How Brexit no-deal impacts the gambling sector in Italy

The Brexit withdrawal agreement could mean good news for the gambling companies operating in Italy, but it unveils considerable uncertainties if not approved. 

I had discussed about the impact of Brexit on the gambling sector in this article, but here is an update after the publication of the Brexit withdrawal agreement.

The Italian gambling law obligation on location of servers and license holders

Italian gambling law requires for both online operators and AWP/VLT licensees that:

  • the license holder is a company with registered office in the European Economic Area and
  • the technical infrastructure, hardware and software, dedicated to the activities subject of the license is in a country of the European Economic Area.

There are considerable discussions as to what can be considered as “dedicated to the activities subject of the license” and for instance as to whether a disaster recovery system can be located outside the EEA, since it is not meant to be operational, but just to activate in case of disaster. However, provisions on the matter are ambiguous and there are no precedents where courts or the regulator gave a clear interpretation.

The consequence of the above requirement was that gambling license holders operating in Italy and based in Gibraltar were ready to relocate their company to (most likely) Malta following the Brexit.

How Brexit withdrawal agreement might change the strategy of gambling companies operating in Italy

The Brexit withdrawal agreement establishes a transition period from 30 March 2019 until 31 December 2020 during which the UK will remain subject to all EU laws (other than those expressly excluded within the Brexit agreement). The UK can extend the transition period (once) by notice before 1 July 2020.

During such period, all references in EU law to Member States and competent authorities of Member States are to be understood as including the United Kingdom and its competent authorities during the transition period. And the same agreement refers expressly to Gibraltar as part of the definition of United Kingdom.

This means that Italian gambling license holders might – in theory – keep their registered office and technical infrastructure in Gibraltar up to the end of 2020, as if nothing had happened. And this would be in line with the interpretation adopted by the Italian gambling authority which held that no need of relocation for Gibraltar based license holder or entities applying for an Italian gambling license applies, up until the regulatory scenario is clarified.

And if the Brexit withdrawal agreement is not approved?

The Brexit withdrawal agreement is likely to be welcomed by gambling operators licensed in Italy. However there is a high risk the agreement will not be ratified by the UK Parliament. In such a case the UK would leave the EU on 29 March 2019 without any transitional arrangements in place.

This means that if gambling operators licensed in Italy bet on the approval of the Brexit withdrawal agreement and do not put in place a relocation strategy, they might have to end up in a scenario where they have to move to an EEA country in just a few months.

It is definitely a gamble, but there are solutions that might enable operators to benefit of the Gibraltar tax-related benefits and avoid major risks in case of lack of ratification of Brexit withdrawal agreement by the UK Government.

On the same topic, you may read the article “Top 6 effects of the Brexit withdrawal agreement on personal data“.

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Giulio Coraggio

I am the head of the Italian Technology sector and the global head of the IoT and Gaming and Gambling groups at the world-leading law firm DLA Piper. IoT and artificial intelligence influencer and FinTech and blockchain expert, finding solutions to what's next for our clients' success.

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