GPWA Times Magazine - Issue 32 - June 2015

Hardware is sealed if you have hardware outside Malta. The LGA reserves the right to request 24/7 CCTV monitoring. Most importantly, you need to replicate every- thing that is happening outside Malta to servers that you have in Malta. That rep- lication process is tested by the regulator before you actually get a license. I think it’s working out fine. Of course, in an ideal world, you would say the gaming system should be in Malta. However, I think the cost makes it a little bit prohibitive. In any case, even if it wasn’t a question of cost, the industry has moved on. Malta has become, from an intellectual capital standpoint, a hub in the iGaming industry. You’re getting people from the Czech Republic, Russia, Ukraine and the U.K. setting up shop. You have a large iGaming community on the island itself. Was this expected? How has this changed the nature of the iGaming industry in Malta? I think in any new venture, you always start with hope. I think in the case of iGaming, we weren’t being optimistic and just hoping. From day one, I think Malta realized that it can make a substan- tial success out of it. And today, gaming is very important for the local economy. It’s a substantial chunk of GDP. So it is important. As you said, Malta has managed to estab- lish a gaming hub. I think that together with financial services, it’s something that has become part of the economic fabric of the island. Whether that is here to stay, that’s another thing. When this started out in 2004, my personal opinion was that this industry is fickle. It’s technology. You can never know which exact shape it’s go- ing to take. You can never know whether regulation is going to be sufficient to overcome the prejudice that surrounds this industry. But I think the general feeling was that there’s a window of opportunity. I think Malta is still very proactive in trying to service the industry. Unfortunately, how- ever, I think the EU in particular is being a bit greedy about it. Let’s keep in mind that once you get any form of license within the EU, that’s supposed to enable you to move your services intra-community without further restraints, without fur- ther ado, unless a member state says, I’m putting a stop to this in the interest of my citizens. Even then, there are limitations. What’s been happening on an EU level is that, unfortunately, the exception to the EC (one market) principle has be- come the rule. No one has been able to do much about it. So Italy has come up with regulations, Denmark, the U.K., France, Belgium, Germany, and the list goes on and on. In an environment where you have country-by-country regulation, and you have a point of consumption tax going in place in the U.K., what is the role of Malta in that universe? It definitely does present some formidable challenges to Malta. I don’t think that the current setup on an EU level is commer- cially feasible. It’s very difficult to hold multiple licenses. It’s not only the cost of the license, it’s the administration of that license. It’s the fact that we need to ensure compliance, and in today’s world, com- pliance costs a lot of money. Most impor- tantly, it’s the gaming taxes that you have to pay. The EU has become a bit too greedy; some of the gaming taxes are hilarious. In Denmark, you have to pay your gam- ing tax on a weekly basis. That means you cannot offset any of your costs, which means that no matter how successful you are, you’re going to be left with no money. France? Same thing; (the) tax is too high. You look at the U.K. – 15 percent. If you work out that 15 percent, give or take, it’s going to shave at least 4 percent to 7 per- cent off your bottom line, which is a lot of money. If I have a Malta license, I need to pay my taxes in Malta, too. (Malta's taxes), by the way, are very reasonable. I’ve never had a client who complained about Malta’s gam- ing taxes. Never. That is quite an achieve- ment, because really and truly, no one is enthusiastic about paying taxes. Malta’s role in the industry is being chal- lenged. Let’s face it: If a Malta license is go- ing to serve you only to target the Maltese market, then it’s a no-brainer — it’s too small. At the same time, if I need a U.K. li- cense to target U.K. players, yes, I will have to go for that license, because the U.K. mar- ket is bound to be very important for me. Then you have all the niche markets. If I have a niche market like Italy, and I know that I need a license, the chances are that I’m going to go for a license. Long-term, I don’t think this is going to be sustainable. We’re killing the goose that lays the golden eggs. There’s no question about that. Three years ago, clients would come here, and they wouldn’t be too con- cerned and bothered with a plan B and a plan C; today, operators tend to come here with a plan A that’s already in place and also a plan B. Maybe unfortunately, the plan B and the plan C are no longer Europe. They’re outside Europe. One would need to see how this plays out. I still think that Malta’s window of oppor- tunity isn’t anywhere near closing for one very simple reason. In today’s environ- ment, Malta has the advantage of the ex- perience of the past 10 years, which does help it a lot. That experience has been translated into flexibility, and flexibility is key to the gaming industry. Malta licensees are used to dealing with a regulator. It’s not a free-for-all. You need to adhere to the conditions of your license. However, if you have an idea for how things can be improved, you have a regu- lator that learned over the years to listen, to feel the pulse of the industry and not to be afraid of change. Other jurisdictions are going to find that very difficult to do and accept. The instinct of a regulator is, if I say yes, if I accept changing things all the time, the licensee might not take me seriously. I think Malta’s regulators figured that out a long time ago. You can still be in control, you can still keep gaming free from any form of criminality, but at the same time, you can still help your licensee to try it. Should affiliates be licensed and regulated? No, I don’t think the regulator can possibly involve itself in regulating affiliates. At the end of the day, if I’m just getting myself a white label, if I just have a banner some- where and you’re forwarding the traffic, it’s going to do one of two things: It either requires an army of regulators, or the regu- lator tells operators that they cannot have 43 The future of iGaming in Malta