HraiGamble Group Analyzes the Impact of Malta's Gambling Industry on the EU
Since the early 2000s, Malta has gained a reputation as a well-regulated European remote gaming jurisdiction, attracting numerous operators. It is estimated to host approximately 10% of the global online gaming trade. The MGA is the primary regulatory body responsible for overseeing all gaming activities in Malta. Its role in licensing, endorsing, and supervising operators ensures the establishment of a sophisticated and resilient regulatory framework for remote gaming. Malta's innovative legislative approach demonstrates its commitment to adapting to industry advances while maintaining effective oversight.
The MGA is also responsible for the prevention, detection and suppression of criminal activity in the gambling sector. It also ensures the fair and responsible operation and promotion of games.
In August 2018, a regulatory framework was introduced to address market trends, technological advancements, and consumer behavior. This framework represents a modern, complex, and robust structure for the regulation of remote gaming operators based in Malta or those seeking to enter the Maltese market.
The regulation of gambling falls within the purview of the Gambling Act, which is set out in Chapter 583 of the Laws of Malta, together with its subsidiary legislation ranging from 583.03 to 583.12. Between 2018 and 2023, the MGA has also issued a number of directives and guidelines. These are binding on licensees and provide additional guidance to operators on the adoption and implementation of the applicable laws and regulations.
In the summer of 2023, the Maltese Parliament passed Bill 55, which protects Maltese offshore operators from foreign liability. On June 16, Maltese President George Vella signed Law XXI of 2023 - the Gambling (Amendment) Act - in the midst of high-profile legal disputes with Austria and Germany.
Legal observers consider Bill 55 to be controversial, and many see it as a direct response to legal actions taken by the Austrian and German authorities against online gambling companies licensed in Malta, which are accused of illegally offering their online gambling services to citizens. In some of these cases, the names of companies such as PokerStars, AdvoFin, 888 Holding, etc. appear.
It is worth noting that the names of the companies carry significant weight and are protected by Maltese law, which lends some validity to the perspective of legal observers.
The newly introduced law is intended to prevent 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 in Malta the actions of foreign betting and gambling regulators. Only Maltese courts have the power to enforce judgments against Maltese gambling companies.
Naturally, this has caused concern among European governments and regulators, as the approval of Bill 55 could create a legal loophole that would allow unlicensed operators to continue to provide services in violation of national laws. German MEP Sabine Verheijen asked the European Commission three questions about the Maltese gambling bill to ensure that Bill 55 does not undermine the updated EU Brussels I regulation and the European rule of law. The European Commissioner for Justice, Didier Reynders, requested some additional information from the Maltese authorities and stated that the European Commission is carefully assessing the compatibility of Bill 55 with EU law, taking into account the potential impact on the regulatory integrity of the EU. It's important to note that the European Commission's approval is necessary for the bill to become law.
In her initiative, Sabine Verheijen asks whether the new law is in principle compatible with European law and whether there are links between the Maltese government and the gambling industry. In his response to her, Reynders only partially commented on the issue The Commission has no information on possible links between individual members of the Maltese government and the Maltese gambling industry.
By the way, the EU's regulatory landscape varies from country to country, with some favoring more monopolistic markets and others prioritizing competition and consumer choice. Germany, for example, operates under stricter regulations than the UK. The passage of Bill 55 could limit the power of German authorities in the courts against Maltese gambling companies, which would have a strong impact on the German gambling market.
Undoubtedly, the European Commission's rulings on this issue could potentially reshape the industry landscape across the EU.
"Due to the prohibition of non-German licensed operators (according to the State Gambling Agreement) from entering the Germany 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," comments Jürgen Meier, gambling industry specialist at Casinospot.de. It's clear, then, that deliberations and possibly even legal action over the legality of Bill 55 are likely to continue for some time to come.
Maltese gambling market boom
The efforts undertaken by MGA to make Malta an attractive destination for gambling companies have become fruitful, resulting in the establishment of Malta as a significant hub for online gaming.
In Annual Report 2022, the MGA stated: 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, that the gambling industry is of significant importance and impact for the Maltese economy.
In addition, it is estimated that at the end of December 2022, MGA-licensed companies employed approximately 11,245 persons engaged in activities covered by the Authority's license, with 92.2% of these employees employed in the online sector. Malta's achievements in online gambling have attracted attention, as numerous companies registered and licensed there are now expanding their operations within the EU.
The MGA also reports a significant increase in the number of active player accounts registered on MGA-licensed sites, which increased by 2.6% in 2022 compared to 2021, reaching an unprecedented 36.4 million accounts.
The Industry Performance Return study shows that 65% of online gaming operators expect their gaming revenues to increase in 2023. The share of operators increases to 74% when expressing their expectations for 2024.
While the MGA does not disclose the amount of contributions it receives from the gambling industry's revenues, the report cites data from the national lottery Malta Lotteries Limited (Maltco). The gambling tax paid by Maltco alone amounted to €5.5 million in 2022. And social payments amounted to about 340 thousand euros.
Under the international corporate tax system, the Maltese jurisdiction is committed to implementing the global minimum tax in 2024. Large international groups with a combined annual turnover of more than €750 million will be subject to the minimum corporate tax at a rate of 15% in 2024. As the tax reform is being implemented on a global scale, the reaction of gaming operators to the potential shift to other jurisdictions is expected to be limited.
Increased regulatory and compliance requirements as a result of the wave of national regulations sweeping across Europe and beyond are also likely to drive industry consolidation, according to experts at HraiGamble Group. The MGA's focus on data and technology demonstrates its desire to maintain a strong regulatory environment. The industry's contribution to the Maltese economy, including employment rates, vividly demonstrates its importance and potential for further growth.
It appears that the MGA has stepped up its efforts to ensure a sustainable strategy for the gaming sector to overcome the potential difficulties and ultimately protect the competitiveness of Malta as a gaming jurisdiction. The passage of Bill 55 by Parliament is one of the steps towards achieving this ambitious goal.
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