Malta has signalled it is setting no limits to growth in remote gaming as it projected itself as the industry's European hub at an exhibition held in London last week.
Meeting in Earl's Court, the world's most important gaming and gambling operators exhibited state-of-the-art casino equipment, the latest slot machines, and all imaginable services related to one of humankind's oldest vices. In a wing dedicated to remote gaming - which broadly refers to internet gambling, sports betting, and all sort of games of skill played through a computer or mobile phone - an entire wall was taken by Malta's stand which comprised the Lotteries and Gaming Authority (LGA), a number of gaming operators in Malta, as well as lawyers, accountants, ISPs and gaming consultants involved in the local industry.
It is widely acknowledged that one factor which makes Malta attractive for remote gaming operators is the fiscal aspect, because locally registered gaming companies are effectively taxed just 4.17 per cent when they operate as an international trading company (ITC). An ITC is subject to a corporate tax of 35 per cent on profits like any other Maltese company, but its non-resident shareholders can claim certain refunds which reduce the tax considerably.
However, according to LGA chairman Joe Zammit Maempel, it is more the rigidity of Malta's regulations which is attracting gaming operators: "The Malta seal gives consumers a guarantee that the gaming operator they are choosing is subject to serious regulation, and remote gaming operators want that guarantee to attract customers. When it comes to fiscal incentives, we have little or no advantage on other jurisdictions."
Being the only European Union member state to have legally instituted remote gaming regulations, the country is therefore a step ahead of others as the industry is growing "by the day".
"Since technology has made it possible for people, anywhere in the world, to win jackpots without having to go to a casino, the expansion of the industry does not have parameters with which you could project saturation within a number of years. Its growth could, and will likely, go on and on", Dr Zammit Maempel explained.
In July 2006, Finance Parliamentary Secretary Tonio Fenech said Malta had taken a bold step from the outset to introduce remote gaming regulations that were far superior than any other jurisdiction in terms of strict licensing procedures, strong monitoring controls and player protection mechanism.
Mr Fenech said that with the country's growing reputation as a serious jurisdiction since the introduction of remote gaming regulations in 2004, an increasing number of applications from operators and high-end job opportunities in the sector, remote gaming was "here to stay".
Besides the direct benefits from tax revenue which remote gaming has generated for Malta, the sector has created a need for professionals to be employed by the operators, as well as opportunities for accountants, lawyers, consultants, internet service providers, software operators and hosting companies to have a finger in the pie.
Companies, such as CSB Total Online Gaming Solutions, have been created to help gaming operators interested in coming to Malta fill up the papers. "We're there to make their life easier," said CSB managing partner Michael J. Zammit.
Gaming operators about Malta as an iGaming jurisdiction
But what do operators think of Malta? Casino-for-me.com chairman Alexander Duffy said he would rather be in Malta than anywhere else because of tax benefits, a strong regulatory regime and "the good people coming out of the technical college".
"If we live up to what they ask of us, the regulator protects you. I would rather be in Malta than in a shady country," Mr Duffy said.
Yet Malta's efforts to secure its share in the lucrative business has not been obstacle-free, as remote games, which can be delivered to players anytime, anywhere, have been the cause of legal litigation, as the Zeturf case has shown.
In September 2005, Zeturf, a Malta-licensed online gaming operator, appealed against a decision by a French court preventing it from offering gaming services via the internet to the French market.
Zeturf offered its gaming services through servers in Malta, but it was successfully argued in court that the exclusive rights of Pari Mutuel Urbain (PMU), a French company which enjoys a monopoly in horse betting in France, had been infringed. The French court ordered Zeturf to cease taking online bets on horse races organised in France.
Zeturf then sued PMU in Malta and filed a complaint against both PMU and France at the EU Commission.
Earlier this month, the Maltese Court of Appeal ruled in Zeturf's favour, revoking a judgment in which the First Hall of the Civil Court had ordered the execution of the French court's judgment in Malta.
PMU had requested the enforcement of the judgment in Malta in terms of an EU regulation governing enforcement of judgments but the court of appeal ruled that since PMU had acted before the French courts in the realm of public law as it had tried to protect French public interests, the judgement of the Paris Court of Appeal was, in reality, a judgment on a public law issue. As a result, it did not fall within the ambit of the EU regulation governing the enforcement of foreign judgments, which applies in the case of civil and commercial issues.
In an article printed recently in IGaming Business Magazine, Tony Axisa, of Cybergaming Consultants, wrote that though "many of the detractors of remote gaming would have us believe that all their actions are carried out in the name of protecting society and denying an easy opportunity for the proliferation of criminality", certain countries were clearly restricting access to foreign operators to protect monopolies.
This was exactly what happened in the United States late last year with the enactment of the Unlawful Internet Gambling Enforcement Act (UIGEA), which effectively prohibits foreign gaming operators from targeting American citizens.
Have Malta-based operators been affected by the new US law? Dr Zammit Maempel said the fact that the American market could not be targeted was a drawback for all operators. Yet only a small fraction of Malta-based operators have been negatively affected because most are oriented towards the European and Asian markets.
"One operator had a lot of customers in the US, and was particularly hit. The other few had around five to 10 per cent of their customers in the US, so they will build on their European and Asian customers to regain their market," he said.
Jurisdictions like Gibraltar, however, were greatly affected by the US law as around 95 per cent of operators there had their market base in the US. The shares of those which were listed companies plummeted and people lost jobs.
In the European Union, around 18 countries still have a monopoly in the gaming sector, and the revenue generated by governments from gambling indicates it will take time before they decide to lay their hands off it.
While websites offering paying bets are not licensed in France, the Norwegian Parliament has taken steps to ban Norwegians from gambling online with foreign companies, while the Italian Supreme Court has ruled that Italy's restrictive gambling policies were consistent with its obligations under current European Law ruling that gaming restrictions were justified to protect public order.
"The countries which still collect gaming profits, as was the case for Malta when all gaming was organised by the Lotto Department, are unhappy that operators in Malta can offer the same services they offer on the internet. And I don't blame them, as a percentage of their market share is being taken by the foreign operators, which are actually eating away their revenues.
But countries, especially EU member states, have to understand that they form part of the same single market as we do, which implies that operators may offer remote gaming to customers across borders," Dr Zammit Maempel said.
The interest shown by stakeholders wanting to speak to LGA chief executive officer Mario Galea at the London exhibition, however, hinted the game would not be over despite legal battles. Operators will definitely be competing for human resources locally seeking Information Technology professionals who are able to throw the dice and feed a compulsive appetite that is probably as ancient as the world's oldest profession.
