Few countries in the world have a vision for iGaming as defined as Malta’s. The rapid expansion of the sector over recent years shows no sign of slowing down. The first EU country to regulate online gaming, Malta today has an outsize influence in the world of iGaming. In spite of its modest size and numbers, the island is just over 316 square kilometres in area and is home to 460,000 people, Malta is regarded as the most prestigious address for gaming operators.
iGaming has grown into one of Malta’s most important economic contributors. Today, the industry accounts for 11% of the island’s GDP and employs more than 6,600 people directly, with an additional 3,000 to 4,000 providing ancillary services such as web hosting, security auditing or legal work. Malta, in essence, serves as the backbone of the industry, attracting the largest gaming operators and suppliers, as well as some of the hottest start-ups.
A Corporate Love Affair
Malta’s open-arm attitude to iGaming companies has seen major corporations and household names flock to the Mediterranean island. Malta plays host to industry heavyweights, such as Betsson, Paddy Power Betfair, GiG, GVC, Kindred, Stars Group, SKS365, DraftKings, LeoVegas, Evolution, and Tipico. Brexit is creating interest from other big league companies like William Hill, bet365 and 888 that are looking to plant a flag on the island. But it is not just the major gaming companies that have been beating a path to Malta, the island has also found fans amongst the large group of B2B suppliers and service providers. Today Malta offers a thriving gaming ecosystem, where gaming companies can find everything and everyone they need to do business with, ranging from game developers and solution providers such as NetEnt, Play ‘n Go, Aspire, Microgaming, Betconstruct and Greentube, to affiliate marketing firms such as Catena Media, Raketech, MatchingVisions and Gambling.com.
20 Years in the Game
Malta has an impeccable 20-year track record in regulating iGaming companies. The first online gaming operators arrived on the island in the late 1990s, well before the dotcom boom. Blazing a new trail, Malta, unlike many other countries that sought to protect their monopolies, allowed commercial operators to set up and enter the gaming market. The government quickly recognised the need for a dedicated regulatory framework and set up a regulatory authority for this young industry just before Malta joined the European Union in 2004. The past 20 years have left Malta with a legacy of know-how and experience that it has put to work in developing what the Malta Gaming Authority (MGA) refers to as next generation legislation.
“Malta’s new Gaming Act addresses conflicts of laws, paving the way for technology convergence and games neutral forms of licensing activities. While the revamp of Malta’s iGaming regulations will ensure the sustainability of the industry in the years to come, iGaming companies will operate in a well-regulated ecosystem that will allow space for further growth and investment.”
Roger A. Strickland Jr, Director of CSB Group
An International Licence
Malta continues to impress as a leading iGaming hub, despite the fact that the global regulatory landscape for the sector is in flux like never before. Malta’s industry had for many years enjoyed unrestricted access to all EU member states, and many had expected that the island would lose some of its market dominance as more and more countries introduced their own national licensing regimes. Although companies now have to hold separate local licences in all regulated markets that they are operating in, the mass-exodus of gaming companies did not happen. Instead the island has emerged as one of the big winners having attracted record numbers of operators and service providers. Big-name operators and start-ups are lining up to receive their licences from the MGA. But why are they coming? The country’s competitive corporate tax system certainly helps, however, companies insist that this alone is not enough to convince them to move to the island as other EU countries offer lower rates. The primary attraction of the Malta licence is that it is an international one that does not restrict an operator to the Maltese market but gives companies the opportunity to exploit white and grey areas in the rest of the world.
Rewriting the Rules
The iGaming industry is today facing technological disruption and change like never before. The increasingly maturing industry demands smoother processes, as well as better regulation for new forms of gaming. The government set itself the task of crafting a whole new set of rules and regulations that would provide the gaming industry with the platform it requires to respond to today’s realities and future developments. The new Gaming Act entered into force in August 2018 and has radically transformed the way the sector is regulated. The new law simplifies and streamlines processes, avoids duplication and speeds up time to market for operators. One of the major changes was the introduction of just two licence categories: a Business-to-Business and a Business-to-Consumer licence. A new set of licence fees and compliance contributions has also been introduced, while licences are now valid for 10 years instead of a 5-year period.
Big in Support
Regulation is only part of the reason for Malta’s global role in the iGaming industry. The island’s main draw-card is the ease of doing business. The presence of data centres, online payment processors, security auditors, gaming software developers, and platform providers contributes to a tailor-made environment that is conducive to growing a successful business. Consultants with technical expertise are always on hand to support critical operations in areas such as search engine optimisation and affiliate management companies. Equally, the island’s lawyers and accountants have a wealth of experience, ensuring that a vibrant and creative cluster of talent and know-how is in place to help companies manage and grow their operations. This is unique in Europe and goes a long way towards explaining Malta’s identity as the world’s iGaming capital.
Malta Gaming Authority Headquarter
From start-up to scale up
The power of rapid scaling is a huge competitive advantage for companies setting up in Malta, which is positioning itself as a key innovation hub for the sector. The start-up and creative culture is being channelled into a vast array of products and services such as analytical tools, games development, fantasy sports and esports. Meanwhile, others are developing virtual and augmented reality products, cloud platforms based on artificial intelligence; as well as new and innovative payment methods. Gaming start-ups find Malta a particularly attractive place due to the concentration of industry players, talent and suppliers on the island. Many of Malta’s first arrivals have grown from small start-ups to global giants. In more recent times, the island has seen the emergence of a new generation of start-ups. They aim to scale fast and enjoy the backing of some of the most experienced and wealthiest investors in the industry. Well-funded and with great ambitions, they are hoping to make a big splash, and many are already on the acquisition trail themselves.
Technology and service innovation go hand-in-hand, and the island is carving out a niche for services that are not on offer in other iGaming jurisdictions: Malta can be a disaster recovery site, a base for payment companies and back-office activities. Malta’s success as an iGaming hub is also having the knock-on effect of enticing other industries into establishing a presence of their own. Case in point: video game developers and publishing companies, as well as gamers themselves, have relocated to the island to take advantage of business incentives and high quality of life.
Malta is also turning heads in the iGaming industry for its willingness to embrace innovative and emerging technologies. Calling itself the ‘blockchain island’, Malta has introduced the world’s first holistic regulatory framework for Distributed Ledger Technologies (DLTs). The framework initially captures DLT platforms and smart contracts only, but the government is now working on extending its reach to other platforms and technologies, such as Artificial Intelligence (AI) and Internet of Things (IoT) technologies. The rise of emerging technologies like AI, machine learning, big data and blockchain offer the iGaming industry great opportunities to tackle a myriad of transparency issues, automate processes and completely re- design its business model.
Malta’s innovative drive has made the island appealing for DLT innovators. Despite its minuscule size, the island has attracted a host of innovative companies, including crypto exchanges, ICO platforms and developers of blockchain-based tools and applications, which have either relocated or established new offices on the island. This opens up exciting opportunities for iGaming companies. They can work with some of the brightest names in the blockchain and cryptocurrency industry to develop, test and scale innovative products and solutions.
Download Gaming Malta 2019 Edition
A Brexit Partner
Malta is now preparing for a new influx of companies that are packing their bags ahead of Brexit. Although Malta is not pitching as aggressively as other nations for UK business, the island’s co-location, not relocation, approach has resonated with operators seeking an address in the European Union. William Hill, bet365 and 888 are reportedly among the companies that are moving operations to the island should the UK leave the European Union.
A Talent-Driven World
While the arrival of new companies and gaming executives will further cement Malta’s position as a leading iGaming jurisdiction, it will most likely amplify the challenges that companies operating out of Malta are already facing.
There are signs of a strain in the talent pool given that the industry often requires specialist knowledge that cannot be sourced locally. Although Malta’s iGaming workforce is incredibly international and diverse, and the island has attracted people from all corners of the world, demand for top talent, particularly tech and product, outstrips supply. While this has created an upward pressure on wages, the skilled labour shortage doesn’t seem to be hurting the continued inflow of new entrants to the sector, at least not yet.
To keep the talent rolling in, and the innovation levels up, iGaming companies have long turned to foreign labour markets to fill gaps in the local workforce. Today, two-thirds of those employed in the sector are foreign expats. Efforts to attract the best and the brightest include a 15% tax cap on the salaries of highly qualified foreign professionals in the gaming sector, as well as a fast-track service for work permits of highly specialised third-country nationals.
However, given the time it can take to recruit the right candidates who are willing to relocate, many companies are rethinking their approach to talent acquisition. Many of the larger companies are reverting to opening offices in other locations where tech talent is more widely available. To avoid outward investment flows and produce more home-grown talent, Malta is putting in place upskilling initiatives. A new gaming academy, the European Gaming Institute of Malta (EGIM), has been launched as a joint venture between the Malta Gaming Authority and the Malta College of Arts, Science and Technology (MCAST) to fill some of the gaps.
“Malta has been at the forefront of the iGaming industry since 2004 and today is a leading jurisdiction, attracting international companies to relocate to the island. Malta has the relevant resources, legislation, experience, and infrastructure to support iGaming businesses with their operations and real estate needs.”
Michael J. Zammit, Director and Joint Owner of Malta Sotheby’s International Realty
Switzerland in the Mediterranean
Ultimately, the aim is to make Malta a centre of excellence for iGaming-related companies, where executive decisions are made that drive global gaming businesses and where start-ups and innovative ideas are nurtured. However, the sector’s fast expansion, in tandem with many other sectors that are experiencing similar growth rates, and an influx of companies and expat workers are also putting pressure on Malta’s infrastructure and the cost of living. The high demand has driven up rents for both offices and apartments, and many say Malta needs to be careful not to outprice itself. To enable the iGaming sector to attract the best talent to the island, Malta urgently needs to address certain capacity constraints in terms of schooling and kindergarten facilities, which reduce the island’s competitiveness. The island’s transport network has also failed to keep pace with the exceptional growth the economy is enjoying.
Quality of infrastructure is a decisive factor when businesses plan investments, and Malta’s future prosperity is linked to the way infrastructure will be deployed. A thorough infrastructural overhaul will place Malta in a better position to compete and challenge other countries for the highest value investment. For Malta to become the ‘Switzerland of the Mediterranean’, many foreign executives emphasise that a stronger focus on green areas and recreational opportunities is required, which would add to Malta’s emerging status as a magnet for talented professionals who are seeking dynamic careers outside of the world’s largest business hubs.
“The regulatory overhaul saw games which were previously provided by entities not licensed by EU/EEA authorities, but which were nonetheless offered on websites authorised by the MGA, being phased out. Licensees that operated shared wallet setups or similar platform arrangements with non-EU/EEA licensed games and gaming services providers also moved key operations to more reputable jurisdictions. These measures were introduced by the MGA in an effort to improve the quality of gambling services offered to consumers while also delivering a more competitive framework in comparison to well-established and upcoming gaming jurisdictions.”
Kris Baron, Partner at ARQ
The negative outlook of the international banking sector on gaming continues to present one of the biggest challenges to gaming companies in Malta. There are only a handful of banks servicing the sector. Paradoxically, while the industry is experiencing difficulties with basic banking services, iGaming companies are coming into view of the global investment banks due to the sector’s increased funding needs to support their M&A activity. Many companies have grown significantly in size and scope, and are today listed on major stock exchanges around the world. This has resulted in a desire to show a high level of corporate governance. Stricter anti-money-laundering laws and new data protection regulations are also being viewed as important steps towards improving the sector’s relationship with the banking sector and its overall reputation.
''The major trends that are characterising the industry revolve around three streams. The first being the continuous movement in M&As, the second being how to cope with multijurisdictional compliance which does not only relate to gaming regulation but also to VAT, AML and GDPR, while the last but most exciting one relates to blockchain technology within gaming. On the latter, Malta is uniquely positioned.”
Reuben Portanier, Founder of Avviza Advisory and Afilexion Alliance
Leading the Pack
Malta is Europe’s undisputed centre for iGaming companies. It is home to CEOs and start-up founders, investors, support professionals and entrepreneurial talent. The island saw strong growth on the back of its regulatory framework that has lured the sector’s strongest companies to the island. However, the future will be written by the level of regulatory, financial and technology innovation that the country can bring to the table. The island’s success will also be built on its ability to constantly attract new entrepreneurs; Malta needs to accommodate global players while acting as a magnet for start- ups. To ensure that Malta fits into the business plans of the world’s largest companies, the country is working hard to have all the right elements in place. Malta has the opportunity to be a truly global centre for the iGaming industry, similar to what New York, Hong Kong and London are to the finance industry. The gaming industry in global terms is still in its infancy and expected to expand significantly in the coming years. Malta now pushes itself towards a more innovation-driven economy, and there is increasing awareness that raising productivity and increasing efficiency are critical if growth is to be sustained.