2012

One of the gaming industry’s growing trends is the rise of B2B operators that host and manage games and provide a range of related ancillary services to B2C operators, while the latter concentrate more on player-side of the operations.  The role of B2B providers equipped to serve B2C operators in multiple jurisdictions is becoming ever more important in the increasingly fragmented EU regulatory scenario.

Maltahas offered a solution for B2B gaming providers in the form of the Class 4 licence from the Lotteries and Gaming Authority since 2004. The applicable legislation has been amended in 2011 to allow B2B gaming providers who are in possession of a valid LGA Class 4 licence to significantly widen their reach for potential clients to whom they can offer services from one and the same physical infrastructure.

Essentially, the new amendment allows Class 4 licensees to act as platform providers for B2C operators licensed by the government or competent authority of any EU/EEA Member State or any jurisdiction approved by the LGA – and not only for those B2C operators who have a licence granted by the LGA in Malta, as was previously the case. Post-amendment, therefore, an EU/EEA country-licensed B2C gaming operator wishing to avail itself of aMaltasetup of a B2B game provider does not need to apply for a Malta B2C licence under the Remote Gaming Regulations (i.e. a Class 1, Class 2, or Class 3 licence) in addition to its EU/EEA licence.

As of the time of writing,Maltais the only full EU Member State which explicitly and specifically licenses and regulates B2B providers, quite separately from B2C licensing, while providing significant tax advantages and business friendly incentives for such providers and their clients. Under this setup, the overall benefit of such setup in Malta to both B2B companies and their B2C clients within the EU/EEA is far greater than that emanating from incentives offered by other countries offering B2B licences, such as by the Isle of Man. The latter’s Network Services Licence for B2B providers can, in fact, be significantly more expensive without giving the advantages of having an EU-based licence.

B2B remote gaming supplies are not regulated at EU level and it is very likely that they will continue to be unregulated as such, notwithstanding the current momentum that is building up on the topic of potential regulation of remote gaming activities in the EU. This assessment is based on the fact that the focus and scope of the current debates at the EU level are strictly related to consumer / player protection and the protection of public order issues – such as establishing the minimum standards for the protection of minors and vulnerable persons, protection of players’ funds, keeping the industry free from crime and similar matters, which are essentially B2C matters.

The main advantages for a B2C operator to choose a supplier who is licensed in Malta include the legal certainty that the provider is a serious company that has passed rigorous checks by a competent and reputable authority in an EU jurisdiction, that its games, including any random number generator used, are tested and fair and that a high level of player protection features are available as a standard offer. This significantly lowers the risks associated with political and operational contexts for the B2C operator.

A further added bonus for a B2C operator, especially an operator active in a number of regulated markets within the EU/EEA, is that using a Malta-licensed B2B provider allows for a more cost-effective setup. As differences in reporting and regulatory compliance requirements in different regulated markets demand significant additional costs and resources from B2C operators, making compliance costs very high or even prohibitive for some operators, using a B2B provider geared up for regulated markets enables the B2C operators to reduce costs and operational overheads through the B2B provider’s utilisation of economies of scale and replication of similar functionality across multiple B2C licensees. Furthermore, B2C operators can achieve better separation of their core business of managing the relationship with their players from non-core issues and services that may be more efficiently outsourced to the B2B providers, while also improving their B2C offering to players by taking on board multiple game providers. Such arrangements, when structured properly, can provide significant legal and commercial advantages to the B2C operators who work with B2B licensees and result in overall risk reduction via a clearer separation of roles and a transfer of certain responsibilities to the B2B licensee.

Maltaoffers an extensive and mature service industry, workforce and infrastructure that support the gaming industry. Moreover, B2B licensees under the Class 4 license are required to undergo the rigorous LGA licensing procedures, which involve checking by the Authority of the business viability of the operation, conducting of a ‘fit and proper’ exercise on the applicant, checking of the provider’s policies, procedures, as well as evaluation of the technical setup and its components.  The regulatory oversight continues throughout the whole 5-year licence term to ensure that B2B’s systems are robust and compliant with the applicable legislation and provide an adequate level of assurance for business continuity and disaster recovery, thus further decreasing the risks of B2C operators opting for a Malta-licensed B2B supplier.

As mentioned above, the above advantages of using a Malta-licensed B2B supplier are now available also to all EU/EEA based B2C operators thanks for the recent amendments of the law, thus making theMaltasetup more flexible and more accessible for a wider range of B2C operators. It must be noted that this flexibility is further extended by the fact that it is possible for a B2B provider to locate certain parts of its under its Class 4 licence not only in Malta, but also anywhere within the EU/EEA, provided that compliance with applicable regulations is assured and that the consent of the LGA for the setup is obtained. This therefore increases flexibility and ensures that Class 4 licensees are able to provide the most efficient and economical setup to their B2C clients.

To sum up,Malta’s Class 4 B2B licence offers a solid foundation for B2B operations that want to be licensed in the EU and offer their services within all EU/EEA Member States. The unique and specialised nature of the B2B licence, which is currently only offered in the EU by Malta, coupled with the well-established industry and regulatory oversight and support offered by the LGA, makes it an attractive and well-positioned opportunity for both emerging and established B2B suppliers and their B2C clients.

Author:

Olga Finkel(olga.finkel@whpartners.eu)

First Published in:

LGA(Lotteries and Gaming Authority) Remote Gaming Update 2012

Link:

http://www.lga.org.mt/lga/content.aspx?id=87573