Tackling the challenges of cross-border operations

The knee-jerk reaction to Brexit – as was borne out by the financial markets’ immediate response – was a generalised fear of disruption and uncertainty. But that anticipated chaos, at least when it comes to online gambling, overlooks an important fact. The UK had already broken from tradition by imposing a highly disruptive point of consumption regime, requiring even white-listed gaming licensees servicing UK residents to adapt to a new, UK-specific regulatory process.

That move drew widespread objection outside the UK, most notably from the Gibraltar Betting and Gaming Association (GBGA). Indeed, the GBGA brought a legal challenge in the UK High Court, arguing that the new UK regime violated the principle of free movement of services under EU law.

As one of the fundamental goals of the European Union was to harmonise and facilitate cross-border trade, the GBGA’s argument was straightforward: legislation that hinders that objective – absent a justification firmly grounded in public policy, health or security – should be struck down. Ultimately, the High Court referred the matter to the EU Court of Justice to determine the applicability of EU law – an issue that Brexit may well now have rendered moot.

Status quo?

But does it truly matter? With or without Brexit, the gambling industry is no stranger to complying with multiple licensing and regulatory regimes. Even if the UK remained in the EU and EU law guaranteed that, when it came to gaming regulations and licensing, one size truly fits all – which is not the case in any event, given the PoC licensing regimes in France, Germany and Ireland.

There are still many lucrative gambling markets outside the EU. As long as the associated administrative and financial burdens are offset by the value of unlocking those customer bases, operators will comply.

More generally, over time the market tends to correct itself in this regard. That is, when licensing regimes are too onerous, black markets flourish – directly undermining the very objectives licensing regimes exist to accomplish.

As a result, licensing requirements are frequently similar across borders, which means a well-organised, diligent compliance department will already have the infrastructure in place to navigate most jurisdictions’ application and compliance protocols. And to the extent a licence does, in fact, require something more disruptive, successful companies are already well-accustomed to performing the type of cost-benefit analysis necessary to determine whether that undertaking is worth it.

Granted, global (or even regional) harmonisation of gaming regulations would be phenomenally efficient, and undoubtedly pro-competitive – as even start-up companies could more easily join the fray.

Stateside

Ironically, the US may be headed in this direction as a result of a recent ruling against New Jersey, upholding US federal law prohibiting sports betting. Had New Jersey prevailed, state-by-state regulation might have become the norm.

Now instead, if and when the US decides to repeal the prohibition and regulate betting, the federal government is better positioned to impose nationwide guidelines, which may ultimately help streamline the process.

For now, however, most operators need not panic; navigating divergent regulatory regimes – whether within or outside the EU – is really little more than business as usual.

What should be concerning, however, is the rapidly changing technologies and trends within borders, where customer preferences and habits can seemingly turn on a dime. Short of accurately predicting the future, the industry’s best protection against these ongoing changes is simply to stay flexible, both in terms of company infrastructure and technology.

Massive investments in building technology in-house has become too risky in its susceptibility to obsolescence, which is where young companies offering outsourced solutions often have an advantage. It’s a given that newer and more attractive products will continue to emerge; the only variable is how well positioned companies are to embrace and adapt to them.