The New Skill Games Regulations
By virtue of Legal Notice 31 of 2017, which came into force on 24th January 2017, Malta has adopted the Skill Games Regulations (‘SGR’) (S.L. 438.11), which have brought into effect a specific regime of regulations specifically geared towards the regulation of skill games with prize. Besides providing a specialised set of innovative regulations to regulate games of skill in a different manner from other games, the SGR classify fantasy sports games as falling within the realm of these Regulations. Consequently, with the adoption of the SGR, the Fantasy Sports (Exemption) Regulations (S.L. 438.10), introduced on 1st August 2016 as a provisional measure, have been concurrently repealed. A three-month transitory period is in effect, which period shall expire on the 27th April 2017.
The recently enacted SGR specifically exclude from their sphere of regulation sports events, thereby bringing within their domain all skill games with a prize, capable of being converted into money or money’s worth, offered by means of distance communication, the result of which is determined by the use of skill alone, or predominantly, and is operated as an economic activity. In turn, the notion of ‘skill’, as defined by the SGR itself, denotes “knowledge, dexterity, strength, speed, accuracy, reaction time, coordination and, or competence in other physical or mental feats acquired, developed or learnt through practice, experience or study”.
The Regulations apply to all skill games organised in Malta, provided from the territory of Malta or promoted or offered to persons in Malta. In this light, the SGR empower the Malta Gaming Authority (‘MGA’, or ‘the Authority’) to regulate the sector in line with a set of public policy objectives envisaged by the Regulation, namely, ensuring that:
- Skill games are subject to risk-based regulatory intervention, which is proportionate, consistent and non-discriminatory, where this is necessary in the public interest;
- Skill games are conducted in a fair and transparent manner and that the sector is kept free from crime;
- The interests of all consumers are adequately safeguarded and proper controls are in place to protect minors and other vulnerable persons; and
- All other relevant objectives listed in the Lotteries and Other Games Act are fulfilled.
If the Authority deems it desirable in pursuance of the regulatory objectives sought to be achieved, it is vested with the discretion to classify, by virtue of the issuance of a public ruling, skill games as ‘controlled skill games’, thereby subjecting the same to the additional regulatory supervision and obligations stipulated in the Regulations, apart from the fundamental requisite of obtaining a controlled skill games licence.
A controlled skill games licence is available in two types; either as a licence to offer a controlled skill games service granted to operators engaging with players directly, or as a licence directed to business-to-business service providers intending to offer a controlled skill games supply. A body corporate established in a European Union Member State or a Member State of the European Economic Area is eligible to hold a licence, which is valid for a term of five years, renewable for a further five-year term by the Authority.
The abovementioned licence is subject to a number of requirements, including a procedure to ensure that the individuals behind the business are fit and proper, financial and system auditing to ensure that the operation is fair, sound and secure, and other measures to prevent fraud and money-laundering, a consumer-centric approach to the business, a high level of information security and segregation of player funds.
The fit and proper test carried out by the Authority shall entail, amongst other considerations, an examination of the financial background, business reputation and current financial position of the applicant’s promoters, shareholders and directors; an evaluation of the applicant’s competence, technical know-how and resources; the management’s suitability in running the applicant’s business; the proposed funding methods of the applicant’s business; as well as the applicant’s commitment in implementing policies and taking affirmative steps to detect and prevent money-laundering, the funding of terrorism, fraud, and any other criminal or suspicious transactions.
The licensee may be subjected to any conditions as the Authority deems appropriate in pursuit of the regulatory objectives. Moreover, a licensee is obliged to appoint and maintain at least one Authority-approved key official throughout the duration of the licence term, who shall be responsible to personally supervise the operations of the licensee; ensure compliance with all the applicable laws and regulations, conditions and directives imposed or issued by the Authority; take on the licensee’s reporting obligations; as well as act as a liaison between the licensee and the Authority.
Licence-holders are subject to the relevant licence fees, application fees, approval fees and any other administrative fees. In this regard, the Regulations exclude applicants who already hold a Class 3 licence, or a corresponding Class 4 licence issued by the Authority in terms of the Remote Gaming Regulations from the administrative requirements which have already been satisfied by the applicant, as well as exempt the same from the aforementioned annual licence fee.
Finally, a licensed provider of a controlled skill games service organised in, or provided from the territory of Malta, or providing such service to any person in the territory of Malta shall pay to the Authority on behalf of Government a 5% tax of real income, with the latter being construed as “total wagers less total monies paid out to players”.