The Gambling Law Review: Malta
Maltese law permits both online and land-based gambling, and the following forms of gambling are catered for: amusement games, casino gaming, commercial tombola games, commercial communication games, gaming devices, remote gaming, sports betting, the National Lottery and other lotteries, and non-profit games.
Maltese law uses the term 'gaming' to cover all gambling activities. The Gaming Definitions Regulations 2018 define 'gaming' as any activity consisting of participating in a game of chance or a game of skill, offering a gaming service or making a gaming supply.
An operator provides a 'gaming service' when it makes a game available for participation by players (whether directly or indirectly, and whether alone or jointly with others) as an economic activity.
On the other hand, a 'gaming supply' is defined as a supply, directly or indirectly, of goods or services, in relation to a gaming service, which is either a material gaming supply or ancillary gaming supply but which does not include the provision of a key function, as outlined in Section III.
'Authorisation' is defined as a licence, approval, certificate, recognition notice or similar instrument issued by the Malta Gaming Authority (MGA), authorising a person to provide a gaming service, gaming supply or a key function.
'Licence' is defined as a gaming service licence or a critical gaming supply licence.
A 'game of chance' means an activity the outcome of which is determined by chance alone or predominantly by chance and includes activities the outcome of which is determined depending on the occurrence or outcome of one or more future events.
A 'game of skill' or 'skill game' is defined as an activity the outcome of which is determined by the use of skill alone or predominantly by the use of skill, but excludes a sport event, unless otherwise established by Maltese law. The MGA has the sole discretion to determine whether an activity is classified as a game of chance, a game of chance and skill or otherwise, and specific rulings may be obtained from the MGA upon submission of a request outlining the proposed game in detail. In determining this, the MGA takes into consideration factors2 such as the presence of random draws and their effect on the outcome, whether the game is played for money or prizes with a monetary value, and whether participation in a game involves any form of commitment having a monetary value.
Games of skill do not generally require a licence, unless they involve a stake to enable participation or offer the possibility of winning a prize of money or money's worth, in which case they would constitute a 'controlled skill game' and require a licence.
The burden of proving that an activity is a skill game (and therefore not licensable) rests on the party operating or promoting such activity.3
The only controlled skills game ruling4 issued by the MGA so far addresses fantasy sports, classifying them as controlled skills games, and therefore licensable. The MGA ruling defined fantasy sports as:
[A] contest offered by means of distance communications, wherein players commit a consideration of monetary value, whether in the form of a stake, periodic subscription or the purchase of in-game items which provide an advantage to the player, to compete against other players for the possibility to win a prize of money or money's worth.
A fantasy sport contest is one where the outcome is determined by the accumulation of the statistical results of the performance of a number of individuals competing in actual sporting events.
The ruling excludes from the definition of fantasy sports the forecasting of the score of sporting events, point spread, or the result of any other future occurrence of one or multiple events. Essentially, the winning outcome must be predominantly determined through the skill or knowledge of the player. The onus of proving the existence of all these factors rests entirely with the applicant.
The National Lottery is Malta's main lottery. The licence for the operation of all National Lottery games is exclusive and was last awarded to Maltco Lotteries Limited in 2012 for 10 years.5 The provision of online lotteries is also allowed under Maltese law and in this respect a remote gaming licence would need to be obtained.
Free prize draws
These types of games draws are exempt from requiring a licence in Malta based on the principle that games of chance that do not require a stake to enable participation or do not envisage the possibility of a prize are classified as exempt.6 A gaming service or a critical gaming supply that is provided in relation to an exempt game does not require a licence or other authorisation.7
In the case of doubt, the MGA has the sole discretion to conclusively determine whether a game should be classified as exempt.8
De minimis games
Directive 3 of 2019 came into force on 1 February 2019. This Directive was issued in order to establish which games classify as a de minimis exempt game in terms of the Second Schedule to the Gaming Authorisations Regulations. Pursuant to Article 5 of Directive 3 of 2019, a de minimis game shall be a game that satisfies all of the following criteria cumulatively:
- a lottery or raffle-type game;
- the value of the stake to participate in the game is not more than €1;
- the value of the prize is not more than €100; and
- the result of the game is not based on the outcome of another game.
The Directive provides that each person or organisation cannot organise more than 10 de minimis games in any calendar year, and that no more than two de minimis games may be organised in any calendar month.
ii Gambling policy
Since the early 2000s, Malta has secured its position as a leading, serious and well-regulated European remote gaming jurisdiction and is estimated to host around 10 per cent of the world's online gaming companies by trading volume. The Maltese government recognises the importance of the proper regulation of this industry, and its relevance for Malta's economy. In keeping with this recognition, Malta has continued its drive to innovate the legal framework to keep up with industry and technological developments, and 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 MGA continually strives to clarify legal issues as they arise and provides much needed legal certainty by regularly issuing rules and guidance documents.
iii State control and private enterprise
Gambling operations are not owned or operated by the state. However, the National Lottery may only be conducted under ministerial authority, or by any person in whose favour a concession is granted. Where government policy requires that certain gaming services may only be provided when in possession of a government concession, the MGA shall not issue a licence for the carrying out of such a gaming service unless the applicant is in possession of a relevant and valid government concession.
iv Territorial issues
Gambling is regulated and licensed nationally.
v Offshore gambling
The Gaming Authorisations Regulations provide that a game of chance, or a game of chance and skill, cannot be operated, promoted or sold by any person in Malta unless it is authorised to be operated under any law in Malta.9 Article 13 of the Gaming Act provides that where the Gaming Act or any other regulatory instrument prescribe that an activity, of whatever nature, requires an authorisation in order to be performed, it shall be an offence against the Gaming Act to perform such an activity or to promote, aid, abet or otherwise facilitate such an activity unless it is duly authorised.
If, however, the game is authorised or licensed to operate under any law enacted by a Member State of the EU, by a Member State of the EEA or by any jurisdiction or territory approved by the MGA and is covered by a recognition notice issued by the MGA, the licensing requirement does not apply.10 Through the issuance of recognition notices, Malta applies a 'recognition' regime in terms of which a gaming operator licenced in another EU or EEA Member State or in an approved territory is permitted to offer its games in Malta or from Malta, and to enter into business-to-business (B2B) agreements with Malta-based gaming licensees. The approval of non-EU or EEA territories by the MGA may be granted where the MGA is of the opinion that such jurisdictions offer equivalent safeguards and levels of player protection as those available under Maltese legislation. Until March 2020, no jurisdictions outside the EEA have been approved by the MGA.
Following the United Kingdom's exit from the European Union, entities operating in or from Malta on the strength of an authorisation issued to them by the competent authorities in the United Kingdom will no longer be able to make use of the recognition notice procedure, and thus run the risk of committing a criminal offence. Such entities are directed to take the necessary measures, which may include either applying for a licence with the MGA, or applying for a recognition notice in relation to any other EU or EEA licence they may have, for it to be recognised accordingly by the MGA.
Since it is not in the MGA's regulatory scope to issue an exhaustive list of approved jurisdictions that may be targeted by Malta operators, it is ultimately the responsibility of the operator intending to target a foreign jurisdiction to ensure that the jurisdiction is reputable and offers equivalent safeguards to the Maltese regulatory regime.
In the case of business-to-consumer (B2C) operators, each operator is expected to ensure that the targeting of any games to players based in any jurisdiction outside of Malta is so targeted in full compliance with the laws of that foreign jurisdiction. The MGA also requires the terms and conditions of each licensee to state that it is the player's responsibility to establish whether their gaming activity is legal according to the laws of the country where such player is based.
In the case of B2B operators, the MGA will only allow the cross-border provision of such B2B services where the counterparty is a business based in a well-regulated jurisdiction.
Legal and regulatory framework
i Legislation and jurisprudence
As of March 2020, the legislative framework governing gaming in Malta consists of the Gaming Act, Chapter 583 of the Laws of Malta and subsidiary legislation 583.01–583.12, which include the following:
- the establishment of the MGA, and its functions and powers;
- the protection of players, minors and vulnerable persons;
- the establishment of a vulnerable gaming fund;
- gaming licence fees;
- the requirement of a licence or authorisation for certain gaming activities, including eligibility, grant criteria and procedure, as well as suspension, cancellation, revocation and termination for an authorisation;
- key functions;
- compliance and enforcement;
- regulations relating to gaming premises;
- regulations relating to advertisements;
- regulations governing gaming tax;
- the establishment of a social causes fund; and
- data retention.
Furthermore, the MGA has issued a number of directives between 2018 and 2020, which are binding on licensees and provide additional guidance to operators in adopting and implementing the laws and regulations. These directives range from authorisations and compliance, player protection, the criteria to be deemed a 'start-up' undertaking by the MGA, calculation of the compliance contribution, compulsory alternative dispute resolution methods, National Lottery licence terms and gaming premises, as well as certain exemptions from the requirement of a licence or authorisation applicable to de minimis games.
By way of general background on the principles relating to gaming and the recoverability of gaming debts under Maltese law, the Maltese Civil Code11 explicitly provides that no action is available for the enforcement of a gaming debt, for the payment of a bet, for the recovery of any sum lent by any person who knew that such sum was intended for gaming, or for the recovery of any sum lent by any person interested in the game, for the payment of money lost at such game. In addition, Article 1716 of the Civil Code provides that the loser at a game may recover from the winner a sum or thing paid if he or she calls upon the winner to return the sum or thing so paid to him or her by means of a judicial act (legal letter filed in the registry of the Maltese Courts, with notice served on the debtor), within two months to be reckoned from the day of payment.
There are, however, the following notable exceptions to this general rule:
- games that tend to help training in the use of arms, footraces, horse races, boat races, ballgames and other games of the same kind, which develop the dexterity and exercise of the body;12 and
- games lawfully provided in accordance with the provisions of the Gaming Act or any other regulatory instrument and any game that is provided by an operator lawfully authorised by or under the Gaming Act.13
Contracts for differences, interest cap agreement, swap, foreign currency exchange or other similar agreement, the purpose or intended purpose of which is to secure a profit or avoid a loss, and insurance contracts that could arguably possess certain characteristics of gaming contracts are similarly excluded from the scope of the gaming and betting provisions of the Civil Code, eliminating the risk of them being declared unenforceable in terms of these special legal provisions.
ii The regulator
The MGA is the primary regulatory body responsible for the governance of all gaming activities in Malta, and this includes both land-based and remote gaming sectors. Its main functions include the issuance of licences, approvals, certificates and recognition notices, as well as the monitoring of the conduct of operators in the field. Furthermore, the MGA is responsible for preventing, detecting and combatting criminal activity in the gaming sector, as well as ensuring that games are operated and advertised fairly and responsibly.
iii Remote and land-based gambling
While both remote and land-based gambling are permitted in Malta, there are some differences in the regulations that apply to each. By way of example, applicants for a land-based gaming licence are required to seek and obtain approval not only for the gaming devices used, but also the premises from which the licensed gaming devices are operated. The Gaming Authorisations Regulations14 provide that operators in both sectors require a licence, unless exempt.
iv Land-based gambling
Casinos are licensed by the MGA; however, obtaining such a licence is dependent on the applicant holding a specific concession from the government to operate the casino. The MGA is responsible for regulating and overseeing the operations of each casino in order to ensure that the games are run fairly and according to law and that the gaming premises used satisfy the required standards at all times. There are currently four licensed casinos operating in Malta.
The default gaming licence term, whether original or renewed, is of 10 years. However, where such licence is granted to the holder of a government concession that has been granted for a shorter period, the MGA licence will be granted for that shorter period.
Betting shops and amusement arcades
Gaming premises15 must be licensed, and any person renting out or allowing another person to use the premises as a gaming premises must ensure that the lessee is in possession of a valid approval or licence.
Gaming premises' operators are obliged to register all players upon entry into the gaming premises, and in any case, before any use is made of any gaming service. Furthermore, gaming premises operators are expected to make the possibility of self-exclusion readily available to every person and must provide assistance and guidance to any person who wishes to exclude him or herself from gaming. More stringent regulations apply in relation to the self-exclusion of pathological gamblers.16
Lottery ticket and sale venues
A valid permit is required in order to sell tickets for the National Lottery. An application for this permit is to be made to the MGA by the proposed seller.17 There are currently approximately 240 'Maltco Lottery' points of sale across the Maltese islands.
Rules applicable to all gaming premises
There is no limit to the total number of gaming premises for the Maltese islands. However, gaming premises are subject to several criteria obliging them to be located at pre-set distances from schools, places of worship and other gaming premises.
Various rules and restrictions are also applicable to gaming premises, such as a maximum of one gaming device per two metres squared, and a maximum, in aggregate, of 10 gaming devices in any gaming premises.18
v Remote gambling
Any person providing or carrying out a gaming service19 or provide a critical gaming supply20 from Malta or to any person in Malta, or through a Maltese legal entity, must possess a valid licence or be explicitly exempt from the requirement of a licence21 under the Act or any other regulatory instrument. Every game offered from Malta or in Malta must be approved or otherwise recognised by the MGA.22 It is similarly an offence for a person to 'promote, aid, abet, or otherwise facilitate' the carrying out of a licensable activity without a valid licence, and it is this extended wording that serves to catch various ancillary services connected to gaming activity within the regulatory remit.
The MGA may issue licences of the following categories:
- Gaming Services licence: B2C licence to offer or carry out a gaming service.
- Critical Gaming Supply: B2B licence to provide or carry out a critical gaming supply.
The B2C licence may constitute any one or more of the following game types:
- Type one gaming services: games of chance played against the house, the outcome of which is determined by a random number generator, and which includes casino type games, including roulette, blackjack, baccarat, poker played against the house, lotteries, secondary lotteries and virtual sports games.
- Type two gaming services: games of chance played against 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 three gaming services: 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 versus player games such as poker, bingo, betting exchange and other commission-based games.
- Type four gaming services: controlled skill games.23
In instances where a game displays elements that may be categorised under one or more of the game types, the MGA has complete discretion to categorise the game as the type it believes closest reflects the nature of the game.24
Where more than one company within a corporate group would like to obtain a licence, an application for a B2B or B2C corporate group licence may be submitted to the MGA. A B2C corporate group licence may cover entities within the structure that provide critical gaming supplies solely to other entities within the same group. In such instances, an additional B2B licence is not required. However, should entities within the B2C corporate group licence provide critical gaming supplies in or from Malta to entities outside of the group, a B2B licence would be required. Those that are to be covered by the corporate group licence must be established in Malta or another EU/EEA jurisdiction.
A licence term, whether original or renewed, is that of 10 years. However, where a gaming service or a gaming supply is by its very nature temporary, consists of a singular event or a number of game instances linked to the same event, such service or supply shall be eligible to apply for a limited duration licence.
Skill games are exempt from licensing, unless the MGA decides otherwise by way of a binding instrument. The MGA will issue such a ruling in the event that it is of the opinion that the skill game should be subject to the regulatory regime due to any risk it may pose to players. The MGA is vested with the sole discretion to classify an activity as a game of chance or a game of skill, provided that this decision is based on criteria set out in the Gaming Authorisations Regulations.25 The burden of proof that an activity is a skill game rests on the party operating or promoting the activity. To date, the MGA has issued only one ruling whereby 'fantasy sports' was pronounced to be a controlled skill game.26 It is possible to obtain a ruling from the MGA in relation to a proposed game, based on the specific operational model.
Any persons offering licensable games in or from Malta without an authorisation issued in terms of these Maltese regulations, but under an authorisation issued by another Member State of the EU or EEA or a state deemed by the MGA to offer equivalent safeguards to those offered by Maltese law, may apply to the MGA to have that authorisation recognised in Malta through the issuing of a recognition notice. Once obtained, a recognition notice grants its holder the same benefits as an authorisation issued by the MGA for the purposes of providing a gaming service, gaming supply, key function or any other authorisation in or from Malta.27
Certain low-risk games, such as non-profit games where the value of the stake does not exceed €5 per player, merely require a low risk games permit from the MGA. This permit is valid only for the singular event or events for which it is granted and expires once the event or events are concluded. Furthermore, it cannot be renewed or transferred without the MGA's prior approval.
Cruise casino operators require a cruise casino permit from the MGA. However, this permit is only valid for a term not exceeding the time during which the cruise ship is moored at or within Maltese territory, and only in relation to registered passengers of the cruise ship. Cruise casino permits are non-transferable and limited to all cruise ships28 with the exception of vessels or aircrafts flying or entitled to fly the flag of Malta, or registered in Malta, while such vessel or aircraft is navigating or flying outside and beyond the territorial waters of Malta.
vi Ancillary matters
Material gaming supply
A material gaming supply is a gaming supply of such importance that any weaknesses or failure in its provision could have a significant impact on the operator's ability to:
- meet the operator's obligation under the Act, and all applicable regulatory instruments;
- manage the risks related to such supply; or
- continue in business.29
A person offering a material gaming supply to a licensee or approved person may apply for a material gaming supply certificate from the MGA. While this is not an obligation imposed on the supplier of that material gaming supply, any B2C licensed operators making use of or seeking to make use of a material gaming supply are legally obliged to ensure that the supplier of such material gaming supply is in possession of the certificate or that the supply is approved, in default of which, the licensed operator will assume full regulatory responsibility for such supplies.30 This certification procedure is intended to ensure high standards in the quality of outsourced services provided to Maltese licensed gaming operators.
Persons performing key functions31 must be in possession of a key function certificate issued by the MGA. The roles constituting key functions vary slightly according to whether the operator is a B2C or B2B operator, and whether such operator is providing remote or land-based gaming services. Further details are provided in Section III below.
Authorised persons holding a licence from the MGA or a concession from the Government of Malta seeking to hold a junket event are required to apply to the MGA for prior approval.
Despite their exempt status, amusement machines cannot be placed on the market or made available for sale or distribution or use in any manner in any gaming premises unless such machine has been registered with the MGA, and any applicable administrative fees paid.
vii Financial payment mechanisms
There are no legislative restrictions in relation to the type of payment mechanisms that licensed operators may implement for the processing of payments from players. Indeed, the payments sector has become highly specialised, with various payment solutions providers offering innovative approaches to facilitate the acceptance of payments from players. Many of these innovative payment solutions are available to licensees and present in Malta.
With regards to the acceptance of cryptocurrencies, on 1 January 2019, the MGA launched the first of two phases of its Sandbox Regulatory Framework. During this first phase the MGA began accepting virtual financial assets (VFAs) and virtual tokens as valid consideration for the participation in licensed games and the use of Distributed Ledger Technology (DLT) within the gaming industry. This trial period, intended to attract innovative business models and allow them to develop in a contained regulatory environment, was initially operative for a minimum period of 10 months, but was extended by the MGA in September 2019 until 31 December 2021.
In September 2019, the MGA launched the second phase of the Sandbox Regulatory Framework. During this phase, the MGA will be accepting applications for the use of Innovative Technology Arrangements (ITAs), such as 'smart contracts' (contemplated by the Innovative Technology Arrangements and Services Act32 (ITAS Act)), and DLT platforms.
Entities holding an MGA licence may apply to the MGA for its approval to participate in the Sandbox Regulatory Framework, conditional on the applicant holding the relevant licence issued by the MGA, and subject to their fulfilment of any other regulatory requirements stemming from other applicable legislation, including but not limited to, the Virtual Financial Assets Act (Chapter 590 of the Laws of Malta) and the regulations issued thereunder.
Furthermore, guidelines on the Sandbox Regulatory Framework may be found in the MGA's 'Guidance on the use of Innovative Technology Arrangements and the acceptance of Virtual Financial Assets and Virtual Tokens through the implementation of a Sandbox Environment'. This guidance document presents the MGA's position in regard to the acceptance of VFAs and the use of ITAs, including DLT platforms and smart contracts, by operators regulated by the MGA. More specifically, it identifies and examines the details of this regulatory sandbox, which shall conclude on 31 December 2021.
The licensing process
i Application and renewal
The application process
The time frame for obtaining a new remote gaming licence from the MGA ranges between four to six months. There are five application stages where the MGA will assess whether the applicant and its key personnel are fit and proper to conduct gaming business in accordance with Maltese laws and regulations, whether the applicant is correctly organised and prepared to undertake its proposed business strategy and whether the applicant satisfies all key operational and statutory requirements. Before going live with its operation, the MGA will also consider whether the applicant has correctly implemented its technical infrastructure in accordance with its approved business plan and systems documentation.
Fit and proper
The MGA conducts a fit and proper exercise by assessing all individuals who are involved in the financing and management of the proposed operation. These would typically include all shareholders having a direct or indirect interest of at least 10 per cent or a lower threshold (as the MGA may determine) of the operator's proposed equity structure, directors and individuals performing key functions.
The MGA undertakes this exercise to ensure that all individuals concerned are competent to perform the functions allocated and also to provide the necessary assurances in the context of the prevention of money laundering and terrorist financing. All relevant persons must be able to satisfy a number of criteria, mainly honesty, integrity, reputation, competence, capability and good financial repute. The degree of review of the aforementioned criteria may vary according to the type of operation and activities proposed by the promoters of the prospective licensee and also the specific position that each individual will occupy. The Authority also conducts probity investigations with other national and international regulatory bodies and law enforcement agencies.
Key functions consist of important functions, roles or tasks carried in connection with a gaming service or a gaming supply. Key functions may only be undertaken by natural persons (as opposed to corporate entities) and any person who provides a key function to a licensee is required to hold a certificate of approval issued by the MGA at application stage or prior to undertaking such function, role or task.
The roles that are considered to be key functions for both B2B and B2C licensees include, inter alia, the following:33
- the chief executive role, or equivalent;
- management of the day-to-day gaming operations of the licensee, including the processes of making payments to, and receiving payments from, players;
- compliance with the licensee's obligations emanating from the licence or licences issued by the Authority;
- the administrative and financial strategies of the licensee, including but not limited to the payment of tax and fees due to the Authority;
- the legal affairs of the licensee, including but not limited to contractual arrangements and dispute resolution;
- adherence to applicable legislation relating to data protection and privacy;
- the technological affairs of the licensee, including but not limited to the management of the back end and control system holding essential regulatory data (applicable to remote gaming operators);
- the network and information security of the licensee (applicable to remote gaming operators); and
- internal audit (applicable to remote gaming operators).
The B2C remote gaming operators would be responsible for additional key functions such as marketing and advertising, including bonus offers and promotions, player support, responsible gaming, fraud prevention, risk management, and prevention of money laundering and the financing of terrorism, while B2C operators of bricks-and-mortar gaming premises would cover the operation of any urn or urns or any other gaming devices requiring human intervention used to generate the result of the game in bingo halls, the management of the casino pit, including the supervision of the croupiers and assistants and the management of their work, the management of the gaming area, including supervision to preclude fraud by customers, the resolution of customer disputes, and the management of the surveillance systems of the gaming premises, where applicable.
A person may be granted a certificate of approval to perform more than one key function, and the same key function may be provided by more than one person provided that no person may exercise key functions that are, in the MGA's discretion, deemed to be in conflict with each other. An application for a key function certificate is subject to a fee of €50 and is valid for a period of three years, which may be renewed upon application to the MGA.
The MGA conducts an in-depth analysis of the applicant's business plan, which must consist of both a detailed narrative outlining the proposed business activities to be undertaken by the company and also detailed financial forecasts of the proposed operations. The business plan is expected to include a detailed forecast of the operation, together with details pertaining to marketing and distribution strategies, resource and HR planning and growth targets.
Operational and statutory requirements
The MGA's analysis includes examining the company's incorporation documents, the games, the business processes related to conducting the remote games, the rules, terms, conditions and procedures of the games, the application architecture and the system architecture of the gaming and control systems.
The application is submitted through an online Licensee Relationship Management System portal, which is operated by the MGA. This gives applicants full and clean visibility on the progress of the application.
Once all the above three areas are successfully completed, the MGA will invite the applicant to implement the operation on to a technical environment in preparation for going live. A period of 60 days is allowed for the applicant to complete this 'go live' operation. Within the 60-day period a system audit is carried out as part of the MGA licensee on-boarding process or when deemed necessary by the MGA. Applicants may engage any approved Audit Service Provider of their choice when a system review of their operations is required by the MGA. Here, the live environment will be examined against the proposed application. If the live technical environment is not implemented within the said 60-day period, the application will be considered as suspended and subject to re-application, unless there are justified reasons for the delay, in which case it is possible to extend the 60-day period.
Upon successful completion of the certification process, the MGA issues a 10-year licence to the licensee for the approved gaming operation.
The MGA mandates that, after going live, a licensee must undergo a number of compliance audits of its operations performed by an approved service provider appointed by the licensee. Such audits need to be completed by the service provider within 90 days of the MGA's notice. The MGA will require the audit to adhere to the following schedule:
- after the first year of operation after being licensed by the MGA; and
- any other audit depending on the compliance plan set by the MGA.
Failing a compliance audit could lead to the suspension or termination of a licence.
ii Sanctions for non-compliance
The MGA may impose fines for non-compliance in the following three main scenarios:
- in order to ensure that the licensee rectifies any default;
- in order to deter future non-compliance and thus ensuring that Maltese licensees uphold high standards of behaviour consistent with regulatory requirements; and
- for the purpose of ensuring that any financial gain that the licensee may have made through non-compliance is eliminated.34
The Third Schedule to the Gaming Act outlines a list of criminal offences that include, inter alia, the provision of a service or supply without the necessary authorisation, aiding, abetting or otherwise such a provision, or failing to effect payments to the Authority when lawfully due. Any person found guilty of a breach stipulated in the Third Schedule is liable to a fine of between €10,000 and €500,000 or imprisonment for up to five years, or both.35
As an alternative to criminal court proceedings, in the case of a breach outlined in the Third Schedule to the Gaming Act, the Authority may, by way of agreement with the offender, and subject to the rectification of the breach, impose a penalty of up to €500,000 for each infringement or non-compliance, or a sum of up to €5,000 for each day of infringement or non-compliance or any other administrative sanctions.36 Once such agreement is concluded, the offender's criminal liability under the Gaming Act for such breaches will be extinguished. The agreement will only be effective if it is accompanied by the payment of the sum due or the provision of sufficient security for its payment.
In addition to any penalty outlined above, any machine or other device whatsoever and any moneys relating to or used in the commission of any offence listed in the Third Schedules may be seized and forfeited in favour of the MGA and may be appropriated in favour of the Gaming Fund.37
In the case of a breach of any other regulatory instrument that is not outlined in the Third Schedule to the Gaming Act, the Authority may impose an administrative penalty of up to €25,000 for every breach or non-compliance or an administrative penalty of up to €500 for each day on which such breach persists.38
Persons who feel aggrieved by a decision of the MGA may, within 20 days of the date of service of notice of the MGA's decision, appeal to the Administrative Review Tribunal. If the decision appealed from relates to the MGA's exercise of its discretion, the Tribunal shall not query such decision if the discretion was exercised properly.39 An appeal will not suspend the operation of any decision being appealed. In addition, there is no right to appeal from (1) a decision of the MGA to impose a fine of up to €2,000 or from any reprimand or warning; or (2) a decision of the MGA to refuse to grant, suspend or cancel a licence or other authorisation on the grounds of national interest or to safeguard the reputation of Malta.40
On 26 November 2019, the MGA published an Explanatory Note setting out the principles that should guide the MGA in its application of enforcement measures when a breach occurs. This Explanatory Note lays down the aims by which the MGA should be guided in deciding the appropriate form of enforcement action; namely, in determining whether it should offer regulatory settlement or proceed with the commencement of criminal proceedings. It also lays down principles for the quantification of penalties.
i Match fixing
Match-fixing is a crime under Maltese legislation, for which harsh penalties are imposed. Furthermore, a duty to report to the Commissioner of Police is imposed on any person who has any knowledge that such an offence has been committed. This offence will be deemed to be aggravated leading to an increase in punishment, should it be committed with the intent of making use of the outcome to profit from gaming.41
ii Money laundering and the funding of terrorism
The Financial Intelligence Analysis Unit (FIAU) is the Maltese enforcement body tasked with the responsibility of preventing of money laundering and countering terrorist finance. The Prevention of Money Laundering and Funding of Terrorism Regulations (PMLFTR),42 introduced in 2018, subjects gaming operators to the obligation of conducting higher levels of customer due diligence based on risk analysis and imposes steep penalties in the case of non-compliance.
The FIAU has published two separate sets of implementing procedures in terms of the PMLFTR applicable to both land-based casinos and the remote gaming sector.43 These implementing procedures focus on specific areas of the PMLTFR and their application at an industry-specific level, in order to highlight the aspects of relevance, and to ensure they are understood and interpreted consistently by licensees.
Any gaming service subject to the requirement of a licence, carried out from Malta, or to any person in Malta, is subject to a gaming tax calculated at the rate of 5 per cent on the gross gaming revenue generated from the said gaming services during the relevant tax period. This tax is levied on the gaming revenue, as defined, generated by operators from end customers located in Malta.
There is also a gaming levy imposed on gaming devices, calculated on the aggregate gaming revenue generated during the relevant tax period. The rates of this gaming levy depend on the type of gaming service offered. The gaming levy imposed in relation to gaming devices deployed within gaming premises in the provision of type one or type two gaming services is 30 per cent, while that imposed on gaming devices deployed within gaming premises in the provision of type three or type four gaming services is 12.5 per cent. Furthermore, the levy on gaming devices deployed within controlled gaming premises44 in the provision of either type one, type two, type three or type four gaming services is 15 per cent.45
It should also be noted that operators are obliged to pay a compliance contribution as well as other applicable licence fees to the MGA. The compliance contribution is determined by the gaming revenue generated by the licensee under its MGA licence, and is calculated in accordance with the Gaming Licence Fees Regulation based on the type of gaming service or critical gaming supply offered.46 It is important to clarify that a Maltese company holding licences in several jurisdictions would not account for the compliance contribution imposed by the MGA for those activities conducted under their non-Malta licences.
Player winnings are generally exempt from taxation in Malta, provided that the gaming activities are not undertaken with such frequency by the player to be deemed to constitute a trade, business, profession or vocation.
Maltese resident and domiciled companies are subject to tax on their worldwide income, less permitted deductions, at the standard corporate tax rate of 35 per cent. However, based on Malta's full-imputation system, upon receipt of a dividend, shareholders of a Maltese company may claim a refund of all or part of the tax paid in Malta at the level of the company, depending on the type and source of the income from which the dividend was paid. Specific tax advice should be obtained in each case.
Value added tax (VAT) is applied at the standard rate of 18 per cent on every taxable supply of goods, services or importation, with lower rates applicable to certain sectors. Two sets of guidelines47 have been published by the Maltese Government in relation to the previous gambling VAT exemption. These guidelines became effective on 1 January 2018, and provide a specific list of exemptions applicable to particular gaming activities. Therefore, in contrast to the previous regime (where a blanket exemption was applicable to all gaming activities), under the current framework, unless the particular gaming activity is specifically exempt, VAT will apply. The VAT exemptions applicable to the respective gaming activities are exemptions without credit.48
Advertising and marketing
Authorised gaming operators are permitted to advertise and market their products and services subject to various restrictions aimed at protecting minors and vulnerable persons.49 The same restrictions apply to persons providing any service to, or acting in collaboration with, licensed and authorised persons offering a licensable game.
In the event that the MGA determines that there has been a breach of advertising or marketing rules, it is empowered to order the modification, retraction or termination of the respective advert or marketing instrument. The MGA may also take any administrative action it deems necessary, including the issuing of administrative sanctions such as fines.
The year in review
Although 2018 was the year of most significant development in the Maltese gaming legislative framework, in 2019, the MGA issued seven binding directives, related to matters such as de minimis games, gaming premises, gaming devices, amusement machines and low risk games, and enhanced automated reporting platforms for land-based licensees. In addition, several Guidance Notes were published whereby the MGA clarified several matters related to, inter alia, shared conduct of gaming business agreements, enforcement principles, the treatment of virtual financial assets, commercial communications, hosting and control systems, data protection and the United Kingdom's exit from the European Union, in the latter case by setting out the impact and options for existing licence holders and recognition notice holders.
Further to the increasing popularity of digital currency and technology, the MGA is taking into consideration the use of VFAs and DLT as methods of payment through the implementation of a Sandbox Regulatory Framework for the acceptance of both VFAs and DLT within the gaming industry. This will allow gaming licensees to submit applications for the use of cryptocurrency (whether directly or via third-party providers) as a valid alternative to fiat currency on the licensee relationship management system.
The first phase of the regulatory sandbox commenced in January 2019, and the second phase commenced in September 2019. The duration of the Sandbox Regulatory Framework has been extended until 31 December 2021, which could prove to be an interesting time for innovation in relation to cryptocurrencies and DLT in the gaming sphere.
1 Andrew J Zammit is a partner, Gayle Kimberley is a senior associate and Nicole Sciberras Debono is an advocate at GVZH Advocates.
2 These are outlined in the Sixth Schedule of the Gaming Authorisations Regulations.
3 Gaming Authorisations Regulations 2018, Article 7.
4 Ruling in terms of Regulation 6 of the Skill Games Regulations, issued on 27 January 2017.
5 National Lottery (Continuation of Concession and Licence Terms) Ruling, Directive 1 of 2019.
6 Gaming Authorisations Regulations 2018, Second Schedule Section 1(c).
7 Gaming Authorisations Regulations 2018, Article 5(1).
8 Gaming Authorisations Regulations 2018, Article 5(2).
9 Gaming Authorisations Regulations, Article 3.
10 Gaming Authorisations Regulations, Article 22.
11 Article 1713, Civil Code, Chapter 16 of the Laws of Malta.
12 Article 1714, Civil Code, Chapter 16 of the Laws of Malta.
13 Article 54, Gaming Act, Chapter 583 of the Laws of Malta.
14 Subsidiary legislation 538.05 of the Laws of Malta.
15 That is, any premises accessible to the public, which is used or intended to be used for players to participate in a gaming service, Gaming Definitions Regulations, Subsidiary Legislation 583.04 of the Laws of Malta.
16 Articles 5–8, Gaming Premises Regulations, Subsidiary Legislation 583.07 of the Laws of Malta.
17 Directive 1 of 2019 (MGA), Article 7.
18 Provided that in the case of gaming devices designed or adapted in such a way as to allow more than one player to use such gaming device simultaneously, the number of any such gaming devices shall be multiplied by the aggregate number of players who can use such gaming device simultaneously (Articles 11–16, Gaming Premises Regulations, Subsidiary Legislation 583.07 of the Laws of Malta).
19 That is, making a game available for participation by players, whether directly or indirectly, and whether alone or with others, as an economic activity (Article 2, Gaming Definitions Regulations, Subsidiary Legislation 583.04 of the Laws of Malta).
20 That is, a material supply that is (a) indispensable in determining the outcome of game or games forming part of the gaming service; and/or (b) an indispensable component in the processing and, or management of essential regulatory data (Article 2, Gaming Definitions Regulations, Subsidiary Legislation 583.04 of the Laws of Malta).
21 The following games are each deemed to be exempt: a game of skill that does not require a stake to enable participation or does not envisage the possibility of a prize; a game of skill that requires a stake to enable participation and offers the possibility of a prize, unless the MGA issues a ruling determining that such a game of skill is a controlled skill game; a game of chance that does not require a stake to enable participation, and, or does not envisage the possibility of a prize, unless otherwise determined by the MGA in a binding instrument; a de minimis game; a licensable game on board any vessel flying or entitled to fly the flag of Malta or registered in Malta while said vessel is navigating outside the territorial waters of Malta; and Second Schedule to the Gaming Authorisations Regulations, Subsidiary Legislation 583.05 of the Laws of Malta.
22 Article 3, Gaming Authorisations Regulations, Subsidiary Legislation 583.05 of the Laws of Malta.
23 That is, a skill game that requires a stake to enable participation and or offers the possibility of a winning a prize of money or money's worth and which shall be a licensable game, Gaming Definitions Regulations, Subsidiary legislation 583.04 of the Laws of Malta.
24 First Schedule, Gaming Authorisations Regulations, Subsidiary Legislation 583.05 of the Laws of Malta.
25 The considerations that the MGA is to take into consideration in determining whether a game is a skill game or controlled skill game are as follows:
a the presence of random draw and their effect on the outcome;
b whether the game is played for money and, or prizes with monetary value;
c whether participation in a game involves any form of monetary commitment, or commitment of a monetary value;
d the possibility of any negative social impact of the game;
e whether the activity is closely associated with the games of chance and, or gambling;
f the duration of each event, competition or match;
g whether the activity is closely associated with games of chance and or gambling;
h the duration of each event, competition or match;
i whether, on the face of it, a skilled player is able to win more than an unskilled player;
j whether a player's chance of winning is significantly increased by experience in playing the game;
k whether skill can be acquired through training, experience, reading literature or other educational material;
l whether a ruleset or format that is used further nullifies the effect of any element of chance;
m whether the game is played against other human players, or otherwise;
n the level of interaction between the players, the level of interaction between the operator and the players, and the level of intervention by the operator during the event, competition or match; and
o the complexity of the game, including the amount of player choices, and their potential effect on the outcome, and the strategies involved.
Article 7, and Sixth Schedule, Gaming Authorisations Regulations, Subsidiary legislation 583.05 of the Laws of Malta.
26 Ruling Reference SG/001. This ruling can be accessed via the following link: www.mga.org.mt/wp-content/uploads/Controlled-Skill-Games-Ruling-Fantasy-Sports.pdf.
27 Article 22, Gaming Authorisations Regulations, Subsidiary Legislation 583.05 of the Laws of Malta.
28 These cruise ships must be passenger ships used for pleasure voyages with a minimum of three ports of call in three different jurisdictions which may or may not include Malta, having its own amenities that include lodging, facilities for all passengers and a minimum capacity of 150 passengers. Article 30, Gaming Authorisations Regulations, Subsidiary Legislation 583.05.
29 Article 2, Gaming Definitions Regulations, Subsidiary Legislation 583.04 of the Laws of Malta.
30 Article 20, Gaming Authorisations Regulations, Subsidiary Legislation 583.05 of the Laws of Malta.
31 That is, an important function, role or task carried out by a person in connection with a gaming service or a gaming supply, Gaming Definitions Regulations, Subsidiary Legislation 583.04 of the Laws of Malta.
32 Chapter 592 of the Laws of Malta.
33 Directive 3 of 2018, Gaming Authorisations and Compliance Directive, Section 6.
34 Explanatory Note: Guiding Principles for the Quantification of Administrative Fines May 2016.
35 Chapter 583 of the Laws of Malta, Gaming Act, Article 23(1).
36 Chapter 583 of the Laws of Malta, Gaming Act, Article 25(1).
37 Chapter 583 of the Laws of Malta, Gaming Act, Article 27.
38 Chapter 583 of the Laws of Malta, Gaming Act, Article 25(3).
39 Chapter 583 of the Laws of Malta, Gaming Act, Article 43(2).
40 Chapter 583 of the Laws of Malta, Gaming Act, Article 43(1).
41 The Prevention of Corruption in Sport Act, Chapter 593 of the Laws of Malta.
42 Subsidiary Legislation 373.01of the Laws of Malta.
44 That is, any premises intended to make available for use, to host or operate one or more gaming devices, but does not include premises in which gaming is carried out in virtue of a concession by government or premises in which the only gaming which is carried out consists of tombola games, Gaming Definitions Regulations, Subsidiary Legislation 583.04 of the Laws of Malta.
45 Gaming Tax Regulations, Subsidiary Legislation 583.10 of the Laws of Malta.
46 Gaming Licence Fees Regulations, Subsidiary Legislation 583.03 of the Laws of Malta.
47 Entitled: (1) 'Guidelines on Item 9 of Part Two of the Fifth Schedule to the VAT Act' and (2) 'Guidelines for the determination of the taxable value of gambling and betting services'. These guidelines may be accessed via the following link: www.cfr.gov.mt/en/vat/guidelines_to_certain_VAT_Procedures/Documents/19.%20Guidelines%20on%20Gambling%20and%20Betting%20Actiivities.pdf.
48 Fifth Schedule, VAT Act, Chapter 406 of the Laws of Malta.
49 Advertising and Marketing is governed by (1) The Gaming Commercial Communications Regulations, Subsidiary Legislation 583.09, and (2) Requirements as to Advertisements, Methods of Advertising and Directions Applicable to Gambling Advertisements, Subsidiary Legislation 350.25.