An extract from The Gambling Law Review, 5th Edition

Overview

i Definitions

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.

Gaming

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.

Skill games

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 factors 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.

Fantasy sports

The only controlled skills game ruling 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.

Lotteries

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. 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. 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.

In the case of doubt, the MGA has the sole discretion to conclusively determine whether a game should be classified as exempt.

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:

  1. a lottery or raffle-type game;
  2. the value of the stake to participate in the game is not more than €1;
  3. the value of the prize is not more than €100; and
  4. 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. 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. 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:

  1. the establishment of the MGA, and its functions and powers;
  2. the protection of players, minors and vulnerable persons;
  3. the establishment of a vulnerable gaming fund;
  4. gaming licence fees;
  5. 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;
  6. key functions;
  7. compliance and enforcement;
  8. regulations relating to gaming premises;
  9. regulations relating to advertisements;
  10. regulations governing gaming tax;
  11. the establishment of a social causes fund; and
  12. 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 Code 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:

  1. 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; and
  2. 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.

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 Regulations provide that operators in both sectors require a licence, unless exempt.

iv Land-based gamblingCasinos

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 premises 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.

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. 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.

v Remote gambling

Any person providing or carrying out a gaming service or provide a critical gaming supply 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 licence 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. 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:

  1. Gaming Services licence: B2C licence to offer or carry out a gaming service.
  2. 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:

  1. 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.
  2. 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.
  3. 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.
  4. Type four gaming services: controlled skill games.

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.

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

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. 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. It is possible to obtain a ruling from the MGA in relation to a proposed game, based on the specific operational model.

Recognition notice

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.

Low-risk games

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 casinos

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 ships 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 mattersMaterial 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:

  1. meet the operator's obligation under the Act, and all applicable regulatory instruments;
  2. manage the risks related to such supply; or
  3. continue in business.

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. This certification procedure is intended to ensure high standards in the quality of outsourced services provided to Maltese licensed gaming operators.

Key functions

Persons performing key functions 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.

Junkets

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.

Amusement machines

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 Act (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.