With new regulation not far from the horizon, James Scicluna of WH Partners speaks to eGaming Review about some of regulatory developments faced by Malta and its licensees

James Scicluna speaks to eGaming Review about some of regulatory developments faced by Malta and its licensees.

(eGR): What  upcoming regulatory changes can we expect, and how will these affect Malta’s egaming industry?

James Scicluna (JS): There are two main pieces of new gambling-related regulation in the offing: a set of regulations relating to gaming on cruise ships within Maltese territorial waters and another regulating “digital games” with prizes. The intention on the part of the Maltese government seems to be that neither should have a negative impact on the online gaming industry.

The latter regulations aim at regulating businesses offering “digital games” or “video games” in which a prize is up for grabs. We understand that these regulations would cover a variety of games predominantly based on skill, ranging from massively multiplayer online role-playing games (MMORPGs) to simpler player-to-player games and tournaments, where the winner gets a prize which has a clear value equivalent to cash.

The aim of the proposed cruise ship casino, as I understand it, would be to allow cruise ships to keep on-board casinos open even while berthed in Malta. It seems that the principal objectives of these proposed regulations are to afford customers on board cruise ships within Maltese territorial waters a level of protection equivalent to that available in land-based casinos in Malta and to create an incentive for cruise operators to increase their visits and lengthen their stays to the island.

eGR: How long is the process to license new products and games?

JS: To a large extent, the length of time for a license application to be processed depends on how quickly an applicant can get together the information required by the Lotteries and Gaming Authority (LGA). Assuming that this is properly put together and the LGA is satisfied that the applicant meets the conditions required for a licence to be issued, it can be issued between three to six months from filing the licence application.

Depending on its nature, a license may or may not be required in order to introduce a new product. If, for example, the operator is in possession of a Class 1 licence, which allows the operator to provide games in which it takes the full risk, such as fixed prize lotteries and casino games played against the house, an operator would require a separate Class 3 licence in order to provide bingo. Conversely, if it already provides slot games under a Class 1 licence, in order to add other slot games running on its own platform, it would merely require the LGA’s approval to add a game by submitting a description of the game and its rules.

Should the operator be running its business on a third party platform, that third party -which needs to be in possession of a Class 4 licence – would have to seek the LGA’s approval in this manner.

On the other hand, an operator wishing to introduce games run on a platform which it does not already host under an LGA Class 1 licence, must apply to the LGA for a change in its gaming system, which would include, amongst other items, the technical specifications of the new platform.

An operator wishing to introduce new games on a platform hosted by a third party would have to apply for a Class 1 licence on that third party’s Class 4 platform.  The LGA would also allow an operator licensed in another European Union (EU) country to offer games on a third party platform hosted under an LGA Class 4 licence and, conversely, would allow an LGA licensee to host games on a third party platform licensed in another EU country.

eGR: What can WH Partners do to help prepare for licensing?

JS: We guide our clients through the whole licensing process, from advising on the corporate structure and local tax issues to assisting with the preparation of documents required to be filed with the licence application and post-licensing compliance. We have several years of experience in this field and are lucky to have a team which can boast industry-leading expertise in this sector across issues ranging from licensing to mergers and acquisitions (M&A), corporate finance to employment.

eGR: What kind of regulatory developments have you seen in Malta over the last few years and what has their impact been on the egaming industry?

JS: Perhaps the most significant developments have been:

  • allowing Class 4 licensed software platforms to host and manage business-to-consumer (b2c) operators licensed from other EEA jurisdictions;
  • allow Malta licensees to host their equipment overseas; and
  • streamlining the application process, which has drastically reduced the lead times for operators to obtain a Malta licence, without affecting the quality of due diligence conducted on applicants.

This has undoubtedly contributed to the continued growth in numbers of LGA-licensed egaming operators, as well as the strengthening of its reputation, keeping it at the forefront of gaming regulation in Europe.

For some time the LGA has mooted the possibility of simplifying the licensing process with a view to reducing duplication of reporting procedures for licensees which hold multiple LGA licenses. It appears that these proposals are likely to develop into regulatory changes including the introduction of game neutral general business-to-business (b2b) and b2c licenses. This would allow larger operators to obtain only one licence for all their activities they run from Malta.

eGR: Is Malta still a leading jurisdiction within the egaming industry?

JS: I would say that it most certainly is.  Malta has managed to create a solid regulatory framework for gaming and the right economic environment for industry operators to establish themselves here.  A 2012 report commissioned by the Malta Remote Gaming Council (MRGC), a local industry organisation, showed that there were just under 4000 people in direct employment in the Malta’s remote gaming industry back in 2010. That number has certainly increased over the past two and a half years. Latest figures quoted in the media suggest that the number is now as high as 7000 people.

Apart from being attractive to operators seeking to obtain an LGA licence in order to offer “.com” operations as they are known, several operators now use Malta in order to run their “.country”operations in those countries, such as Italy, France, Spain and Denmark, which offer local licenses. The latter category of operators can do so because of the European law principle that licenses, including “.country” remote gaming licenses, must be available to entities established in any EU country.

Malta is certainly attractive to operators which have or wish to apply for “.country” licenses due to the fact that economic conditions, including the availability of good quality human resources are available here.

eGR: The use of technology within egaming is continuing to develop rapidly. Do you feel that egaming regulations in Europe are keeping up with these developments?

JS: My view is that, as a rule, regulation can only ever play catch-up. Technology will develop first. The key is how quickly and effectively regulation can be put in place to efficiently regulate technology, where regulation is needed.

The problem on the other hand lies where existing technology is ignored, by legislators and regulators who, for one reason or another, either do not trust or do not understand it.
I think that most regulatory systems in Europe did not embrace technology to the extent they should have at the moment they were put in place, and that they practically all lag behind.  One striking case is that of customer identification. Another is the archaic reporting requirements which several regulators still prefer.

eGR: What can regulators and service providers do to ensure Malta remains competitive?

JS: It is fundamental for both to stay on top of and understand the technology involved in this industry, the broader picture in terms of regulatory changes going on worldwide, but especially in Europe, as well as the business requirements of industry operators. In my view, both also have a responsibility to aim for excellence as their benchmark in their respective functions.

The interview was published in the eGR  Malta Report 2013.