himes from the UK Betting & Gaming Council. It had been expected that the White Paper would be published by the time of the eSummit but it has been subject to further delay. Panellists discussed the likely contents of the White Paper and also the UKGC’s aims to “minimise consultation fatigue” and the risks this might present to the industry in responding with feedback to the proposed changes.

Elsewhere, Ivor Jones from Peel Hunt led a session on Capital Markets which looked at value creation in gaming companies and recent M&A activity in the market, while KPMG’s Adam Rivers and Anna Soilleux Mills from CMS presented on Consumer Protection and Choice Architecture. Appearing virtually from the US, Susan Hensel led a panel of north American regulators from Colorado, Tennessee, Ohio and Ontario who gave a fascinating insight into how sports betting is developing – and the accompany varying regulatory approaches – in different states.

ESG is becoming an increasingly important part of business strategy and Charlie Leach from KPMG hosted a session on how the eGaming industry can transition to a more sustainable, responsible and resilient future that touched on carbon management and the growing demands from Millennials and Gen Z to act as a force for good.

Power Presentations

This was followed by a discussion on Diversity, Equity and Inclusion in the Gaming Sector led by Micky Swindale which explored the experience of an all-female panel in their careers to date and how companies can make progress in the workplace.

As ever, the eSummit finished with a lively panel made up from major players in the eGaming sector who reflected on key developments and trends in the industry. Throughout the day delegates also had the opportunity to attend a number of “Power Presentations” covering Gibraltar-focused issues and various regulatory topics.

Speaking after the event, KPMG Global Head of Leisure Will Hawkley paid tribute to all the speakers and panellists for sharing their knowledge and expertise.

“It’s clear that although there may be some tough times ahead for the economy and potential challenges on the regulatory front, there is also plenty of opportunity for the eGaming sector,” he said. “I am always amazed at the breadth of topics we cover in these eSummits and the progress that so many companies are making in so many different directions.

Steph Beavis, Managing Director of KPMG Gibraltar, said she was delighted the event was so well-attended, adding: “We are proud to support the industry in Gibraltar and to deliver such a compelling agenda on issues that have such strong relevance for the sector. The eSummit is also a great opportunity for delegates to network and it was fantastic to see people making new contacts and developing business relationships. I am sure everyone has left with plenty of food for thought and we look forward to gathering together again next year to see how the industry evolves over the coming months.”

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Delegates at the much-anticipated 10th KPMG Gibraltar eSummit were given a valuable insight into the new Gambling 2021 Act, as industry leaders gathered together to discuss the latest developments. 

As well as all the usual updates and news from the global gaming industry, there was a particular focus on the here and now for Gibraltar with reflections on how both the Corona Virus and Brexit have impacted the sector.

Opening the conference, Minister for Digital and Financial Services, Albert Isola said that Gibraltar’s gaming businesses had shown themselves to be “more resilient than most” over the previous 18 months with Gibraltar Betting & Gaming Association members voluntarily receiving “not a penny” in financial support from the Gibraltar Government during the pandemic. 

He also paid tribute to the sector for its adaptation over Brexit and the natural transition that had occurred with the loss of EU business and a new focus on the UK and rest of world markets. “When this conference first started in 2011, there were around 2,000 employed in the gaming industry, a very good number,” he said. “At the height of Brexit in 2016, we had 3,500 employed in the sector and today, having lost all of the EU business, we have around 3,400. Which tells me that, despite the loss of the EU business, you have continued to grow. I congratulate you on that”.

Looking forwards, he said “border fluidity” was the “number one priority on our 2016 heat map” and that work was continuing on the Schengen Treaty to enable businesses “to continue to grow on the basis of shared prosperity”. At the same time a Plan B for a no negotiated position well-advanced.  

The importance of border fluidity was also raised as a key issue in the operators’ discussion panel later in the day, where a team of representatives from some of the big names in the industry (Kindred, Entain, Gamesys and Lottoland) looked at trends over the past 10 years and opportunities and challenges to come. 

Artificial Intelligence

It was agreed most businesses had been quick to adapt during the pandemic, harnessing technology to cope with remote working and the increasing demand for online services. The gradual move towards more of an “entertainment” format was noted, as well as the increasing use of Artificial Intelligence to identify potential problem behaviour. The panel also felt there had been a shift in focus of stakeholders from concentrating solely on responsible gambling to a wider ESG perspective that took in early education and environmental issues such as carbon neutrality along with diversity in the workforce.

Gibraltar Gambling Commissioner, Andrew Lyman gave delegates a presentation on the draft Gambling Act 2021 which seeks to modernise the regulatory framework and maintain Gibraltar as an attractive remote gambling hub and key licensing jurisdiction. 

Mr Lyman outlined how the changing nature of gambling businesses, with increasing reliance on the cloud and diversified supply chains, meant there was a need to update regulation to keep up with how the industry was developing. New proposals under the draft Act include new investigation powers and sanctions along with notice rights and rights of appeal as well as the introduction of an approved persons regime.

Businesses will still be required to have “substance” in Gibraltar but there will be a more flexible approach proportionate to the nature and size of a business and its overall economic value. The draft Act is currently undergoing a final review within Government.

A copy of the draft Act and explanatory note is expected to be issued to stakeholders shortly which will be followed by consultation on licensing categories, fees, codes and secondary legislation. 

Elsewhere at the conference, there were insights into the USA and Canadian markets as well as a “fireside chat” involving former Chief Minister, Sir Peter Caruana QC, Peter Montegriffo, QC of Hassans and Peter Isola, Senior Partner at Isolas, reflecting on the previous decade of eGaming in Gibraltar.

Simon French of Panmure Gordon gave an update on the capitals market, noting that the market capitalisation of the four largest listed companies is now in excess of US$120bn and that, such is the pace of mergers and acquisitions, none of the quoted big four existed in their current form five years ago. This was underlined by the announcement of Draftkings £17bn approach for Entain two days before the conference.

There was also a focus on regulation and responsible gambling both in the UK and Gibraltar with Professor Zsolt Demetrovics, Chair of the Centre of Excellence in Responsible Gaming at the University of Gibraltar, outlining some of the challenges in developing effective interventions and understanding the difference between recreational gambling and behaviour that may be harmful. 

Responsible gambling

Minister Isola had earlier encouraged operators to engage with the University in providing data for the research and reiterated the government’s wish for all members of staff with customer interaction to attend a responsible gambling course “to put our jurisdiction ahead of the curve in terms of responsible gambling”. These courses are currently being designed.

A series of three masterclasses in regulation and tax were held alongside the conference and Stephanie Beavis, Managing Director of KPMG Gibraltar, brought the day to a close by thanking all the speakers and sponsors who enabled the event to take place.

“The KPMG eGaming Summit has been a key event in the calendar for 10 years,” she said, “Despite having to put the event on hold in 2020, we were determined to get it done this year.” A special thank you was extended to Micky Swindale, KPMG Global Gaming Team and COO/Head of Markets, KPMG Islands Group, who was the impetus for the first Gibraltar eSummit in 2011 and has overseen the event each year since. 

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 By Jon Tricker, Managing Director, and Elaine McCormack, Senior Manager, Risk Consulting, KPMG Gibraltar

Putting Brexit aside, one of the key challenges for the online gaming industry is regulation. This is a topic that is hotly debated at the KPMG eGaming Summits in both Gibraltar and the Isle of Man, and it was interesting this year to see some positive thinking from operators about regulation and discussion of how it is changing the industry for the better.

Recent regulatory changes, for example, have not only strengthened player protection but have also been good for the industry as a whole by creating a more level playing field. The changes are intended to generate a mentality whereby everybody is focused towards the same goals and outcomes, which is really important.

There has been a lot of very public regulatory action over the last few years, and some may see this as the regulators trying to flex their muscles. But industry is also now seeing evidence that these regulations are there to enhance business and customer enjoyment, particularly because everybody is playing to the same rules.

On a technology front, operators continually strive for a safer industry, but it isn’t always easy. Firms gather an awful lot of data about their customers as part of their on-boarding processes. The challenge is how that data is used on an ongoing basis to help and support customers if, and when, they need it.

There are also some fantastic tools available to help customers gamble responsibly, but customers aren’t always aware of them. It’s unfortunate that a lot of these technological advances only rear their heads when customers realise they have a problem and it may be too late, whereas if they were prompted earlier, then it could really help solve many issues the industry is facing when talking about responsible gambling.

There is a perception that the gaming industry is not as mature as some of the other more traditional financial services industries, and that it looks to those industries when it comes to implementing some best practices. All industries can always learn from each other, and it’s been interesting to see that the Financial Conduct Authority in particular have been very vocal recently about what financial services firms can learn from the gaming industry. They cited the gaming industry’s investment in technology, and the use of it, to help become more proactive when it comes to responsibility and collaboration with customers.

The ideal is for firms to use the data they collect to prompt customers when there may potentially be a problem. Imagine a world whereby the operator actually gets in touch with their customers when there are indications there may be an issue. That prompt may just be the nudge the customer needs to recognise that there is a problem.

Invariably, changes within a business on the back of regulatory requirements are implemented with the assistance of compliance departments. Historically (and this isn’t limited to the gambling industry), compliance has often been seen as the “business prevention division” within a company but it is encouraging to see this perception slowly changing over the past few years.

Within a lot of businesses, departments can be very siloed, each with their own agenda. Thankfully that is also changing but there’s still a lot to do. Compliance was something of an afterthought for some companies however latterly they’ve been pulled to the forefront, and it’s becoming standard practice for compliance to sit right across the whole organisation. This allows involvement from a really early starting point so, no matter what the business is planning, whether it be new features, new games, new markets etc, now there is compliance involvement at the start of a project. It is here that potential pitfalls and considerations can be discussed and addressed from the outset rather than a day before launch, which could save so much heartache going forward.

A good compliance department

Businesses never like spending money on departments that are going to cost them money but firms are now realising the true value of a good compliance department on protecting their business.

Firms are always judged on their culture and how they treat their most at-risk customers. Many are now realising that when they get this right the whole perception of their business and brand is impacted positively.

Regulation definitely isn’t ruining the industry, it is actually trying to enhance the industry and make it a safer and fairer place in which to operate. There is still work to do, media stigma to break and more investment needed in technology but the increasing desire for a collaborative approach, where everyone is striving for the same end goal, will enable the industry to grow and its reputation to flourish. It can become an industry to which others look and aspire to be like.

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The talk was all about collaboration, embracing new technology, and keeping customers safe, when industry experts met to consider the future of gaming at the KPMG eGaming conference, Ray Spencer reports

But just below the surface, spoken only sotto voice, was growing concern at how two US businesses – Amazon Web Services (AWS) and Google – are limbering up to use the Cloud and enter the eGaming market internationally.

There is a perceived risk that the two firms might gobble up US online gaming revenue – predicted to dwarf that of the UK and Europe combined – and be transformative for the gambling industry worldwide, much as has been seen with online video streaming and terrestrial TV channels.

In January, Amazon was linked with development of a cloud gaming service streaming to homes and last summer Google revealed its xCloud, while Apple is interested too and Sony is trying to develop what has been dubbed ‘the Netflix of gaming’.

Speaking at the 9th annual KPMG eGaming conference, attended by 280 professionals at Gibraltar’s 5-star Sunborn Hotel, Peter Isola, senior partner of ISOLAS law firm, held: “The issue now is how gaming operators can use the opportunities presented by Google and Amazon cloud services: how, as a jurisdiction, can we measure the footprint to ensure we maintain the level of regulation that we have established.

“It is important to us that the gaming company’s footprint remains in Gibraltar economically.” Isola’s remarks brought into sharp focus behind-the-scenes activity to recast Gibraltar’s Gambling Act by the autumn to ensure it remains the premier jurisdiction for licensed online gaming companies and their suppliers.

“We still have the original remote gambling licenses”, Peter Montegriffo, a partner specialising in eGaming at Hassans law firm, noted. “The proposed reforms are not just about regulation of tech, but must also take account of substance requirements and tax developments. Some of the models adopted in other jurisdictions need to be reviewed. There should be renewed consultation before any final position is adopted,” he declared.

Basically, the issue is about servers and where they can be located and what each does. Andrew Lyman, Gibraltar’s Gambling Commissioner, explained: “The present licenses for gaming companies are predicated on location of technology and we want to maintain some regulatory discretion over what we do and don’t grant, so I think we will end up adding ‘mind and management’ to the legal criteria. Rather than drop the IT provision, we are more likely to say we want to retain discretion.”

Reviewing servers

Ten new licences were issued in 2018-9 to six companies, split evenly between gaming operators (B2C) and games developers & suppliers (B2B). Companies have significant resources and investment in Gibraltar, yet others, particularly start-up B2B firms, want to be on The Cloud, which potentially lowers operators’ costs to fund things like, compliance, ensuring Responsible Gambling (RG), and flexibility. At present Gibraltar does not permit server use beyond its territory.

Consultation with the industry also involves B2B companies – they account for half of the 30 eGaming licenses – and many want to be on webservers like Google Cloud or AWS, because “they contend that the cost of bandwidth here is relatively expensive, and the cost of kit”, Lyman declared, “so we’ll probably end up licensing the B2B software and supply chain to Gibraltar’s B2C licensees, but with some flexibility on IT infrastructure”.

After the £10,000 application fee, gaming companies at present pay £100,000 for their licenses and B2B’s pay £85,000, although they don’t pay gaming tax. “We will look at how small start-ups might initially be assisted by a reduced charge”, but as Lyman observed: “I am certain that whatever results, we are not going to make everyone happy!   If we are too liberal with our licensing regime, some who have built size and scale here – people and offices – will say it’s unfair, while others want to supply Gibraltar firms using remote servers and they must pay for the privilege.”

In the UK, where gaming companies already can use remote internet servers, there has been pressure on profits after fixed-odds betting terminals – dubbed “the crack cocaine of gambling” because of their reported addictive effect on players – maximum stake was cut from £100 to £2. The Point-of-Consumption tax for UK online bets has also been raised from 15% to 21%.

Profit pressure grows

“That has put further pressure on Gibraltar-based gaming companies, because we are paying more tax direct to the UK, reducing profitability in Gibraltar and making the local 10% corporate tax rate less beneficial as there is less to tax”, Gibraltar Betting & Gaming Association (GBGA) spokesperson, Paul Foster, explained.

“Over the past year or more, there has been lower profitability generally for gaming companies, because of compliance costs and greater regulation”, Foster declared. Most companies had taken a profits hit of between 5 – 10% as a result, some being up to 20% down.

Hence the interest in embracing the US market – which last summer permitted sports betting in all States – to offset other pressures, and all major firms are securing alliances with US casino and other gambling operators.

GBGA’s Foster was emphatic: “Concern over Amazon and Google is not misplaced – we can never rule them out – so we should be wary as an industry. They are saying they can cover all of the US, but at present they are not involved in any eGaming. There is no such thing as ‘the Cloud’; it’s just somebody else’s server.”

Foster, who is Digital Compliance and RG Operations Director for GVC Group, Gibraltar’s largest on-line gaming company, insisted: “The eGaming industry wasn’t created in the US, it was born in Europe and we know how to do it – they don’t. They are recruiting from Europe, but all European operators are going out there and securing their own local agreements. You will never be able to go in The Cloud throughout the US, because it’s state-by-state rather than Federal regulation.”

Gambling Commissioner Lyman revealed: “We have a generally risk-averse license regime. At one time we would only accept established brands, now we are slightly less risk-averse and have included a couple of well-managed B2C start-up businesses. Not all start-ups necessarily will succeed, but if we didn’t accept them, we would simply drive them to other jurisdictions.”

The first to benefit from license relaxation for start-ups two years ago was Addison Global, (AG) with former William Hill Operations Director Juergen Reutter as chief executive: in August 2018 AG launched MoPlay, an on-line betting and casino gaming site employing 80 people at the Gibraltar World Trade Centre. Mobile-focused Lottomart, another new B2C was licensed in January.

UK guarantees access

The UK – at present the largest eGaming market – has guaranteed continued access for Gibraltar businesses after leaving the EU (Brexit), which equally affects Gibraltar, but it also has prompted companies with EU customers to make contingency arrangements. Some EU states insist that gaming servers be within the bloc and this has led most affected companies to seek operating licences additionally in Malta or Ireland.

In February, GVC re-located two servers and some staff to Ireland in preparation for its EU-facing online gambling business, utilising Malta eGaming licenses, but it emphasised: “Our online businesses will continue to be headquartered in Gibraltar” where it opened in 2008 and now employs over 1,000 people locally, 15% up on a year ago.

BetVictor and William Hill, with around 350 staff each, and Lottoland (some 250 staff) and 888 (230 staff), are amongst others publicly committed to remain in the jurisdiction.

But in late May, bet365, Gibraltar’s second largest online gaming business with around 550 staff locally, confirmed it was relocating most operations to Malta, where it has a large office complex “to maintain and enhance operational efficiencies”. Foreshadowed a year ago, the move prompted on-going government negotiations over how many and which posts must stay to satisfy Gibraltar license obligations, including still having a degree of substance in the territory, such as offices, staff and some ‘mind & management’. Interpretation of those requirements will be a government decision.

Recruiting scramble

Almost all gaming companies have been scrambling to attract bet365 staff, and holding recruitment fairs. “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 doubt, the market will easily absorb every single person wanting to stay,” asserted GBGA’s Foster.

Albert Isola, Minister for Business and responsible for eGaming, insisted: “Gibraltar remains the best jurisdiction in the world from which to do well-regulated, reputable online gaming business”.   Two weeks after bet365 confirmed its Malta move, Gamesys, a prominent UK-based gaming operator and games developer formed in 2001, launched a new UK sportsbook site, Virgin Bet, that sits alongside fellow group Gibraltar licensees, including Profitable Play and Leisure Spin.

Gibraltar’s eGaming firms today employ around 3,800 people, 300 more than a year earlier) and in total contribute around 25% to the local economy. Minister Isola insisted: “The sector continues to make a very significant contribution to the economy in terms of corporation tax, PAYE and gambling charges and fees.”

Tax changes neutral

Gambling taxes previously were based on Gross Gaining Yield (GGY) – stakes minus payout – at 1% with a £425,000 cap pa that benefitted larger operators; now there’s a more progressive GGY tax rate of only 0.15%, but with no limit.

As a result, in 2018-19, the government found revenue from gaming duty and licences down £1.5m to £12.5 million, but in the current year revenue has been forecast to be £14m, broadly flat year on year. No separate figures are available for the sector’s PAYE and business tax income.

“There continues to be a lot of consolidation in this industry”, Hassans’ Montegriffo noted, but also revealed: “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.”

The government believes “there is a major opportunity for operators to expand into Asian markets from Gibraltar” and the review of gambling, now being led by retired Gambling Regulator, Phil Brear, is expected “to build one gold regulatory standard again that is fit for the future”.

No rush to enforce

On the planned introduction of fines for license transgressions rather than revoking them, the Regulator 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, Lyman is discussing standards and identifying 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,” he said.

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.”

In November, the UK Gambling Commission (GC) revealed nearly £14m in penalty packages will be paid by three online casino companies over failings to put in place effective safeguards to prevent money laundering and keep consumers safe from gambling-related harm.

Gibraltar University is establishing what it hopes will be a world-leading charitable research facility focusing on aspects of Responsible Gambling (RG) with a budget of more than £2m a year funded through an industry levy and also fines.

The GBGA believes that any UK fines paid by Gibraltar-based companies should be given to a Gibraltar RG project to help problem gamblers. The plan is for the University to establish an international RG Centre of Excellence with firms collaborating by providing anonymised data and the research findings shared with all contributors. At present, privacy laws prevent data sharing on individual problem gamblers.

Prof Catherine Bachleda, project leader, explained: “There is a lot of information out there in companies that have their own research programmes, in data held on customer experiences, age profiles, etc. and on what works and what doesn’t.”

£2m for information sharing project

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 more savvy today and are asking what we are doing.”

Yet Sarah Hanratty, deputy chief executive of Senet, an independent RG standards UK industry body, maintained: “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.”

Ian Ince, Playtech’s head of regulation and compliance, felt: “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.”

Regulatory difference

Gibraltar and UK gaming authorities have committed to “greater regulatory alignment”, but industry sources in the jurisdiction suggest the stances on regulation and enforcement “are going to stay quite a long way apart”.   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 UK GC) conceded: “The UK GC 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.”

The post The continued growth of Gibraltar’s world-leading eGaming sector appeared first on Gibraltar International Magazine.

Gibraltar is planning to ease some remote gaming license conditions to take account of a general move toward Cloud-based operations and also create a new category of license, embracing start-up businesses locally servicing the established gaming companies

Much-delayed reshaping of the jurisdiction’s world-leading licensing model to future proof it and provide greater license flexibility is under way, but this also will be accompanied by more stringent regulation – especially around Anti Money Laundering (AML) and social responsibility – focused on the effectiveness of operator’s own risk based controls and the outcomes achieved to reduce risk.

An enforcement department is to be established to help maintain the jurisdiction’s reputation and there is likely to be a move towards a range of possible sanctions for transgressions other than just license cancellation, which is considered a blunt instrument.

Industry leaders are looking to have specific areas of operations licensed separately, so that if one part of a business hits a problem the whole generic operating license is not at risk.

Crucially, Gibraltar gaming licenses stipulate that in addition to top management, just about all servers must be physically on The Rock, but in response to industry concerns and greater use of new technology – The Cloud – some servers may be relocated.

Key elements of servers and functions associated with creating a gambling transaction – in payments, transactions, bets placements, trading and debts – will most likely need to remain in the jurisdiction.

The Gambling Act will be overhauled by Spring next year “when the shape, timing and nature of Brexit will be much clearer”, Albert Isola, minister for gaming, told industry “influencers” at the 8th KPMG eSummit at the Sunborn Hotel in late-April.

The revised license regime is likely to embrace the majority of gambling support functions, yet Andrew Lyman, Gibraltar’s Gambling Division (GD) new executive director, assured: “It will not be at any significant financial disadvantage to those who currently sit outside that perimeter, or who need to flex their arrangements”.

The government was spooked in May by a Tier 1 operator’s decision to relocate some (as yet undisclosed) key Gibraltar personnel and functions to Malta, in part as a hedge against losing access rights in Europe after Britain and Gibraltar exit the EU (Brexit). Bet 365’s move comes at a time when increased sector mergers & acquisition (M&A) activity locally and elsewhere is also having an unsettling effect.

Gibraltar’s 30 eGaming licenses are split almost evenly between Business-to-Business (B2B) and Business-to-Consumer (B2C) operations, after a significant growth in local games development software and services supply firms. “New and established B2B and B2C providers continue to make applications for licenses and there is a small handful in train,” Isola revealed and emphasised “still there are 3,250 staff directly employed and half as many again in industry support services.”

A KPMG eSummit gaming audience survey of issues revealed 48% thought freedom of movement across the border was most important [53% in 2017]. Up to 85% of the sector’s Gibraltar workforce lives in Spain, estimates Paul Foster, a Gibraltar Betting & Gaming Association (GBGA) director and treasurer.

Peter Montegriffo, a Hassans partner and specialist gaming lawyer, suggested frontier fluidity was “a matter of primary interest – not concern”, but many things were changing. Some countries required servers to be within the EEA for certain types of business and if as a result of Brexit, Gibraltar is outside the EEA, Montegriffo said firms may need to have servers there.

Lyman concurred: “We are prepared to support cogent and flexible regulatory solutions and whilst we would want as many key functions as possible (people and technology) to remain in this jurisdiction, our regulatory structures are already flexible and can be flexed further by legislative change if necessary.

“The Cloud has potential to reduce technical operating costs and we recognise technical architecture, including platform support, is becoming increasingly multi-jurisdictional.”

In a market presentation Simon French, a leisure analyst at Cenkos Securities, a leading UK stockbroker, revealed the worldwide eGaming market had 10% compound annual growth since 2011 – “at present it’s split roughly a third mobile, and two thirds desktop, but by 2022 the market will be worth €50bn when mobile will account for just under 50% of revenue”.

French held: “The UK is the power house of the EU continent and given the €6bn [annual] revenue, that leaves the regulatory and political risk even more concerning.”

No services trade war

Continued access to EU markets was identified by 38% of those surveyed – sharply up on the 10% recorded in 2017. John Tricker, KPMG Gibraltar managing director, assessed: “Those wanting certainty of a licence outside of Gibraltar will look to have one also in Malta or Ireland as a backstop”.

Lyman told the eSummit: “I would strongly contend that relocation of transactional technology at this stage is premature. Whilst respecting the individual concerns of operators, it is in no one’s interests for a trade war in the area of services and I do not see a ‘wait and see’ approach (or a partial realignment) as being one that lacks sense.”

Bet365 later justified its move: “Due to regulatory developments in various jurisdictions and the evolving global regulatory environment for online betting and gaming, we have decided to increase our existing presence in Malta, which provides a mature and robust regulatory environment for the industry.” The firm added: “The number of people reported as being relocated to Malta [1,100] is wholly inaccurate.”

As Foster, who also is digital regulatory compliance director for Ladbrokes Coral Group, explained: “We all know that if we want to passport our services into Europe after Brexit we are going to have another line, in Malta probably, as the most welcoming of licensing regimes in Europe.

“But while Malta has a lot of people in gaming – second, third and fourth tier operators historically – I feel it doesn’t have the necessary skill sets and availability of people. First tier operators historically have only had a very small base there.” It would be several years before Malta had sufficient numbers of skilled people – “it’s always a risk and I think Gibraltar is already in discussions with Malta about getting closer”, Foster revealed.

“Until the post-Brexit situation is known, no-one will be doing anything”, he maintained. “One firm was rumored to be leaving last year and we all thought they were mad.”

Montegriffo disclosed: “Businesses obviously have to consider all potentialities and we are seeing some adopting a potential ‘Plan B’. All operators are different and each has distinct licensing and business models, but all will be reviewing what the outcome of different Brexit eventualities might be for them. We are very busy assisting with that process.”

Lyman accepted operators needed “to make contingency plans to deal with the Brexit risk and the advance of in-country regulation”. However, “moving people and technology in a knee jerk way carries with it a significant level of business risk and we are here to work with operators; not against them”, he emphasised. “We do not want to present operators with binary options, but equally we are alive to what I would term Brexit opportunism.”

As with financial services, the UK has guaranteed Gibraltar continued access to the UK market from March, through the Brexit transition period and beyond, and it is the only jurisdiction to have received such assurance. Lyman submitted: “We know operators are concerned about access to other European markets, but a cross-jurisdictional approach may be more sensible than putting all your eggs in one basket.”

Exposing Gibraltar’s nervousness at potential loss of key market players – and a possible knock-on reduction in its economic footprint – Lyman cautioned: “What I would say to our operators is hold your nerve and work with the Government and the [GD] in a transparent way to facilitate the contingent measures you need to take, without burning any bridges and leaving you able to access all existing markets.

Don’t be seduced

“Do not be seduced by what could be short lived financial and perceived technology advantages elsewhere and work with us to fashion the future,” he implored.

Large B2B operators with history, like NetEnt and Playtech, are licensed, but Foster identified: “There are a lot of start-ups involving people who have been in the industry for a long time generally in Gibraltar, and they want to set up new enterprises – they don’t want to move – but under the current licensing regime there is no way they are going to be allowed to have a license.

“I think we are moving to a situation where [GD] will start doing due diligence on the individuals in B2B start-ups and then license them.”

Minister Isola vowed recast gaming charges will not lead to higher industry costs. Gibraltar gaming licenses are considered quite expensive, around £85,000 minimum each, including turnover tax, making for a maximum payment of some £425,000 and each firm has several licenses.

Lyman admitted: “The licensing bar is high, but in the future we will not automatically dismiss well-funded start-ups with experienced management. I believe Gibraltar, with its concentration of technology and IP [intellectual property] can be an incubator for tech businesses.”

AML/CTF (Counter-Terrorism Financing) and consumer protection is key for all UK and Gibraltar major gaming firms, which account for some 80% of sports betting and much of UK gaming.

French cautioned: “The [UK] National Crime Agency is something we all have to be very aware of given the big amounts of money now changing hands that will attract the interest of a far wider range of regulatory authorities, and compliance tightened.”

Foster believed having new regulators in both jurisdictions – Gibraltar’s Lyman and UK Gambling Commission’s chief executive, Neil McArthur – “will result in it being more easy for them to work together and achieve co-operation. There is no chance that Gibraltar’s regulatory body will give up its independence, because the operators genuinely don’t want that”, and some variation in approach can be expected.

Looking ahead, the largely untapped US market “could increase dramatically”, following recent US Supreme Court rulings. “North America represents a potential US$14bn opportunity in the near term should there be wholesale re-regulation or deregulation of the US market and to date most success there has been achieved by William Hill in Nevada, creating a world-class offer”, French maintained.

The US has little on-line gaming experience. “Yes, some people will go out, but key operations will remain in Gibraltar, so that there’s no risk of destabilising the rest of the business, or – as PartyGaming used to do – operate from here and run the US from Gibraltar,” Foster predicted.

Some firms operate Asian-facing operations from Gibraltar, “because the skill set built over time here, cannot be gained easily anywhere else. I don’t expect to see much in the way of relocation of personnel”, the GBGA director contended.

As Lyman noted: “I do not underestimate the challenges faced by the industry, but Gibraltar is, and can remain, a first tier regulatory jurisdiction for remote gambling, supporting a critical mass of operators in both the B2C and B2B sector.”

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Can diversity in eGaming become a safe bet?

Self-help is possibly the best way for women to gain deserved recognition in the largely male-dominated eGaming industry, according to a group of key executives, reports Ray Spencer

Women mentoring each other, targeted female recruitment, gaming advertising, and collective lobbying of government for improved childcare benefits and facilities were all identified by the sector’s eight women and one man taking part in the KPMG (Gibraltar) 3rd annual ‘Roundtable’ event organised in conjunction with Gibraltar International Magazine.

A general lack of confidence by women and their self-doubt on personal ability were quickly identified as key obstacles to having a more gender balanced workforce. As Cristina Turbatu, technical lead at Playtech, noted: “If someone advertises a job, with most women, if they don’t tick 80% of the [requirement] boxes, they don’t apply. I see a lot of male applicants with a similar level of qualification, who think they still will go for the job.”

Turbatu, who is also managing director of not-for-profit Girls in Tech Gibraltar, revealed: “In some cultures girls are encouraged to go into maths and technology, but even from an early age in Gibraltar, US and the UK, they are distanced from maths and sciences and it is regarded as boys stuff; girls don’t have the option to study applied maths and they grow up with the idea that it’s not for them.”

KPMG research addressed the myth that women were less confident and explained that women simply tend to present themselves differently than men in interviews. Women typically were “brutally honest and forensically self-analytical about their abilities”, whereas men were more likely to ‘self-promote’, which can lead to “incorrect assumptions that men are better”, Micky Swindale, KPMG’s director responsible for technology, reported.

Dawn Adams, transformational director at William Hill, declared: “I used to work for a company (in a different sector) which had a mentoring programme and it was evident that junior staff felt the need to ask permission to go for a promotion.”

She recalled not being able to do technical drawing at school and having “to negotiate my way into doing advanced maths. Businesses can change that experience by working with children in schools and having development managers”.

When working for newspapers in the 1980’s it was a male dominated environment, but “when they started to bring technology to the fore you could really feel the diversity and flexibility in the roles that technology brought,” Adams said.

Picking up that point, Neil Banbury, UK general manager for Kindred, noted: “The reality is that the sector we are in – entertainment, technology – is offering more opportunity to work in an exciting field with more transactions per second than in almost any other sector of industry. This opportunity should be open to anyone, even though gambling has an image of being very male dominated.”

Missing a trick

Jon Tricker, KPMG Gibraltar’s managing director, interjected: “Fundamentally a woman’s brain is different to a man’s and operates in different ways when talking about the same thing.” He came from a background of working with six male partners, and Swindale was the only KPMG female partner in a group of seven! “We are missing a trick in not having more of the different perspectives women can bring to help grow the business,” he concluded.

A poll of some 300 delegates at the April 2017 KPMG Gibraltar eGaming summit revealed that threequarters had 10% or fewer women on the executive team of the gaming company they worked for, or were most closely associated with; “that was quite a wake-up call,” Swindale confessed.

She noted: “We are talking about the commercial benefit of having women in the team and we are focused on the idea about understanding what it might take to encourage more female involvement in businesses. Several research studies have shown that women are not getting the same opportunities or treatment.”

Agreeing, Nyreen Llamas, chief strategy officer for Addison Global, said: “Women always bring a different perspective and it is of value; we don’t always get it right. Different men bring different perspectives and different women bring different perspectives. The more diversity that you can have in the pool, the more you are going to get out – it is exponential.”

Balancing work & home

Donna Del Greco, Betvictor’s head of legal / general counsel, said women should consider what the organisation’s attitude towards female career progression and work/home life balance, and advised: “If either cannot be offered, then the woman needs to be able to recognise this and decide whether she wants to remain in the organisation for the long term and petition for change.”

Swindale suggested: “It’s about achieving a balance. We need to learn that confidence is self-awareness; confidence is an innate belief, it isn’t about being good at self-promotion.”

Elicia Bravo, chief strategy officer at Lottoland, told how she had worked for a City of London firm which, “from their
perspective, really were focused on trying to promote women, but whether it is being done in the right way is up for debate. Some of my colleagues definitely experienced a bias towards women!

“Women who are assertive are often perceived as aggressive – also if they appear too much like a man, then they lose their edge,” warned Bravo, whose firm has two thirds of its 300 employees in Gibraltar. Women bring something very different to the table, which has an intrinsic value, however it is difficult to achieve a perfect balance when it comes to diversity.”

Nevertheless, Janet Ainsworth, Ladbrokes Coral head of talent & development, felt: “We have to help women challenge themselves. I hear women say ‘I’ve got a child so I can’t do that’, or ‘I’m not as confident as men in this situation’, or ‘I’ve not got the right qualifications’, and feel that it would be great if we could support them to be more confident and believe these are not always blockers to being a senior leader”.

Her colleague, human relations director, Katie Hirst, said that following the Ladbrokes merger with and Gala/Coral, (which had been “male dominated”) she was seeking ways to attract female candidates, and asked: “Where do we advertise roles, where do we go to get them interested in our environment . We know there is an opportunity for women to progress.” Whilst the business was changing internally, “everything external is reinforcing the male stereotype, so how do we express what we really are, because of the perception of gambling?”

Ainsworth maintained: “We need to be challenging on what industry we are really in – how we describe it; we are in the entertainment industry and this may be more attractive; we need to think differently about how we describe it to potential employees and customers alike.”

Negative perceptions

There was a “lot of the noise in the UK about the gambling industry in society and it’s not helping when the perception is very negative”, Llamas formerly a partner in a local law firm, asserted. Ainsworth declared: “We should look at how the finance sector has improved its image and re-established trust again [following the 2008 crisis]”.

Swindale observed that financial services firms had long attempted to appeal to women through their advertising, but had not practiced what they preached [on greater inclusion of women] within their organisations “and the public is seeing through that approach.” She added: “The approach to bingo advertising has noticeably changed from omnipresent pink five years ago to the likes of tombola advertising showing men and women in a bar, having parties, generally enjoying themselves, and this has had a positive impact on participation by men.”

Women make up a good proportion of the on-line gaming market, yet “most gambling advertising doesn’t appear to try to appeal to women as customers” and it perhaps needed to be presented as “less macho and aggressive”, Swindale submitted.

Hirst judged: “This is not a sector that has been traditionally attractive to women and not enough women in the business are singing about how good it is, singing the diversity hymn sheet to attract other women”, conceding her HR team was all-female!

“Without sounding too negative, I’m not sure whether the customer base in the demographics of the products is ever truly going to change from basically appealing to males”, Hirst declared, while suggesting that before giving sports betting a greater feminine appeal there was need for research “to see whether women genuinely are interested in sports betting”.

If advertising was doing well, why would a firm change it and possibly antagonise its predominately male customer base, Del Greco questioned: “We are very much a male [appeal] company, so would we alienate a large number of customers? When females are put into the mix, the tendency is to make [advertising] sexy.”

This led Ainsworth to wonder: “Is there a correlation then between demographics of the customer and those of an organisation, where the customer is primarily male?”

Banbury observed: “The industry’s advertising has been very focused towards men – lads, drinking and going out – but the demographic is all types. We’ve tried female targeted sports betting, but the industry could also broaden its targeting from stereotypes, even within the male audience.”

Llamas determined that future diversity would bring balance “and this industry hasn’t been particularly good at it, but it is at a crossroads. Sometimes women are not very good at mentoring and there is an element of female jealousy. I’m not suggesting for a minute it’s going to be easy, but if we have female [as well as male] role models it will be more helpful.”

More help needed

Recording that working mothers frequently experienced problems dealing with school timetables, Hirst stated: “Childcare is very expensive and some flexibility in benefits would be beneficial. We [in Gibraltar] have not got a voucher scheme as in the UK; everything comes out of salary. There ought to be communication with the government about what more can be done – looking at options around use of benefits – to give women more opportunity from working.

Llamas maintained: “It is also up to this industry to do something about it. It’s all very good saying that the government should do it, but I think the industry should lobby and try to do something itself. When one of the first gaming companies arrived here, there weren’t any nurseries, so they set one up. It was very successful and developed from providing a facility for employees’ families to include others more generally.”

The industry had not been good at collective efforts, although its response to the UK Point of Consumption Tax had been an example of working together. “Even in a competitive industry like ours, childcare provision could be achieved by doing things together,” Llamas determined.

Ladbrokes Coral research into local benefits packages for mothers, found “there’s not a huge amount out there that goes above and beyond”, Hirst related. “Together we should see what can be done to help women and agree on whom we can go to for help, to influence change,” she believed.

Sarah Wood, head of compliance at Betvictor, pointed out: “As you can see from the people around this table, there is genuine progress in the area especially in management and executive roles.”

The post Can diversity in eGaming become a safe bet? appeared first on Gibraltar International Magazine.

“Unequivocal support” for the eGaming sector has helped to encourage more on-line eGaming and financial services firms to relocate to Gibraltar since the UK’s vote to leave the EU, despite concerns that a ‘hard’ BREXIT might lead to difficulties with border access from Spain for thousands of staff, reports Ray Spencer

After Brexit, Gibraltar’s frontier will become an external border of the EU and the threat of restrictions on free flow of pedestrians and traffic “fills many who live in Spain and work in Gibraltar with dread”, suggested Peter Isola, senior partner at local law firm, ISOLAS; the gaming industry that accounts for roundly a quarter of the jurisdiction’s economy, he conceded, could be “disproportionately affected”.

He was speaking as a sector expert

panellist at the KPMG 2017 eSummit near end-March, the seventh in Gibraltar primarily for the gaming sector, that now employs 3,350 people, two thirds of whom arrive daily from Spain.

A ‘live’ poll amongst the 260 delegates at the Sunborn Hotel showed 53% reporting continued “free movement across the frontier” was by far the greatest concern, whilst continued access to the UK at 12% was the second biggest issue.

Yet Isola quickly pointed out that, although there was no certainty of post-Brexit circumstances, “there are reasons –both

practical and legal – why concerns may well be overblown”.

Post Brexit, Gibraltar will be an external border of Spain, but that “does not mean Spain is free to act as it pleases”, Peter Isola declared.  There is EU legislation from last September regulating the “efficient” management of EU external borders that, although aimed at migration and potential future threats, is committed to ‘safeguarding the free movement of persons’ and ‘processing of personal data should respect the principles of necessity and proportionality’.

In addition, he pointed to a new European Agency being established under a EU Directive that will ‘oversee the effective functioning of exterior borders (particularly ‘neighbouring countries’) and ensure there are necessary additional resources, including ‘equipment, infrastructure, staff, budgets and financial resources’.

Cautiously optimistic

As Isola remarked: “I do not mean to underplay the challenge that this represents: uncertainty is never good for business.” Nevertheless, there are “good logical reasons to be cautiously optimistic”.

Gibraltar firms account for a substantial part of the UK’s eGaming market – 60-70% of sports betting, 50+% of casino and on-line bingo, and 10% of poker games – but most also have separate individual licenses to operate in European countries.

One of Gibraltar’s largest operators, 888, days earlier published its annual report that included a risk assessment on Brexit, which concluded that although the future was unclear, if the company operating in Gibraltar “…it’s ability to rely on EU freedom of services / establishment principles in supplying its services within the EU will be limited”; it might “become ineligible to retain existing licenses in some EU jurisdictions”.

Although the company could not control political changes, it would “reconsider the appropriateness of remaining registered, licensed and operational in Gibraltar in these circumstances. Malta may be considered as an alternative ‘dot com’ licensing jurisdiction,” 888 noted.

That position did not faze Minister for financial services and gaming, Albert Isola, who in opening the KPMG event, declared: “I would expect companies to make plans for what may happen at the end of the Brexit process – it is only right and proper – and I know every financial services and gaming firm has done exactly that.” He added: “I don’t see that as a negative” and promised consultation “with each of you to better understand what support and help we can give.  I am certain we will have a solution for you.”

So far this year, four licenses have been granted to providers of games to the sector, “which is where nearly all of the growth is coming from because we have all the major eGaming companies here already”, Phil Brear, Gambling Commissioner and Regulator, told Gibraltar International.

Despite eGaming industry consolidation, with an expected loss of five licensed firms, and the shadow of Brexit, there continues to be around 30 firms based in the jurisdiction.  Three more license applications are in the pipeline, but Brear revealed: “We continue to have expressions of interest that don’t meet our licensing requirements (either from the businesses not being sufficiently well established, or not dealing with what we consider to be mainstream markets).”

In financial services (that account for a further 20% of the economy, there had been 20 additional licences granted since the Brexit referendum, Minister Isola reported, and 20 more licenses were being processed, which together with more eGaming companies demonstrated “continued interest in Gibraltar as a safe, well-regulated jurisdiction”.

Isola assured his audience: “All of the discussions we have had with [UK government] across the spectre, whether fluidity at the border or continued access for financial services, has been very constructive.  Our relationship with the UK government is better than I could ever have hoped for and not just at a political level, but also filtering through to the officials, (which is always a challenge).  We have made clear that “this has to be done – there is a debt and an obligation to Gibraltar to maintain open trading links.”

Challenges remained, he acknowledged, and his Brexit review team were exploring “options and ideas”.  Government support for the sector is “unequivocal and we will do whatever we have to do to support and encourage you and ensure that you remain as profitable as possible during your stay in Gibraltar; you are an important part of the economy and it works for you and it works for us.”

Jay Stubina, co-founder of Continent 8, a provider of managed hosting solutions secured over a global private network, told Gibraltar International investment of $US5m for 200 data storage racks is being contemplated nearly doubling the number it already has within The Rock. The firm, which operates in 26 locations, spent $US10m in 2011to open in Gibraltar, and is “waiting to see how the dust settles” on Brexit before expanding.

Gibtelecom, which has 300 data racks at Mount Pleasant serving local businesses, has separated out its operation into a new company Rockolo, and it will install a further 200 racks in 2019.

Expert panellist, Peter Montegriffo, a lawyer at Hassans, maintained: “The UK point of consumption tax has been beneficial in some ways, in that it is has brought more traffic to Gibraltar, rather than to the UK.”

Double tax take

Clive Hawkswood, chief executive of the Remote Gambling Association – an industry lobby group – said the UK tax introduced last year had been expected to raise £300m revenue, “but they are getting double that.”  He added: “The UK is the largest gambling jurisdiction online in Europe and the most mature.”

Now the sector also faced dealing with an EU ruling on VAT for gambling, “although there is some leeway in its application as it could lead to the end of some markets as being unviable”, Hawkswood warned.

“Gibraltar is the exception [with no VAT]”, he said, “It is a very attractive jurisdiction, because overall the business environment is very positive.  The confirmation of the government’s unequivocal support for our sector is music to my ears.”

In the UK there were increasing demands in respect of tax on gaming ‘bonus’ offerings, advertising standards, social media activity and involvement of ‘affiliates’, he declared, and “I expect there will be a lot of tightening up on regulation” of the sector.  That meant greater certainty for operators, but also more cost.

However, Hawkswood suggested that “there is a move away from evidence-based decision taking and more towards what a government Minister wants to happen to satisfy public reaction” and even media references to the on-line gaming sector tended to add to negative public perceptions around people being addicted to gambling, even though only 0.7% of the population was classified as ‘problem gamblers’.

“Internationally that percentage is very low”, he maintained; the UK was the least affected, with Australia, Singapore and Ireland being the top three jurisdictions for problem gambling.

Anti Money Laundering (AML) activity is a growing consideration too, although it was suggested eGaming had relatively little.  Keith Bristow, chairman of the year-old Gambling Anti-Money Laundering Group representing 70% of the UK sector, admitted there was a risk the eGaming sector could be exploited by criminals working hard to ‘clean’ their money through gaming.  “The scale of money laundering generally is huge.  We are not talking about small amounts of money; certainly in the UK it runs into billions, not millions [of pounds Sterling].”

Collaboration needed

Now eGaming firms needed to work collaboratively on AML and study how members could share information and experiences – putting inter-company competition aside – on a legal basis, given the UK Regulator was demanding the sector should do so.  “The industry is low risk from a money laundering view point, but we can always do better”, Bristow conceded.  “I am not seeing rampant money laundering through online gaming.”

The Group intends publishing a report with suggestions for action later this year as part of transparent consultation, but requests from other jurisdictions to join the Group were been rejected for the time being.  “Whilst people want to know how we are tackling this issue, there is less interest in where the money comes from in the first place – through mobile phone use, banks, etc”, he declared.

Gibraltar also is looking to improve further its Gaming law.  Minister Isola said: “Our gambling review got side tracked, but we are picking up all the issues around Brexit to put us in an even better place for the next 10-20 years.”  In 2016, the government consulted on the internet block chain, Bitcoins and other virtual currencies, and as a result will publish by summer “a consultative document on the framework for legislation covering the gaming and financial services sectors, because the technology overlaps both sectors.”

As part of that review, the proposal is to establish later this year a new, enlarged structure to strengthen and broaden the scope of regulation and licensing of the gaming sector.

In parallel the government is looking to appoint a successor to Phil Brear (60), who is retiring at end-October after eight years, but he will then play a leading consultative role “to ensure continuity of approach”.

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A High Court challenge in October to halt UK remote gambling licensing was dismissed when it was found that the Gibraltar Betting and Gaming Association (GBGA) had “not established that the new regime is unlawful under EU law or domestic law”.

In the Administrative Court Mr Justice Green, added: “It is neither disproportionate, nor discriminatory, nor is it irrational”, as had been claimed by the GBGA.

However, he also concluded that Gibraltar is not to be treated as the same Member State as the UK and it is this aspect that has prompted the bid for a fresh Judicial Review, this time on the discriminatory effect of the new tax as it impacts on the provision of services between EU member states – a matter the GBGA regards as “of unparalleled constitutional importance”.

The hope is that a judge will be appointed to examine the validity of the claim and potential for Judicial Review – the stage at which the first JR bid failed – by November and, if supported, that there will be a full High Court hearing expedited before the new tax comes into effect on 1st December 2014.

Concern at the UK’s actions are not just rooted in the financial implications, given that the gaming sector accounts for a quarter of Gibraltar’s economy.

There have been claims that some companies may desert Gibraltar so as to avoid paying double taxation in both UK and Gibraltar jurisdictions. That potentially affects The Rock’s income from income, corporation and gaming tax and puts operators at a commercial disadvantage not just to UK operators, but particularly to rogue operators elsewhere over which the UK Gambling Commission has no jurisdiction and will be unable to enforce its regulations.

The effect of all that, it is argued, is also to weaken consumer protection. It could mean that “responsible foreign operators are forced to raise prices” [ie. offer less favourable odds or a high rake] says the GBGA, encouraging many consumers to move to companies with no regulation and lower overheads and where they “will face increased risks of fraud, non-payment and abuse”.

The GBGA case also maintains that the tax is a restriction on the provision of services between EU member states and there are “no equivalent precedents of the UK Government seeking to tax entities abroad in respect of the provision of services into the UK without going through the appropriate route of seeking harmonization through the EU”.

Again Mr Justice Green’s finding is encouraging. He pointed out: “Case law also establishes that measures restricting the freedom to provide services between Member States may not be justified on purely economic grounds”. He maintained that “a restriction designed to raise tax would be an economic objective and, as such, inadmissible as a justification.”

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