Navigating gaming and gambling law and regulation in Malta

INSIGHTS

01 Jun 2022

Over the past 20+ years, Malta has established itself as the pre-eminent European jurisdiction for remote gaming and gambling. Malta’s success in online gambling is due largely to its legal environment. In 2001 it amended its gambling laws to take into account the possibility of gaming or gambling by means of remote communications and in 2004, it became the first European Union member state to adopt detailed regulations for online gambling. It has continued its drive to innovate the legal framework to keep up with industry and technological developments. In August 2018, a new legal framework was implemented to address market and technological developments and consumer trends, providing a modern, sophisticated, and solid framework for the regulation of remote gaming operators based in Malta or seeking to target the Maltese market. In addition, the Malta Gaming Authority (“MGA”) continually strives to clarify legal issues as they arise and provides much-needed legal certainty by regularly issuing guidance documents.

THE GAMING ACT

The Malta Gaming Act (“Gaming Act”) came into force, together with a number of regulations on August 1, 2018, superseding the previous legal regime. The result is a tiered framework: an act of Parliament, supported by subsidiary legislation and other binding and non-binding instruments which together provide flexibility in the application of the law. Obligations on gambling operators are laid down in subsidiary legislation and instruments published by the MGA allowing for more technical requirements to be amended without recourse to parliament.

LICENSING UNDER THE GAMING ACT

The Maltese regulatory regime divides operating licenses into two classes: B2B and B2C as follows:



B2B Critical Gaming Supply license


B2C Gaming Service license



  • Supply and management of material elements of a game
  • Supply and management of software to generate, capture, control or otherwise process any essential regulatory data
  • Supply and management of the control system




  • Offering, provision or operation of a gaming service
  • Hosting by a person in public premises a gaming operation, making available for use a gaming device or gaming system therein


These two license classes apply to both remote and land-based businesses and cover the provision of the different gaming service types across multiple distribution channels. A second level of authorization is required for approval of each specific gaming vertical across the individual distribution channel (e.g., land-based and/or online) proposed to be used under the license as follows:



B2C Licenses


TYPE 1: Games of chance played against the house, the outcome of which is determined by a random generator, including casino type games (roulette, blackjack, baccarat, poker played against the house) lotteries, secondary lotteries and virtual sports games;

TYPE 2: Games of chance played against the house, the outcome of which is not generated randomly, but is determined by the result of an event or competition extraneous to a game of chance, and whereby the operator

manages his or her own risk by managing the odds offered to the player;

TYPE 3: Games of chance not played against the house and wherein the operator is not exposed to gaming risk, but generates revenue by taking a commission or other charge based on the stakes or the prize, and it includes player versus player games such as poker, bingo, betting exchange, and other commission based games;

TYPE 4: Controlled Skill Games such as fantasy sports.

As a result of the license simplification introduced through the Gaming Act, operators can bring new games to market more quickly and efficiently. Operators must notify the MGA of minor changes in their operations, such as the addition of new games within the gaming vertical of their license and the addition of a URL for the provision of their gaming service(s). This is done via an easy-to-use online portal which is made available by the MGA to licence applicants and licensees.

MGA authorization is required for changes which may cause a significant modification to the licensee’s risk profile, such as the addition of a new gaming vertical or a new distribution channel.

Simplifying the license categories has also resulted in a “one operator one license” scenario, with the exception of operators who offer both B2C and B2B services and those who choose to structure themselves differently. The license validity period is ten years under the Gaming Act.

THE APPLICATION PROCESS


GAMES OF SKILL

The Gaming Act defines “gaming” as participation in a game, the offering of a gaming service, or the making of a gaming supply. “Game” covers both games of chance and skill. “Game of skill” refers to an activity, the outcome of which is determined solely or predominantly by the use of skill, but excluding sports events. The MGA determines a game’s classification based on criteria including game structure and the number of variables built into a contest to subvert the elements of chance. It is for the operator/promoter of a skill game to show that it meets the criteria. The MGA also has the power to determine whether a game is a controlled skill game, the only type of licensable “game of skill” under Maltese law. A game of skill which is not subject to such a ruling does not require a license.

LICENSE FEES

The Gaming Act brought with it not only a change to the license categories, but changes to license fees and gaming taxes, too. The 2018 Gaming License Fees Regulations provide for: (1) a fixed license fee payable by operators yearly in advance and (2) a monthly variable fee (known as the “Compliance Contribution”) payable only by B2C operators. B2C operators are also liable to pay a 5% tax on gross revenue generated from Malta-based players although the size of the market means this does not represent a significant burden. The Compliance Contribution is calculated according to the gross gaming revenue generated by the operator in question for operations undertaken through its Maltese license. This has reduced costs for larger B2C operators using several games suppliers while creating an obstacle for startup companies. These have been helped by a twelve-month moratorium for the payment of Compliance Contribution easing their financial burden at a time when they need to invest significant funds.

GROUP LICENCE

As well as an individual MGA license, a group (or “corporate”) license can now also be obtained covering the activities of several related companies, so long as each of them is established in the EU or the EEA and owned at least 90% by the same ownership.

KEY ROLES

There is now no requirement to appoint a person within the operator’s organization to the role of key official. Now, licensees must identify those persons within their organization responsible for the core management of the operator’s business, known as “key persons.” They need not be resident in Malta but must be approved by the MGA and available to meet with the MGA when requested. The main key functions are the following:

  • the chief executive role,
  • the management of the day-to-day gaming operations of the operator, which includes the management of financial obligations of the operator, the management of risk strategies and the prevention of fraud;
  • compliance with the obligations of the operator, including obligations relating to responsible gambling, player support, marketing, and sports integrity;
  • legal affairs of the operator, including dispute resolution;
  • adherence to applicable data protection and privacy legislation;
  • prevention of money laundering and financing of terrorism;
  • technological affairs of the operator; and
  • internal audit.

With regards to operators of gaming preemies and national lottery, there are additional functions which need to be fulfilled.

With amendments to the Gaming Authorisations and Compliance Directive, brought into effect in October 2021, the MGA clarified that an applicant company for a license needs to identify and get approved before getting the respective license, at least the persons who will be responsible for the chief executive role, the compliance role and the money laundering role on application. The other roles have to be appointed and approved within 6 months of the license being issued.

FOREIGN LICENCES

The Gaming Act allows suppliers and operators established in Malta to operate under a license issued by a regulator in another member state of the EU or EEA, or a third country which is deemed by the MGA to offer safeguards largely equivalent to those under Maltese law. A company holding any such licence and operating in Malta must apply for a Recognition Notice from the MGA. Once a Recognition Notice is issued by the MGA, that foreign license has the same legal effect as an authorization issued by the MGA. A company that obtains a Recognition Notice is also required to pay gaming tax in Malta on the gross revenue generated from Malta-based players. A Recognition Notice is also required for those suppliers and licensed operators who although not established in Malta want to take business from Malta with their EU or EEA license.

CONCLUSION

The new legal framework delivered a robust, logical, and technologically neutral basis upon which to regulate the gaming and gambling industries. For it to achieve its potential, the application of the law is critical to putting the spotlight on the MGA. Overall, Malta’s overhaul of its gambling laws has been a success. It achieved three policy objectives simultaneously: (1) minimal disruption to the industry; (2) a more solid, streamlined legal framework, and (3) provision for emerging technologies. It reduced red tape whilst increasing the MGA’s supervisory effectiveness and increased Malta’s attractiveness as a jurisdiction in which to operate.

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