The New Gaming Act

Changes and Challenges of the New Gaming Act

Dr. Silvana Zammit co-authored with Thea Leigh Micallef | 27 Jun 2018

The New Gaming Act

The New Gaming Act, being a framework law, was enacted on the 15th of May 2018 and will become effective as of the 1st of July 2018. The regulations emanting from the New Gaming Act which would implement the majority of the changes discussed in this publication, are presently still in draft format and shall be enacted in due course. 

The New Gaming Act - Main Changes:


The New Gaming Act addresses a number of matters which the industry had been striving to achieve for a number of years, including:

Structure

The New Gaming Law has been drafted in such a manner as to be theme-oriented (definitions, authorisations, taxes, player protection) rather than product/sector oriented (land based gaming, online gaming, online controlled skills games etc) as was the case with the Lotteries and Other Games Act. In view of this, a remote gaming operator of games of chance for example, under the new law, is not able to refer to a particular text, such as the Remote Gaming Regulations today, wherein the major rules that affect it are provided for. Indeed, in the new law,  the provisions regulating one type of activity are spread throughout the main act and the proposed different regulations, and cover all types of activities from land-based casinos to online skill games. 

On the other hand, the new structure provides for consolidation of the laws regulating all gambling activities including land-based and online in one body of law, creating a more streamlined and cohesive legal regime whilst bringing together technology convergence and integration of the different channel of distribution of games, albeit, losing on the immediate clarity as to which specific rules apply to particular products/sectors. 

Simplification of Licensing Procedure

The current system of concessions and various classes of licences will be replaced with a new one, which provides for just two types of licences: business-to-business (B2B) and business-to-customer (B2C). This is believed to simplify the existing processes and encourage further growth of the sector. Whilst the B2C license will still be categorised in accordance with the game type provided (game types being very similar to the current concepts of Class 1, Class 2, Class 3 games and skill games), the new law eliminates the requirement of a new licence per class of games. Under the new law a licensee with a B2C licence can add on different game types without the need to go through a full license procedure.

The description/definition of what games fall within each game type is clearer and more precise than the description of the existing classes of licence in the current Remote Gaming Regulations. The proposed description/definition, despite being more elaborate, is, at the same time worded in such a manner as to allow the inclusion of unorthodox games within such description/definition.

Duration of Licence

The duration of license issued by the MGA has been extended  from a validity period of 5 to 10 years, giving licensees more long-term stability.

Different Authorisations Given by the MGA

The MGA will now be in a position to provide different types of authorisations such as permits, approvals or certificates.  Guidelines or regulations have not yet been issued on this, however, in accordance with the consultation document issued in 2017 there shall be a different regime for promotional games, recognising that the provision of such gaming services is usually of secondary nature and in furtherance to a primary scope being generally independent from the provision of gaming services per se.

New Licencing Fees

The current point of supply gaming tax has been done away with and new licence fees introduced. Undoubtedly, this may have an negative impact on some operators, particularly smaller start-ups which will have to do new calculations and adjust their budgets, especially in cases of shifts from a fixed point of supply tax (e.g. casino operators) and a relatively low gaming licence fee of €8,500, to a fixed licence fee of €25,000 and a variable licence levied on gaming revenue generated. The introduction of exemptions for start-up undertakings partially addresses this.

An additional measure that aids in making the proposed new Maltese licence regime attractive is the introduction of a cap on the variable licence fee.

Blockchain and Crypto

Whilst, to date, no specific regulation has been enacted, the new law caters for the possibility of introducing, in the future, regulations concerning virtual currencies (VCs) and distributed ledger technology (DLTs). In parallel, currently,  the MGA is in the process of finalising its guidelines for the regulation of VCs and DLTs in a sandbox environment. Making Malta one of the first jurisdictions to regulate VCs and DLTs even in the gaming arena.

Player Protection and Fraud Combatting

Important areas which have been amended by the new Gaming Act include consumer protection standards, responsible gaming measures, reporting of suspicious sports betting transactions in the fight against the manipulation of sports competitions and objective-orientated standards to encourage innovation and development.

One such example is that the management and holding of player funds is now provided for at law. If the licensed operator delegates or entrusts functions or duties relating to the management and, or holding of player funds to a third party, the operator shall remain fully responsible for all regulatory requirements connected to player funds, and shall be liable towards players for any loss suffered by such players as a result of the acts, omissions or insolvency of such third party. Thus, in such a manner the player will always look at the operator to obtain redress.

Whilst under the existing body of laws, the MGA had already the role of receiving complaints, the new law seems to formalize this role and enhance the functions by creating a specific Player Support Unit with alternative dispute resolution powers to facilitate an amicable settlement of the dispute between the consumer/player and the licensed game provider.

Additionally, in order to further protect players, the MGA is in the process of launching a unified self-exclusion system for remote gaming operators (this was already introduced for land-based). The inclusion of such system is still currently being discussed, however, there is a push for such system to be created on distributed ledger technology systems.

The New Gaming Act - The Player Protection 

The New Gaming Law should be a welcomed initiative and, overall, a step ahead in the right direction for enhanced player protection. This mainly due to the following:

an enforced player support unit to receive player complaints and mediate disputes (as described above) which, it is anticipated, will provide a more robust complaint forum which can resolve the complaint;
the stricter approach to supervision of the licencee’s operations in turn enhances the integrity and seriousness of the operators, resulting in a benefit for the players;
the possibility of introduction of VCs in the future, opening new avenues for players;
extension of the oversight of the regulator to entities providing ancillary services to gaming operators (such as payment providers) which should result in increased player confidence in Maltese operators;
the MGA has now the power to request the court for a gaming company to be put under administration – a highly important power that can in effect usurp the directors from the management and control of their company specifically as a measure to safeguard players and employees of the gaming operator.

 

The New Gaming Act - Expansion of regulatory powers 

The New Gaming Law broadens the regulatory scope to increase the MGA’s oversight and to allow, in a proportionate manner, intervention where necessary. The New Gaming Law provides for a stricter, yet less bureaucratic, supervision of the gambling companies by the MGA with a view to simplifying the procedures and combatting illegal activities, namely money laundering and terrorist financing.  The main initiatives enhancing the MGA’s regulatory powers are the following:

  • formalization of  the role of the MGA as official mediator between operators and players (the so-called Player Support Unit) and reinforcing the existing consumer protection standards. In addition, in an effort to combat illicit activities, a new reporting system will help track and tackle accordingly suspicious sports betting transactions;

  • the New Gaming Act will also segment what is currently the role of a Key Official within a licensed entity into various key functions for direct scrutiny and targeted supervision controls. The responsibility for ensuring the observation of the operator’s obligations with the operator’s set-up will therefore no longer be focused in one person but in different persons having key roles. Such persons holding key roles, need to be certified by the MGA and risk losing their certificate if in breach of their obligations at law;

  • under the New Gaming Act, the MGA may intervene to request the court to appoint an administrator to operate or liquidate the gaming operator in order to ensure that player’s rights are protected;

  • the discussions leading to the enactment of the law also put on the table the introduction of the concept of “mystery shopping” whereby officers of the MGA may register and play on the operator’s websites/premises with the aim of ensuring that the operators are fulfilling their legal and regulatory obligations.  It is expected this initiative is pushed through after the coming into force of the New Gaming Law;

  • the scope of the functions and powers of the MGA has increased to not only supervise licensed operators but also those entities offering ancillary services;

  • criminal liability is stricter under the New Gaming Act– penalisation stricter for criminal offences and the administrative sanctions such as warning, fines, or suspension and revocation of licence have been set in place.

To counter-balance the visible extension of powers of the MGA, the new law also formalises the operator’s right of appeal from the decisions of the MGA to the Administrative Review Tribunal.

New structures have been introduced within the MGA which practically reflect supervision both on-site and off-site, in collaboration with Financial Intelligence Analysis Unit (FIAU) which ultimately has the function of taking actions against breaches of AML regulations. The MGA shall be empowered to share any relevant personal data in its possession with local and foreign regulators entrusted with the governance and regulation, when such transfer is considered to be in the public interest.

The public interest requirement is deemed ipso jure satisfied where the data is required in relation to the detection, prevention, and investigation of:

  • money laundering;

  • terrorist financing;

  • fraud, identity theft and misappropriation of funds;

  • computer misuse; and

  • manipulation of sports competition.

The MGA shall now also have the power to suspend any authorisation previously granted by it if such authorised person is in breach of anti-money laundering and funding of terrorism regulations applicable to it.


The New Gaming Act - Conclusion

We believe that the New Gaming Act has so far been well received within the gaming community, considering that the new law implements changes that the industry has for a number of years been calling for including the elimination of the multi-licence system, a longer licence period and the possibility of inclusion of future technologies and more specifically crypto currencies. Indeed, the increase fixed annual fee was not the most welcomed change and may discourage the smallest operators but indirectly also ensuring operators’ financial stature. The feedback so far has been such that, possibly, Malta has lived up to its reputation of stirring away from a condescending response to this budding industry and focusing on regulation transparency and practicality, in an attempt to keeping a balance between two opposing needs: the supplier’s and the customer’s.


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