IGaming in Malta is now 20 years young

It started as a whim in 2002, under the auspices of the old-style Lotto department, then still faithfully turning the 90-number lotto wheel. It was a bold step taken by the PN government to venture into the unknown -specifically when bandwidth was limited and was owned exclusively by MaltaCom - a state monopoly.

Banks were shy and scared of online gaming with bankers wanting to court it but stayed aloof not being familiar with its risks. The new kid on the block grew slowly in the early years, while yours truly was a pioneer writer about its fortunes in business media extolling its potential. This was a taboo sector and most newspaper editors were cautious not to be closely supporting it. My editor used to tell me - an article once a month on the subject was the limit.

I took particular interest in the relatively unknown sector and in 2003 travelled to Australia to register in Malta, the first sport book company then a listed company based in Northern Territory (Darwin) at a time when Australian politicians at the hustings were keen to wean off its popularity among gamblers. They threatened to ban it completely via a moratorium hence the option for a gaming license in Malta. More gaming licenses followed once the Lotto office was replaced by a Lotto and other Games Act - fortuitously chaired by politically appointed bigwigs.

For a start, as the agency was still in its infancy the task of conducting due diligence on applicants was entrusted to MFSA - under the patronage of its chairman Joe Bannister.  Problems abounded for beginners trying to test the setup when as stated earlier there was no redundancy in bandwidth and no bank would open credit facilities or extend full scale credit card processing.

Most of the early credit card processing via Visa, Mastercard and others were handled by foreign companies. The legislation catered for various licenses and the gaming tax was moderate. I had participated in numerous international gaming conferences and started to gain some familiarity with the gaming community in New Jersey, Dublin, London, Barcelona and Spain. My first big scale gaming conference was hosted in a five-star hotel in Barcelona in 2002.

Success led me to organise a two-day international law conference (fee paying) in London close to the days when the celebrated ICE conference was held annually at Earls Court. My modest part in promoting Malta during the early days of the gaming saga saw me being cautioned by managing partners of the Big Four audit firms. These would not touch them with a barge pole seeing them as too risky to audit.

Obviously, the attitude evolved as the Big Four and leading law firms now service such rich clients professing their expertise in indirect tax, gaming regulation, players protection, AML. They hastily set up specialist departments advising their clients about international gaming law. There is no looking back now that the industry has matured during the twenty-year interlude. It has grown into one of Malta’s most important economic contributors.

It provides ancillary services such as web hosting, security auditing, players protection, HR recruiting or legal work. Malta, in essence, serves as the European backbone of the industry, attracting the largest gaming operators and suppliers, as well as some of the hottest start-ups. Readers may remember the harsh legal battles that early operators had to endure? Clashes with the European Court of Justice has landed Malta at the hot spot especially the famous case of the Zeturf - a French subsidiary in Malta which targeted punters on French horse racing circles.

Malta lost the case yet there were other legal battles along the 20 year ride. Moving forward, one appreciates the key areas of licensing with much prospect for growth such as in B2B, as well as the appeal of flexible B2C regulations for overseas markets. An option frequently chosen by such parties is that of setting up a skin, that is, a white label arrangement. This works as empowering operators are able to rely on and be promoters of pre-existing online gaming licensees.

The flexibility of Malta gaming rules allows gambling operators the option to reap the benefits of setting up shop within this industry without incurring the expenses and responsibilities associated with the attainment of an online gaming license. 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.

Another novelty is that the duration of the license, has been extended from a validity period of 5 to 10 years, giving licensees more long-term stability. A number of foreigners specialised in the complex operation of sports betting, poker, table games and skill games - which grew in importance over the years. Is there a lesson to be learned by local regulators (previously - LGA now recently morphed into MGA)? The political class were visible to stay close to the foreign boards running the show and placed persons of trust in MGA to harness the fortunes of the expanding sector.

The sudden demand for specialists was facilitated by local HR agents which undoubtedly led to a growing community of well-paid professionals. Boys and girls now afford to rent quality furnished apartments and party hard. More broadly, they have made Malta their home and not just their workplace. For the techies, these have welcomed the arrival of new bandwidth providers with ample connectivity via micro links and a number of subsea cables to mainland Europe.

A welcome development took place where software developers laid anchor in Malta and started a thriving ecosystem. With the introduction of new gaming laws this widened the concertina for new flexibility. Despite the countless setbacks faced by businesses since March 2020 by the COVID-19 pandemic, the iGaming business proved vigilant. It has no intention of slowing down, and unlike other industries, has shown remarkable resilience in the face of the Covid 19, downturn.

In light of the pandemic, Malta Enterprise launched a €5.3 million research and development fund, to which iGaming companies are encouraged to apply. What’s next for the Igaming sector? Will banks become more friendly towards the industry? Should this occur, Malta can capitalize on the millions currently paid overseas to credit card processors and intermediate fees paid to foreign credit institutions.

Fortune favours the brave and I hope that the next paradigm shift will surprise us all during the post-Covid recovery with Metaverse blazoning the trail.