16 September 2014

Online Gaming industry feels it is under siege

 - Sunday, 30 May 2010, 00:00

by Noel Grima

Despite opposition from Malta, whose gambling industry brings it substantial revenue, EU ministers on Tuesday agreed on a common definition of illegal gambling, taking the first steps towards possible European regulation on the subject.

The ministers, who were meeting in Brussels, briefly discussed a progress report by the Spanish presidency that could pave the way for a legal framework on gambling and betting in the EU.

Gambling activities have traditionally been strictly regulated at national level to protect consumers against addiction, fraud, money laundering and fixed games.

After gambling activities were excluded from the EU’s Services Directive, there have been a growing number of complaints from sports betting service providers regarding access to national markets.

This has led to a number of European Court of Justice rulings on the issue and several Commission infringement procedures against member states to verify whether national measures limiting the cross-border supply of online gambling services are compatible with Article 49 of the EC Treaty, which guarantees the free movement of services.

According to reports in the international media, Tuesday’s meeting resulted in an agreement over a common definition of illegal gambling. The Spanish report said that illegal gambling may be defined as “gambling in which operators do not comply with the national law of the country where the services are offered, provided those national laws are in compliance with EU treaty principles”.

Up until Tuesday, Malta and the UK had been opposed to any initiative at EU level on the matter, arguing that gambling is an economic activity like any other, and that EU rules on freedom of services in the internal market should apply.

But last Tuesday, only Malta decided not to support the Spanish Presidency’s report and tabled a separate statement on the matter. The UK’s tacit approval of the report was taken by many to signal a softening of its stance.

Malta stresses that it already has high-quality legislation and regulation on illegal gambling and therefore sees no reason for an EU-level initiative on the issue.

Malta and the UK both have inexpensive online gambling licences and favourable tax rates for gambling operators based in their territories, and in a country the size of Malta, tax revenue from online gambling represents a significant amount.

Last Tuesday, coincidentally, former Prime Minister Alfred Sant spoke in Parliament about the online gaming sector.

Dr Sant referred to the 2009 IMF reports on Malta, which produced a graph showing that between 2006 and 2008 the sector had constituted between 50 and 60 per cent of the Gross Domestic Product. During 2008 the sector had contributed 10 per cent to the GDP in export services - more than double that of the financial services.

From a close analysis of government revenue, it emerges that online gaming contributed €32.5 million to government revenue in 2007 and €37.2 million in 2008, and was expected to have contributed €43.4 million last year and €46 million this year.

While figures for online gaming are usually said to be confidential, minister Tonio Fenech himself had broken this “confidentiality” last March when he addressed the World Gambling Briefing 2010, held in Malta. After telling delegates how favourable Malta was to remote gaming operations, Mr Fenech had informed them that 350 licences for online gaming had been issued and some 600 applications had been received and Malta had 250 internet gaming operators and the gaming industry employed 5,200, of whom 3,400 were employed directly by the remote gaming sector.

This juxtaposition of news and comment about Malta’s online gaming industry has made many in the industry nervous and jittery. The industry has a huge spill over for the Maltese economy, what with rented high-quality apartments and travel, etc., and the economic environment is contributing to the nervousness. Comments passed on to this newspaper from the industry reported that some of those involved are questioning whether the bi-partisan support of the industry has unravelled.

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