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The Overhaul of Malta's Gaming Regulatory Framework

03.11.2017

The White Paper issued on 12th of July seeks to address a number of issues towards revolutionising the legal framework and future-proofing the industry. 

In the first place, it aims at replacing the current multi-licence system with a system in which there will be two different types of licences – a Business-to-Consumer (B2C) licence and a Business-to-Business (B2B) licence, both for remote and land-based operators, thereby addressing the increased product and technology convergence between online and land-based gaming.

The licence period is to be extended from the current 5 years to 10 years, and the White Paper provides also for the introduction of a “limited duration licence” with the term to be established at the discretion of the Malta Gaming Authority.

Low Risk Games, comprising non-profit games and commercial communication games, including limited commercial communication games shall not require a licence but rather a Low Risk Games Permit. Additionally, the requirement to obtain a licence to operate an amusement machine shall be removed, albeit that operators are to register the machine with the MGA.

Innovatively, suppliers of material non-critical gaming supplies, such as risk and fraud management, event and odds management systems, holding or managing player funds, player identity verification systems and back-up and disaster recovery services, shall merely require an approval from the MGA before commencing the supply.

Licence fees shall, pursuant to the draft regulations, be made up of fixed and variable parts. A fixed licence fee of between €25,000 and €35,000, shall fall due every twelve months, in advance, while the variable component is calculated according to gaming revenue, further varied depending on gaming type.

Providers of back-end services, or a control system whereby significant regulatory data is captured, stored or processed shall be subject to a fee ranging between €3,000 and €5,000 per year. A six-month moratorium on licence fees is being proposed for start-ups fulfilling the criteria considered in the Gaming Licence Fees Regulations.

Gaming types shall be four, and each type has been allocated a sliding scale of variable licence fees that will be due in addition to the aforementioned fixed licence fee.

1.  Games of chance played against the house, the outcome of which is determined by a random generator, and shall include casino type games, including roulette, blackjack, baccarat, poker played against the house, lotteries, secondary lotteries and virtual sports games.

Where Gaming Revenue does not exceed €1,000,000                   €12,000.00
Where Gaming Revenue does not exceed €5,000,000                   €54,000.00
Where Gaming Revenue does not exceed €10,000,000                  €120,000.00
Where Gaming Revenue does not exceed €20,000,000                  €210,000.00
Where Gaming Revenue does not exceed €45,000,000                  €330,000.00
Where Gaming Revenue does not exceed €75,000,000                  €480,000.00
Where Gaming Revenue exceeds €75,000,000                  €660,000.00

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.

For every euro of the first €3,000,000 4.00%
For every euro of the next €4,500,000 3.00%
For every euro of the next €5,000,000 2.00%
For every euro of the next €7,500,000 1.00%
For every euro of the next €10,000,000 0.80%
For every euro of the next €10,000,000 0.60%
For every euro of the remainder 0.40%

Minimum Variable Fee €25,000 and Maximum Variable Fee €600,000

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 shall include player vs. player games such as poker, bingo, betting exchange and other commission based games.

For every euro of the first €2,000,000 4.00%
For every euro of the next €3,000,000 3.00%
For every euro of the next €5,000,000 2.00%
For every euro of the next €5,000,000 1.00%
For every euro of the next €5,000,000 0.80%
For every euro of the next €10,000,000 0.60%
For every euro of the remainder 0.40%

Minimum Variable Fee €25,000 and Maximum Variable Fee €500,000

4.  Controlled Skill Games

For every euro of the first €2,000,000 0.50%
For every euro of the next €3,000,000 0.75%
For every euro of the next €5,000,000 1.00%
For every euro of the next €5,000,000 1.25%
For every euro of the next €5,000,000 1.50%
For every euro of the next €10,000,000 1.75%
For every euro of the remainder 2.00%

Minimum Variable Fee €5,000 and Maximum Variable Fee €500,000

Land based operators, that is, providers of gaming services to players physically present in Malta shall, in addition to the fixed and variable licence fees become subject to pay gaming tax, at the rate of 5% of the gaming revenue generated from the said gaming services. 

Furthermore, should the gaming devices used be tantamount to a Qualifying Activity, they shall bear a levy on the gaming devices including slot machines, gaming tables or tickets located or sold in gaming premises, calculated as a percentage of total gaming revenue generated, via an increasing sliding scale. B2B operators shall no longer be subject to gaming tax, whether remote or land-based.

Also appreciable is the intended adoption of a risk-based approach both at licencing stage and monitoring stage, whereby licencees will be allocated a risk rating, and on-going due diligence and frequency of compliance audits shall be required with reference to said rating, albeit it is intended that the first-year compliance audit be retained.

The move towards automated reporting, facilitating adherence to regulatory obligations is also encouraging. To this effect, various initiatives are currently being explored by the Authority, to ensure optimum results with minimal impact on the compliance and other operational costs of licensees.

The Malta Gaming Authority is conscious of the rise of crypto-currencies as payment methods and is committed to allow the use of crypto-currencies by its licensees in the immediate future. In this respect, the Authority is expected to engage in a public consultation exercise towards the end of 2017. Amendments to the draft clauses published with the White Paper and the directives detailing the processes towards achieving the aims of the thereof, pursuant to the closure of the consultation process are also expected to be issued by the end of 2017.

Generally, the regulatory design of the new Gaming Act as foreseen in the White Paper seems very much in favour of promoting technological, channel and game neutrality, thereby accommodating continuing innovation and industry developments, whilst attaining its regulatory objective to develop Malta as a centre of excellence for gaming-related competencies and skills.

For more information please contact Oliver Zammit or Dr Alexandra Dimech from International Client Services at Nexia BT.