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MGA Fuels Gambling Industry Growth

MGA Fuels Gambling Industry Growth
by
September 18, 2023
in Finance News, Laws
104

The Malta Gambling Authority (MGA) has been on a mission to transform Malta into an attractive destination for companies in the gambling industry. According to the Annual Report for 2022 released by the Malta Gambling Authority, their efforts have yielded significant results. The report reveals that the number of new players entering the licensed gambling arena in Malta surged by a remarkable 56%, jumping from 75,262 in 2021 to an impressive 170,303 in 2022. What’s more, the total Gross Value Added (GVA) generated by the gambling industry in 2022 amounted to a staggering €1,495 million, making up approximately 9.6% of the GVA of the entire Maltese economy. This represents a 1.6% increase compared to 2021.

In this comprehensive article, we delve into the expected growth of the Maltese gambling market, its potential ramifications for the European Union, and the controversy surrounding a new law introduced by the Maltese Parliament in the summer of 2023.

Malta: A Hub for Online Gaming

Since the early 2000s, Malta has garnered a reputation as a well-regulated European remote gaming jurisdiction that has successfully attracted a multitude of operators. It is estimated that Malta hosts around 10% of the global online gaming trade. The Malta Gambling Authority (MGA) plays a pivotal role as the primary regulatory body overseeing all gaming activities within the country. Its responsibilities encompass licensing, endorsing, and supervising operators, thereby establishing a sophisticated and robust regulatory framework for remote gaming. Malta’s legislative approach has been innovative, reflecting its commitment to adapting to industry advancements while upholding effective oversight.

Moreover, the MGA is responsible for ensuring the prevention, detection, and suppression of criminal activities within the gambling sector. It also plays a critical role in ensuring fair and responsible gaming practices.

In August 2018, a forward-looking regulatory framework was introduced to address market trends, technological advancements, and evolving consumer behaviors. This framework represents a modern, intricate, and resilient structure designed to regulate remote gaming operators based in Malta or those seeking entry into the Maltese market.

Regulation of gambling in Malta falls under the purview of the Gambling Act, as outlined in Chapter 583 of the Laws of Malta, accompanied by its subsidiary legislation ranging from 583.03 to 583.12. Between 2018 and 2023, the MGA issued a series of directives and guidelines that are legally binding on licensees. These directives offer additional guidance to operators regarding the adoption and implementation of applicable laws and regulations.

Bill 55 and Its Controversies

In the summer of 2023, the Maltese Parliament passed Bill 55, a piece of legislation designed to protect Maltese offshore operators from foreign liability. On June 16, Maltese President George Vella signed Law XXI of 2023, officially known as the Gambling (Amendment) Act. This development occurred amidst high-profile legal disputes involving Austria and Germany.

Bill 55 has been viewed as controversial by legal observers, and many perceive it as a direct response to legal actions initiated by Austrian and German authorities against online gambling companies licensed in Malta. These companies have been accused of illicitly offering online gambling services to citizens of these countries. Notable companies embroiled in these cases include PokerStars, AdvoFin, and 888 Holding, among others.

It’s important to highlight that these company names carry significant weight and are protected by Maltese law, lending credence to the concerns expressed by legal observers.

The newly enacted law aims to curtail the proliferation of claims against Maltese operators for offering gambling services within the scope of their licenses. In practice, this means that Maltese courts will refuse to recognize and enforce actions taken by foreign betting and gambling regulators. The power to enforce judgments against Maltese gambling companies will be exclusively vested in Maltese courts.

Naturally, this development has raised concerns among European governments and regulators. Bill 55’s approval could potentially create a legal loophole that allows unlicensed operators to continue offering services in violation of national laws. German MEP Sabine Verheijen raised three questions with the European Commission regarding the Maltese gambling bill. Her aim was to ensure that Bill 55 does not undermine the updated EU Brussels I regulation and the European rule of law. European Commissioner for Justice, Didier Reynders, sought additional information from the Maltese authorities and stated that the European Commission is carefully assessing the compatibility of Bill 55 with EU law. This assessment takes into account the potential impact on the regulatory integrity of the European Union. It’s essential to note that the European Commission’s approval is a prerequisite for the bill to become law.

In her inquiry, Sabine Verheijen explored the compatibility of the new law with European law and sought information about any connections between the Maltese government and the gambling industry. In response, Didier Reynders provided only partial commentary on the matter. The Commission stated that it has no information regarding potential links between individual members of the Maltese government and the Maltese gambling industry.

It’s worth noting that the regulatory landscape within the European Union varies from one country to another. Some EU member states favor monopolistic markets, while others prioritize competition and consumer choice. For instance, Germany has more stringent regulations in place compared to the United Kingdom. The passage of Bill 55 could potentially curtail the authority of German authorities in their legal disputes against Maltese gambling companies, which could have profound implications for the German gambling market.

Undoubtedly, the European Commission’s decisions regarding this matter could reshape the industry landscape across the European Union.

Jürgen Meier, a gambling industry specialist, comments on the situation: “Due to the prohibition of non-German licensed operators (according to the State Gambling Agreement) from entering the German market, Maltese gambling companies find themselves in court time and again, as legal representatives demand compensation for their customers’ gambling losses. Conversely, Maltese companies invoke the principle of providing services within the EU and raise questions about potential breaches of existing European legislation by the German State Gambling Treaty. Bill 55 is poised to give Maltese companies greater influence in legal proceedings.” It’s clear that discussions and potential legal actions concerning the legality of Bill 55 will likely persist for some time.

Maltese Gambling Market on the Rise

The Malta Gambling Authority’s persistent efforts to position Malta as an attractive destination for gambling companies have paid off, leading to the emergence of Malta as a significant hub for online gaming.

The Annual Report for 2022 from the MGA states: “The total Gross Value Added (GVA) generated by the gaming industry during 2022 stood at €1,495 million, representing around 9.6% of the economy’s GVA. When the indirect effects are included, the industry’s contribution to the economic value added amounts to just over 12.4%. The gaming industry is estimated to have registered a value growth added equal to 5.8% compared to 2021.” The fact is, the gambling industry holds immense significance and influence over the Maltese economy.

Additionally, it’s estimated that by the end of December 2022, companies licensed by the MGA employed approximately 11,245 individuals engaged in activities falling under the Authority’s purview. A staggering 92.2% of these employees were associated with the online sector. Malta’s accomplishments in online gambling have not gone unnoticed, with numerous registered and licensed companies expanding their operations within the European Union.

The MGA’s report also highlights a significant increase in the number of active player accounts registered on MGA-licensed sites. This number rose by 2.6% in 2022 compared to 2021, reaching an unprecedented 36.4 million accounts.

The Industry Performance Return study reveals that 65% of online gaming operators anticipate an increase in gaming revenues in 2023. This figure rises to 74% when operators express their expectations for 2024.

While the MGA does not disclose the exact amount it receives from the gambling industry’s revenues, the report does mention data from the national lottery, Malta Lotteries Limited (Maltco). In 2022 alone, the gambling tax paid by Maltco amounted to €5.5 million. Social contributions amounted to approximately €340,000.

Under the international corporate tax system, Malta is committed to implementing the global minimum tax rate in 2024. Large international groups with a combined annual turnover exceeding €750 million will be subject to a minimum corporate tax rate of 15% starting in 2024. Given the global nature of this tax reform, the likelihood of gaming operators shifting to other jurisdictions in response is expected to be limited.

Furthermore, the surge in regulatory and compliance requirements stemming from the wave of national regulations across Europe and beyond is likely to lead to industry consolidation. Experts at HraiGamble Group believe that the MGA’s focus on data and technology underscores its desire to maintain a robust regulatory environment. The gaming industry’s contributions to the Maltese economy, including employment figures, vividly underscore its significance and potential for further growth.

It’s evident that the MGA has intensified its efforts to establish a sustainable strategy for the gaming sector. These efforts are aimed at addressing potential challenges and ultimately safeguarding Malta’s competitiveness as a gaming jurisdiction. The passage of Bill 55 by Parliament represents one of the key steps toward achieving this ambitious goal.

FAQs (Frequently Asked Questions):

What does the Malta Gambling Authority (MGA) do?
The MGA is responsible for regulating and overseeing all gaming activities in Malta. It grants licenses to operators, ensures fair gaming practices, and works to prevent criminal activities in the gambling sector.

What is Bill 55, and why is it controversial?
Bill 55 is a piece of legislation passed by the Maltese Parliament in 2023. It aims to protect Maltese offshore operators from foreign liability in response to legal actions by Austrian and German authorities against Maltese-licensed gambling companies. It is considered controversial because it could create a legal loophole allowing unlicensed operators to provide services in violation of national laws.

How is the European Union (EU) reacting to Bill 55?
The EU is closely monitoring Bill 55’s impact. German MEP Sabine Verheijen raised questions with the European Commission to ensure that the bill complies with EU law. European Commissioner for Justice, Didier Reynders, is assessing the bill’s compatibility with EU law and its potential impact on EU regulatory integrity.

How significant is the gambling industry to the Maltese economy?
The gambling industry contributes significantly to the Maltese economy. In 2022, it accounted for approximately 9.6% of the Gross Value Added (GVA), amounting to €1,495 million. When indirect effects are considered, its contribution to economic value added surpasses 12.4%.

What is the global minimum corporate tax, and how does it affect Malta?
The global minimum corporate tax is set to be implemented in 2024. It affects Malta by subjecting large international groups with an annual turnover exceeding €750 million to a minimum corporate tax rate of 15%. This reform aims to create a level playing field in international taxation.

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