Market Update: Malta – Joseph Borg (EEGReport Magazine – Issue 6 – June – September 2017)

Dr. Joseph F. Borg is currently a Senior Advisor to WH Partners, a law firm specializing in Gaming, Corporate, IT, Telecoms and Intellectual Property Law. He also lectures Gaming Law at the University of Malta and is the Secretary General of the Malta IT Law Association. Before joining WH Partners he occupied the post of Chief Regulatory Officer of the Lotteries and Gaming Authority – Malta. Joe was also an elected Member on the Board of Trustees of the International Association of Gaming Regulators (IAGR), a position which he held throughout 2012. He had originally joined the Authority in March 2007 as Director Legal and Enforcement and has occupied this position for almost 4 years. Before joining the Authority, Joseph, acted as a Legal Counsel to Vodafone Malta Limited for three years.

Joseph was conferred with an LL.M. in Information Technology and Telecommunications Law at the University of Strathclyde (Glasgow), with Distinction. Earlier, he was awarded the LL.D. from the University of Malta, after writing and successfully defending a thesis entitled, ‘Protection of Trademarks Against Domain Names’. In November 2000, Joseph graduated with a Bachelor of Arts (BA) in Legal and Humanistic Studies. Joseph went on an Erasmus Exchange in 2002 at the Facolta di Giurisprudenza of the Universita’ degli Studi di Bologna.

In 2009 he completed a Regulator Development Program organized by the International Gaming Institute at the University of Nevada in Las Vegas (UNLV). In 2012 he was awarded a certificate in Casino Management by the UNLV.

 

EEGReport Magazine: Esports betting is a whole new landscape for many European states, however this is not the case of the open market of Malta. Could you give a brief introduction about Maltese licenses in an overall point of view and shed light on the esports licensing procedures?

Joseph: The Maltese licensing system is game neutral and does not in any way limit any games that are predominantly based on chance, to be licensed and operated, in or from Malta. There are four classes of licences that are divided as follows:

  • Class 1 – This licence covers those games where there is risk taking on repetitive games by random events – e.g. casino games, slots, lotteries.
  • Class 2 – This licence covers fixed odds betting.
  • Class 3 – This licence covers operations in which the licensee does not take any gaming risk but simply provides the environment for players to play against each other or to compete for prizes that would have been pooled by the those participating in the games – e.g. poker, bingo or other P2P games.
  • Class 4 – This licence allows operators to provide games and platform service for other operators. It creates a B2B relationship between operators of other classes and a Class 4 licensee – thus creating a network functioning on the same platform.

 

Betting on an eSports event is considered to be no different than betting on any other event. Whether it’s political elections, song contests, sports events or eSports events, fixed odds betting is licensed under the Class 2 remote gaming framework. On the other hand, if the betting services are provided in the form of a betting exchange or through a totalizator, then the required licence would be a Class 3.

 

EEGReport Magazine: Earlier this year, all news pointed that Malta will start offering Skill Based Gaming Licenses. Has this process helped the route to Fantasy Sports regulation?

Joseph: The Skill Games Regulations (S.L. 438.11) have indeed come into force at the end of January. In terms of the said regulations, all games the results of which are predominantly dependent on skill and which offer the possibility for the participant to win a prize in money or money’s worth, now fall under the remit of the MGA. However, this does not mean that every operator that provides such games requires a licence. Only controlled skill games require a licence under the Skill Games Regulations, and to date the only game that was designated as a controlled skill game is Fantasy Sports.

Since January, the MGA already issued a number of licences under this framework, including a licence to the largest fantasy sports provider in the world, Draftkings.

 

EEGReport Magazine: What are the necessary steps that need to be taken by Skill Game operators to comply with the MGA license, how is the taxing done and what is the expiry date of the licenses?

Joseph: A licence under the Skill Games Regulations will enable a body corporate to offer skill games with prize in, and, from Malta, in a regulated manner which gives players enjoying such services the peace of mind that they are playing with a regulated and serious entity.

The licensing process shall ensure that the people involved in the operation are untainted with illegality and have the reputation and expertise to ensure that the business is operated successfully and in a compliant manner. Furthermore, the MGA shall also review and establish whether the proposed games are skill games or games of chance taking into consideration certain characteristics of the game.

An operator needs to ensure that player protection mechanisms are implemented to safeguard all consumers and must comply with the minimum requirements established in the Skill Games Regulations, which include segregation of players’ funds, possibility of player exclusions and a player complaint system.

A Key Official must be appointed, whose regulatory role will be to personally supervise and have access to the licensed operation, ensure the licensee’s compliance and act as a liaison between the licensee and the MGA.

A skill games licence is granted for a term of five years which may be subsequently renewed.

The scope of gaming legislation in Malta has always been to be technology neutral in order to give operators the space they require to be innovative and differentiate themselves from other operators. Although we have not witnessed significant innovation to the games available to players, the Skill Games Regulations should have a positive impact on this situation whereby operators may now also dedicate their resources to creating new, licensable skill games which will give players a varied gaming experience.

However, the main focus is player protection and in particular the legislation imposes safeguards relating to the:

-Fairness of the game delivered to the player;

– Protection of minors and vulnerable persons; and

– Keeping gaming free of crime and money-laundering.

Furthermore, the player deposits are protected in the same way as they are protected in online gambling.

Tax is 5% on GGR capped at Euro 466,000.

 

EEGReport Magazine: The treaties of the European Union guarantee a free market for goods and services. The MGA license can be used for any country which hasn’t explicitly legislated that DFS falls under their existing gambling legislation. How has this worked out so far? Will this be the case in the newly regulated Czech Republic or is it the case in Romania? 

Joseph: It is hard to tell and a lot will depend on the interpretation of the respective Czech and Romanian laws. If one looks at the situation in the US, there are almost as many States that consider Fantasy Sports as a game of chance as there are States that consider it to be a game of skill. Probably we will have the same situation in Europe. One should keep in mind that Fantasy Sports is not a totally new activity in Europe. It has been popular with football fans for a very long time, even before the era of computers. Media companies and sports federations also have an interest in it, since sports newspapers and football federations have been providing Fantasy Sports for quite some time. It is true, however, that this has not become as popular as it has become in the US. That said, lobbying by such organisations may sway in favour of looking at Fantasy Sports as predominantly based on skill. 

 

EEGReport Magazine: As we know, media companies and sport teams who want to sell advertising and sponsorships to betting operators must comply with the advertising directives of each state. Does this apply for DFS and eSports?

Joseph: Again, this depends a lot on the respective jurisdiction and on whether Fantasy Sports and DFS are considered as activities requiring a gaming licence in that particular jurisdiction.

 

EEGReport Magazine: Recently the MGA followed through on the idea that online poker could also be classified as a skill game. What are the developments of this process? Do you think that it will change everything in the already regulated markets in Europe where poker considered as gambling?

Joseph: I believe this would be a long shot. In Europe, practically every Member State already considers poker to be a game of chance. Personally, I believe that poker, particularly poker tournaments, are predominantly based on skill and there is empirical research that backs this. However, it is now too late to change the course of history. Poker in Europe is a game of chance and that’s how it will be perceived for the foreseeable future.

 

EEGReport Magazine: Malta is currently overhauling it’s entire Gaming Legislative Framework. What should we expect?

Joseph: If law is not updated constantly, it easily becomes obsolete, thus weakening the regulatory regime. This in turn creates difficulties for the regulator to properly regulate the market, for operators to be in a position to provide the best possible service to the customers and to customers themselves who would end up less protected and more vulnerable. Furthermore, when one looks at the land-based legislation, it becomes evident that it requires a substantial overhaul. The law is fragmented into different legal instruments, some of which overlap each other and in some cases there is a conflict between provisions of the various laws. Therefore there is dire need for consistency in the law. Furthermore, it is essential that the law caters for:

– Increased technology convergence between online and land-based;

– Technology neutrality that allows industry development while ensuring that the regulator is in a position to regulate effectively, irrespective of technology advances and development of new business models;

– Non-duplication of controls in order to render processes smother and faster for operators to obtain licences and approvals while ensuring that customers are protected.

The industry is expecting to see:

– A simplified licensing system that allows operators to provide different services under the same licence. Therefore, we are expecting the removal of the distinction between Class 1, Class 2, Class 3 and Class 4 licences and instead a new system will be introduced with a B2C and a B2B licence which would make it much easier and faster for operators to increase more games and services under their respective licences.

– The legislation should allow the MGA to come up with the most efficient process in the grant of new licences and approval of new products and services.

– It should cater for platforms and game aggregators.

– Technical specifications need to be clearer giving a greater certainty to the industry and consultants. However, the structure of the legislation needs to enable the MGA to be able to react in a timely manner in order to cater for new games and business methods.

– It must be easier for online gaming software providers to provide their services to land-based operators.

– An appeals process should be introduced in order to avoid costly and lengthy court proceedings in case of disagreement with MGA decisions.

It is expected that in the coming days, the MGA will be publishing a consultation paper with all the information required by the industry to assess the new regulatory framework.

 

EEGReport Magazine: Do you think that a common regulatory model that can be adopted on EU level would be a good practice? Economically speaking EU countries differ a lot, thus having an all governing law in every country regarding the online gambling sector could prove to be a major setback for many less developed countries in Central and Eastern Europe. This is of course my opinion, what is your expert opinion on such a topic?

Joseph: Of course, I agree perfectly with your analysis. Compliance across the EU 28 has would be unsustainable for gaming operators.

That said, I do not believe that there is any chance of seeing a common regulatory model, similar to financial services, or at least similar to the Telecoms framework, any time soon. What we should aim for in the immediate future, is to try to find an agreement on a set of common technical standards in order to simplify compliance for operators across the EU. The Green Paper followed by the Commission’s Communication ‘Towards a comprehensive European framework for online gaming’ was a step in the right direction. However, little has been done in this direction after 2012.

The industry needs to get together and make itself heard as one voice towards the common goal of finding a EU-wide agreement on technical specifications and player protection mechanisms. This would strengthen the industry while providing the same level of protection to citizens across the EU.