04 May 2005

The Web

Gaming London conference by PKF

Following the successful conference organised by PKF MALTA last year in London with Sports Business group (publishers of I-Gaming magazine), a sequel is planned this year to take place on 2nd June 2005.
The conference will be discussing the uncertainty prevailing on regulatory issues among various jurisdictions concerning:
• Remote gambling including advertising
• Taxation
• Money laundering and location of servers
The panel of experts will give its views on current EU thinking on possible directives to dismantle the state gambling monopolies. The speakers will cover issues such as principles of EU Law, harmonisation of standards and unresolved matters concerning cross border advertising. The conference also compares various available licensing jurisdictions by giving key information on Telecommunications, Infrastructure & Facilities, Company Law, Taxation, specific Licensing Facts and in particular any emerging tax implications on the Gambling Act 2005 after the UK Budget 2005.
The uniqueness in the conference is the fact that cross border VAT implications will be tackled as PKF are experts in this field, so we will be going a bit further than other seminars where normally the VAT is just mentioned but not into detail.
The event will split into focus groups in an interactive breakout session to discuss matters of topical interest.
A valuable panel of speakers will contribute such as:
• Ms Irit Herzenshtein VAT Specialist PKF UK
• Mr Peter Bruford Tax and Engagement Partner PKF UK
• Hon John Dalli for Malta
• Mr Peter Montegriffo Senior Partner Hassans Law Firm for Gibraltar
• Mr Herman Behr of e-Management for Netherlands Antilles
• Mr Morten Ronde Legal Advisor, Danish Gaming Board
• Mr Miles Benham of MannBenham Ltd for Isle of Man

But some may ask what is the relevance of online gaming business opportunities for Malta?
The answer is given by the Lotteries and Gaming Authority. According to Mario Galea CEO there are 45 operating companies with 16 pending applications. With careful marketing at international fora Malta now potentially qualifies as a low-cost ,high-tech domicile for online casinos and egaming operations. In a short period of five years since the first betting licenses were issued it has built itself a reputation as a first class regulatory destination .It created the world’s most comprehensive set of technical standards. But what are the prospects for internet gaming some may well ask. The answer is simple; the Internet is set for an explosion of interest in gaming, according to reliable sources in the e-Gaming world. Nobody can predict the future however according to Professor T. Verbiest it is possible that Europe is currently at the advent of e-gaming breakthrough. It is obvious that nothing can stop internet. New technologies are fundamentally changing our society
Thus one can notice the proliferation of mobile technology which make a compelling platform for fully-featured gambling style games on mobile phones. This is mostly due to handset manufacturers having decided to focus on Java enabled phones.
If one takes a step back from all the hype associated with mobile revolution ,one can see the push for global mobile gaming proliferation is driven by two main motivators. The first is the demand from the mobile telecommunications industry to drive airtime usage, increase the purchase of premium services and motivate new Java enabled handsets. The second is the need for online casinos and betting companies to enhance the value of games to existing customers.
Specialist game developers such as Chartwell are developing a number of soft games that are better suited to the smaller screen and yet are still entertaining to play. Quoting Lee Richardson CEO of Chartwell another new product which is becoming very popular is online bingo. One of the key advantages of bingo is that it doesn’t require the player to learn strategy or complex game rules. But of course poker is the biggest online success story by far. As an example, players will now able to download a poker game to their mobile for a fee and play a time-limited tournament. At the end of the tournament each player’s game is maintained on the server to be used to determine his or her standing in the Poker tournament.

Effective regulation
For online players the number-one concern has always been the security that is the confidence they can get that their money is protected. Obviously they rely on the regulatory vigour of the host licensing country to monitor or enforce universal standards for online gaming. This perception of continuous vigilance usually takes the form of compliance with host country regulation, ensuring highest from of players’ funds protection, third –party auditing and proactive dispute resolution practices. Another practical way to reassure players is to conduct a third-party audit of a gaming platform or casino payment history. These audits are performed by some of the most trusted names in worldwide accounting firms. It is not surprising that online businesses are starting to turn into profits and investors are no longer wincing at the sight of tech stocks on their portfolio. But with so many competing jurisdictions where would a prospective investor drop anchor? The selection can be daunting considering that operators are being offered a wide choice of attractive conditions by regulators each vying for their business.
In order to get a closer look at where the majority of the gaming revenues are generated it is useful to divide the market into different segments. The following graphs depicts the breakdown of the worldwide online gambling market in terms of revenues generated based on Datamonitor estimates for the year 2002.

Finding the best location
For global operators it is certainly becoming a tough decision where to locate their online gambling server. It is becoming a great deal more challenging while there is limited scope for effective unilateral initiatives. Taking the example of the Isle of Man, we notice a movement to liberalise the licensing rules which in the past were seen to have over-regulated remote gambling activities. In spite of this regulatory hegemony we find that Governments generally are competing amongst each other to attract blue-chip companies to license within their jurisdiction. Some even commission studies of relevant aspects of gambling on the Internet, and each try to promote their regulatory initiatives as being the optimum jurisdiction around the world. Thus it is not surprising that operators are being offered a wide choice of competing jurisdictions each vying for their business. But only by careful analysis of the legal, fiscal ,regulatory, social and technical aspects of each jurisdiction can one arrive at the best location where to weigh anchor .
In most jurisdictions around the world, the law is still a long way behind the technology and issues applying to online gambling. As a result, the question of whether or not it is legal to gambling online can rarely be answered definitively. It is probably fair to say also, that government attitudes to online gambling vary significantly, from whole hearted support, to strong opposition, to indifference. What is clear though, is that there is a concerted effort within Europe by way of legislation drafted specifically to deal with online gambling, whether positive or negative with the underlying provision of the liberal decision taken in the Gambelli case. In particular we see that the application of a revised code of code in Britain paves the way to attract a host of operators currently operating offshore. The latter may be applying for a remote gaming licences when the new facility will be available under the Gambling Act 2005.
Locally the Lotteries and Gaming Authority also takes an active interest in regulating license holders to ensure problems do not escalate in the best interest of player protection. Another innovation in the law is to help players control their total exposure to the amount risked on games through the setting up of reality checks. Setting one’s own limit prior to starting any game of chance is now possible.
The licensee may facilitate these limits so that players may set a limit on the amount he/she may wager within a specified period of time. The same can be set for maximum loss per period of play. To reduce the impact of compulsive players who wish to increase a set limit or time exclusion, the regulations state that such a notice will only take place after seven days .On the other hand any instructions by the player to reduce previously set limits or exclusion periods will be have immediate effect. These are all positive aspects of the world class regulations issued last April by LGA. The regulator in Malta does its best to understand the commercial realities facing the egaming industry and therefore has adopted a commercially realistic approach towards regulating the industry. Malta can serve as a comparatively low-cost springboard to the global egaming market.
Let us hope to see you all at the London conference.

The writer is a partner in PKFMALTA an audit and business advisory firm.
Visit www.maltaconference.com

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