How Gibraltar Became a Hub for Online Gambling Companies

Author: Matthew Haynes

Perched ceremoniously in the Southwesternmost corner of Europe and considered a gateway to the Mediterranean, Gibraltar, to many, is virtually unheard of. Once proclaimed a long-forgotten British backwater, the UK-owned colony now stares defiantly at those who had all but written it off.

While it was always a useful military base, it had nothing else really going for it that it could effectively boast about - that is, until the late nineties when one man made a move that sparked a domino effect, transforming the fortunes of the ‘Rock’ almost overnight.

Gibraltar’s Beginning and the Chandler Legacy

British businessman Victor Chandler essentially had his fingers on the pulse when it came to operations. One thing he quickly realized in the late nineties was that transitioning from brick-and-mortar casinos and bookmakers to an online enterprise would be a smart move.

However, identifying new premises in order to be able to execute this proved to be more than a tricky exercise. That is, until Gibraltar came under his radar. Realizing the many advantages that this would provide his company and still being British-owned, he swiftly got to work, looking for office space on the Rock that would eventually accommodate a workforce the size of his ambitions.

It wasn’t long before Chandler closed down all operations in the UK, effectively rendering them unnecessary, and turned his attention to the online sector of the gambling industry - at the time, still a major gamble.

Opening ‘Victor Chandler’ in Gibraltar and launching a website not long after, the company began taking telephone bets to help it in its changeover while also launching an advertising and marketing campaign to help make people aware of its website.

At the time, Gibraltar still relied on tourism as its main source of income, and even then, it had a hard task drawing in visitors - arguably, the only mildly intriguing selling point being that the Rock had monkeys at its summit. There were many advantages to Chandler in making the move, though. Initially bringing 80 employees with him to help get the firm off the ground, it was also benefitting from much favorable tax rates. The better than average, year-round climate also made it a major selling point for attracting further employees from the UK.

Having started completely new departments in the company to cater to different online functions, it wasn’t long before envious glances were cast from competitors who were beginning to realize that this was a smart move after all.

In the years that followed, eager to not be left behind, a number of big companies followed Chandler’s lead, also establishing a base in Gibraltar, albeit while retaining headquarters in the UK and, in some cases, betting shop operations. As such, the likes of William Hill, Coral, Ladbrokes (the ‘big three’), and Stan James all moved to Gibraltar, with this quickly being viewed as a major prospect in the online gambling world.

Many more companies soon followed - even software providers for the industry, to cater to the numerous operators that had moved there. It meant that almost overnight, Gibraltar effectively went from a ghost town to a thriving, busy hotspot. The emergence of the online gambling industry in Gibraltar had a major knock-on effect. In terms of job creation, this gave an immediate lift to the local economy, with infrastructure needing to be built in order to accommodate the influx of new employees on the Rock.

From private residences to commercial hospitality venues, the landscape of Gibraltar soon began to change dramatically. A complete revamp of infrastructure led to the construction of new bars, offices, shops, and even hotels and spas to meet the demands of what was becoming a swiftly growing industry.

All of a sudden, Gibraltar had transformed from an initial gamble into a sure thing, and new employees were flocking in their hundreds to work for an industry that was now one of the biggest growing in the world. Thanks to the development of online and the widescale emergence of technology, companies had begun to notice a considerable uplift in terms of traffic to their sites, and as a result, they were keen to capitalize on this by growing even more. By the mid-2000s, the British colony was almost unrecognizable, and the economy was booming. This was in stark contrast to its annexed neighbor Spain, with the border town La Linea displaying anything but the riches that Gibraltar could offer.

Such was the quality of the redevelopment in Gibraltar that it started to attract tourists from some of the wealthier countries around the world and, as such, could adequately cater to their requirements. Two land-based casinos - the Admiral being the principal one and the Sunborn’s very own luxury casino - on a floating yacht hotel that sits impressively in one of Gibraltar’s development projects as part of the online gambling boom.

In order to attract top talent, online gambling companies offered new employees multiple benefits and higher-than-average salaries, with many often bidding for the same candidates.

Throughout the 2000s, Victor Chandler experienced much change, with a number of rebrands, before completely renaming itself BetVictor, with its luminary founder having since left.

Gibraltar Online Gambling – The Rise

By the mid to late 2000s, online gambling was well and truly considered a major industry, this becoming even more certain following the development of mobile technology, especially smartphones which had become even more sophisticated.

As a result, this meant that online gambling companies expanded further to accommodate mobile divisions, with many becoming ‘mobile-first’ in response to the explosive growth of smartphone usage for online gambling activities.

In addition, software providers soon began to realize this, with the likes of Playtech establishing operations there to cater to the growing demand. However, perhaps the biggest factor for the growth in Gibraltar occurred when the ‘big three’ moved their operations there.

Effectively this was the transistor and made the rest of the industry sit up and take notice. Having a presence in Gibraltar was becoming a priority, even for many new companies, such as bet365, however, like for many, this was only for partial operations. Its main business was based in Stoke-on-Trent (England), while Coral’s PR department was run mainly from London.

This meant that headcount varied (and still does) in terms of the biggest online gambling companies on the Rock. Firms like BetVictor (as it is now called) are based entirely in Gibraltar, apart from a small IT outpost in Bulgaria, though others are scattered around Europe.

Malta’s emergence as a major online gambling stronghold further east across the Mediterranean saw a number of companies pull most of their operations out of Gibraltar and relocate to the small island.

Understandably, this caused a few ripples across the landscape of Gibraltar as some employees changed their geographical allegiance. Malta’s emergence as a competitor to Gibraltar was essentially stimulated by the Brexit vote, which saw the UK split off from the European Union, which in turn caused a number of effects, especially from an economic standpoint. For a number of firms, Malta was seen as a very viable alternative.

Gibraltar Eyes New Prospects with Fintech and Cloud Services

Over the last few years, a number of other industries have appeared in Gibraltar that have become essentially interlinked with the online gambling sector and the link between online casinos and fintech has become more present than ever.

Speaking at а KPMG eGaming conference, senior partner at Isolas Law Firm, Peter Isola, talked about some of the opportunities that could be unveiled for the Gibraltar online gambling industry with the emergence of new ideas, revealing: “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.

Partner specializing in iGaming at Hassans law firm, Peter Montegriffo, reminded: “We still have the original remote gambling licenses.

The proposed reforms are not just about the 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.

It appears that servers would play a major part in this, or so it was agreed, with Gibraltar Gambling Commissioner, Andrew Lyman, weighing in: “The present licenses for gaming companies are predicated on the 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.”

Taxation Implications and the US Factor

From a tax perspective, there were a number of implications, with some of these interlinked with gambling companies’ existing remote servers. There were numerous fixed odds betting terminals in and around Gibraltar due to high demand from gamblers. Consequently, these remote gambling companies with servers there saw the point of the consumption tax increase from 15 percent to 21 percent.

Gibraltar Betting & Gaming Association (GBGA) representative Paul Foster revealed some of the motivations behind this decision, explaining: “That has put further pressure on Gibraltar-based gaming companies because we are paying more tax directly to the UK, reducing profitability in Gibraltar and making the local 10% corporate tax rate less beneficial as there is less to tax.”

He continued: “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 profit hit of between 5 – 10%; as a result, some were even down by 20%.

Foster was also emphatic in response to the US legalizing sports betting in several states, revealing the effects that this could have on the wider industry, with many Gibraltar-based firms establishing relationships with US casinos, saying: “Concern over Amazon and Google is not misplaced – we can never rule them out – so we should be wary as an industry.”

Foster, who was Digital Compliance and RG Operations Director for the then GVC Group (now Entain), Gibraltar’s largest online 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.”

Stay tuned for part 2 of The rise of Gibraltar.