Skill Games Regulations (2017)

Skill Games Regulations

Malta has issued new legislation to regulate Skill Games when this is done in organised manner. Through the enactment of the Skill Games Regulations (L.N. 31 of 2017), which came into force on the 24th January, 2017, the Malta Gaming Authority is now able to provide the necessary governance and regulation over the skill games sector, and this ability is attained by publishing standards in order to safeguard the rights and interests of the consumers, while protecting minors and vulnerable persons, as well as to ensure fairness and transparency and to prohibit any crime in this sector.

Essentially, the Regulation defines a skill game as ‘a game for money or money’s worth and through means of distance communication, the result of which is determined by the use of skill alone or predominantly by the use of skill and is operated as an economic activity, but does not include a sport event’. In addition, it is the operator promoting the activity who has the burden of proving that a particular game falls within the remit of skill games as defined in the Regulation.

On the basis of the risk of the consumer, the regulation makes a distinction between skill games in respect of which intervention of the Authority is justified, and those in respect of which no intervention is required. Henceforth, the Authority has discretion in determining as to whether or not the activity is a skill game ‘or otherwise’ and this by taking into consideration a number of criteria found in the First Schedule, Regulation 3.  These are the following:

1.     The presence of random draws and their effect on the outcome;

2.     If the game is played for money and, or prizes with a monetary value;

3.     Whether participation in a game involves any form of monetary commitment, or commitment of a monetary value;

4.     The possibility of a negative social impact of the game;

5.     Whether the activity is closely associated with games of chance and/or gambling;

6.     The duration;

7.     If at face value, the skilled player is able to win more than an unskilled player;

8.     If a player’s chance of winning is significantly increased by experience in playing the game;

9.     Whether skill can be acquired through training, experience, reading literature or other educational material;

10.  Whether a rule-set or format that is used further nullifies the effect of any element of chance;

11.  Whether the game is played against other human players, or otherwise;

12.  The level of interaction between the players and between the operator and the players and the level of intervention of by the operator;

13.  The complexity of the game, including the amount of player choices and their potential effect on the outcome and the strategies involved.

Where it seems that a particular skill game requires further regulatory control by the Authority due to the number of risks that the skill game imposes on the consumer, according to the Regulation, the Authority is required to issue a license as per Regulation 6, as the skill game would be deemed to be a controlled skill game. This being said, a controlled skill game may only be organised in, or provided from Malta, and made available to individuals in Malta if:

                      i.        It has obtained a licence in terms of the regulation or;

                     ii.        It is offered under an equivalent authorisation issued by the government or a competent authority of another Member State of the European Union or a Member State of the European Economic Area or;

                    iii.        It is exempt from the requirement of a license under the Act or any other law; and

                    iv.        It is at all times compliant with the Regulation and any other applicable regulatory instrument authorisation

Additionally, an applicant who already holds a Class 3 license or a corresponding Class 4 license issued by the Malta Gaming Authority in terms of the Remote Gaming Regulations would not be subject to additional administrative requirements in terms of these regulations, which would have already been satisfied by the same applicant and the latter shall also be exempt from the annual licence fee of €8,500 per annum.

In issuing the license, the MGA may subject the licensee to any other conditions as it may deem appropriate, and may also impose new conditions, vary or revoke any condition so imposed. The Regulation further imposes an obligation on the applicant to satisfy the Authority that the activity which it intends to offer under the license is a skill game and the Authority shall examine the documentation submitted, including any studies, research, rulings or certification submitted by an applicant prior to making such a determination.

Moreover, in Regulation 10, a distinction is made between a license to offer a controlled skill games service, or a license for controlled skill games supply. The former is defined as a controlled skill game available for participation by end customers, whether directly or indirectly, and whether alone or with others, while the latter being defined as the organisation of a controlled skill game for or with a controlled skill game operator. Therefore, in this case, the MGA may issue two different types of licenses – a license for a controlled skill games service to consumers and a license for a controlled skill games supply between two business operators.

The MGA issues the license for a period of five years however this may be renewed for a further five-year term.

A controlled skill game licensee is further obliged by virtue of the Regulations to keep the players’ funds separately from the licensee’s own funds in a clients’ account. In addition, the licensee is obliged to provide its consumers with the option to set a limit on the amount that the player may deposit or play, and an option to exclude oneself from playing for a definite or indefinite period of time. A player may, further, amend the limit or exclusion referred to above by notifying the licensee. A notice which increases or revokes the limit or decreases the exclusion may only take effect after the lapse of twenty-four hours from the licensee receives such notice. A notice reducing a limit or increasing the exclusion will take immediate effect.

The licensee is also obliged to appoint a Key Official throughout the duration of the license term and which among other things, such person has to personally supervise the operations of the licensee and to ensure that the license holder is complying with the applicable laws and regulations.

The Regulation imposes a non-refundable application fee of € 2,300. Furthermore, the rate of the taxation due shall be 5% of real income, which such real income shall be construed as total wagers less total monies paid out to the players. The said tax must be paid to the Authority every month and the maximum annual payable tax by a single controlled skill game shall not exceed € 466,000.

The Authority may also require the licensee to undergo an audit conducted by a certified third party with regards to the licensee’s financial position, its compliance with the regulation and any other regulatory instrument. 

The enactment of this Regulation also brought about the revocation of the Fantasy Sports (Exemption) Regulations, hence fantasy sports operators as well as applicants of such operations are now deemed to be subject to this Regulation.

How can we help?

We can assist clients assess their position in terms of the regulations and assist with any representations with the MGA. We can also assist throughout all stages of the application process and with the eventual setting up of the company and any related legal work and issues.