If we spoke to you about the ‘Chandler effect’ you might be forgiven for thinking we’re talking about Matthew Perry’s character from the NBC sitcom Friends. In fact the Chandler effect was the name given to the relocation of several UK-based gambling companies to Gibraltar in the early 2000s. The name comes from the first company to make the move – Victor Chandler. The sports book was soon followed by two other gambling giants – Gala Coral and William Hill. Very swiftly several other leading wagering firms made the jump to the tiny British Overseas Peninsula.
“It’s easy to see why online casinos and sports books found Gibraltar such an attractive proposition,” says Peter Addison, a contributor at leading online gambling info-site CasinoUK. “The territory has a basic corporation tax rate of ten percent, and only a one percent tax on profits generated by gaming. Compare that to nearby Spain, where profits from gambling are taxed at twenty-five percent.”
It can just as easily be considered that Gibraltar is something of a gambling oasis for companies that base themselves there. These companies control around sixty percent of the global gambling market and generate over £25bn per annum for the industry. However, the prospect of Brexit has thrown this idyllic status all out of kilter. It’s just one of the effects that Brexit is likely to have on the online gambling industry as a whole.
Gibraltar-based wagering companies typically offer their services where permitted to other EU-based companies, but if – as is expected – Gibraltar leaves the EU with the UK, it would fall outside the European Economic Area, and therefore any licensing agreements with EU-based countries would become null and void.
“One possibility would be for companies that are based within Gibraltar to move their headquarters back into EU territory,” said Addison. “However, that would complicate matters with the UK, and licensing from the UK Gambling Commission. We’d have to see a second ‘Chandler Effect’ before we can understand what is going to happen.”
The passing of the 2014 version of the UK Gambling Act was supposed to make the UK a more attractive proposition for gambling companies, but that never materialised. The 2014 changes made it mandatory for any company that offered gambling services to UK residents to possess a UK Gambling Commission licence. With that necessity came the requirement to pay a fifteen percent ‘Point of Consumption’ tax to the UK Government’s treasury.
Post-Brexit the UK could be even less of an attractive proposition for online casinos, sports books and poker rooms. Licensing agreements in EU-based countries usually stipulate that applicants be members of at least the European Economic Area – a privilege not likely to be extend to the UK once the long and complicated Brexit process is completed.
The UK took a leap of faith when it voted to leave the EU, and it seems that many aspects of the online gambling sector are in for an equally bumpy ride.