Legal Defeat for Gibraltar a Blow for UK Online Casinos

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Publish: October 12, 2014

A legal challenge by the Gibraltar Betting and Gaming Association (GBGA), the licensing and regulatory authority for a number of international online casino brands, against the UK government’s proposed introduction of the Gambling (Licensing and Advertising) Act 2014 has been rejected by the High Court.

The basis of the GBGA challenge, which was launched in August, was that the Act contravened European law on the free movement of services with the European Union, and it characterised the legislation as “unlawful” and the system as being “illegitimate and discriminatory.”

Peter Howitt, CEO of GBGA, said the UK Gambling Commission “has neither the resources, the legal powers, nor the skills to operate successfully across the globe,” and that Gibraltar was far better placed than the UK to be able to regulate online gaming operators based in its jurisdiction.

However, the rejection of the challenge by Judge Nicholas Green was not entirely unexpected. In passing judgement, Justice Green said, “Parliament was clearly within its rights to act as it did.”

The Gambling (Licensing and Advertising) Act 2014, which was designed to bring online gambling companies based in offshore locations such as Gibraltar and Malta into the UK tax system, may have profound effects on the way online casinos operate in the UK.

Under its provisions, any online operator who wants to advertise or provide remote gambling services to players in Britain will need to apply to the UK Gambling Commission for what is known as a Point of Consumption Licence. This will then mean they are liable for UK taxation at a rate of 15% on all winning bets made by UK players, as well as making them subject to a number of other licensing conditions and regulations. It is estimated that the new legislation could cost the industry in the region of NZD$617 million each year.

This introduction of the Act has been seen as a bid by the UK government to tighten controls on the online gaming sector, although many within the industry consider it little more than a cynical revenue raising move by a cash-strapped Coalition government, although this was a view rejected by Justice Green. It is unclear at the moment as to whether the GBGA is intending to appeal the ruling.

It is feared that the Act, whose introduction was postponed from 1 October to 1 November pending the High Court ruling on the GBGA challenge, will only increase the number of rogue online casino and sportsbook operators who will remain unlicensed so as to avoid taxation, and who therefore offer UK players no protection against fraud nor legal procedures for redress.

There are also further changes planned regarding the licensing of gambling software in the UK that are due to become law in March 2015 and which will place further restrictions on the industry.

Last updated May 20, 2015