Gaming Malta 2017 by CountryProfiler

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GAMINGMALTA 2017 EDITION

, Malta: THE WORLD S iGaming Capital

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GAMINGmalta 2O17 EDITION

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GAMINGMALTA 2017 EDITION

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Europe

, Malta: THE WORLD S iGaming Capital

64, St Anne Court, Suite 2, Bisazza Street, Sliema SLM 1642 - Malta T: +356 2034 2034

North America

Suite 21-2123, Walkers Line, Burlington, Ontario L7M 42Z9 - Canada Tel: +1 905 645 1130 Fax: +1 905 963 7968

Sonja Lindenberg Editor

lindenberg@countryprofiler.com

Email: info@countryprofiler.com Website: www.countryprofiler.com

Photography

Alan Carville / George Scintilla Fritz Grimm / Armand Sciberras / Viewingmalta

Printing

Dennis Avorin Deputy Editor

dennis@countryprofiler.com

Gutenberg Press, Malta

Publication Date February 2017

All rights reserved. Reproduction in whole or part is strictly prohibited without the written permission of the publisher. Opinions expressed in Gaming Malta are not necessarily those of the editor or publisher. All reasonable care is taken

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to ensure truth and accuracy, but the editor and publisher cannot be held responsible for errors or omissions in articles, advertising, photographs, or illustrations. Cover illustration: Moira Scicluna Zahra

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WE INVEST IN OUR PEOPLE

VIEW ALL OF OUR VACANCIES AT

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What has established our global reputation in the gaming industry? At the Malta Gaming Authority, our regulatory philosophy, organisational principles and culture are focused on player protection. Maltaâ&#x20AC;&#x2122;s transparent legal framework and experience in regulating gaming has developed into a world class eco-system providing effective, innovative and efficient regulation. Our regulatory framework provides assurances both locally and internationally that fairness and transparency are at the core of everything that we do. To this effect, our licensees are associated with the highest levels of integrity and efficiency. Proudly recognised as a world class authority in terms of innovation, governance and diligence.

MALTA GAMING AUTHORITY Building SCM02-03, Level 4, SmartCity Malta, Ricasoli SCM 1001, Malta T +356 2546 9000 E info.mga@mga.org.mt www.mga.org.mt

GAMINGmalta

2O17 EDITION

Malta iGaming Centre: Facts and Figures

Gaming Jurisdiction Overview

Interview with Emmanuel Mallia, Minister for Competitiveness and Digital, Maritime and Services Economy

Industry Review & Outlook: This was 2016…and what we will be talking about in 2017 Mobile................................................................. 48 Virtual Reality / Augmented Reality.................49 Start-ups............................................................. 50 Operator M&A / Affiliate Consolidation........... 51 eSports.................................................................52 Daily Fantasy Sports...........................................53 New Markets.......................................................54 iGaming Stocks...................................................55 Cryptocurrencies................................................57 Twitching / Payments & Convergence..............57 Blockchain Technology / Skin Gambling.........58 Brexit...................................................................59 Artificial Intelligence & Recommendation Engines ...........................59

Regulatory Update Malta: European Hub with Global Relevance..... 94 Licensing Overview: The Application Process..... 98 Compliance at a Glance........................................ 102 Pioneering the Fantasy Sports Sector................. 108 The Road to Change...............................................110

CONTENTS

GamingMalta: Home to Gaming Excellence

Interview with Christian Sammut, Chairperson of the GamingMalta Foundation

PERSPECTIVES 1: Joseph Cuschieri, Executive Chairman of the Malta Gaming Authority.................32 Andrew J. Zammit, Managing Partner of GVZH Advocates.....................................36 Jesper Kärrbrink, CEO of Mr Green ......................................................................... 38 Kenneth Farrugia, Chief Business Development Officer of Bank of Valletta........... 41 Fredrik Elmqvist, CEO of Yggdrasil Gaming..............................................................44 Vladimiro Commodini, Partner of RSM Malta..........................................................46

Quickfire: Quick Questions, Short Answers

PERSPECTIVES 2: Carla Maree Vella, CEO/COO of Optimizer Invest.................................................... 65 Erik Bergman, Chief Strategy Officer and Co-Founder of Catena Media................ 68 Valéry Bollier, CEO and Co-Founder of Oulala Games............................................. 70 Dean Nicholls, CEO of iGaming Elite......................................................................... 72 Alan Alden, CEO of Kyte Consultants......................................................................... 74 Morten Klein, Board Member of Cherry AB............................................................... 76

78 88

116 126

131

140

149

The Silent Interview

The 2017 CEO Guide to Gaming in Malta

Cyber Security: Protecting Your Crown Jewels

Making the Right Move

The Essential Expat Guide

Insider Tips

Events

Who’s Who

GAMINGmalta

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Malta iGaming Centre

Facts and Figures

GOZO COMINO

Main towns by population: Birkirkara: 21,889 Mosta: 19,795 St Paul’s Bay: 17,443 Qormi: 16,443 Zabbar: 14,844

Mellieha

St. Julians

MALTA

Sliema

Valletta

Mdina

Other major towns: Valletta (Capital): 5,700 Sliema: 14,189

Marsa

Luqa

Located in the centre of the Mediterranean, between Europe and North Africa, Malta is the European Union’s smallest member state. Famous for its 7,000-year history and 300 days of sunshine, Malta has emerged as one of the most remarkable success stories in the Eurozone. Recognised for its pro-business attitude, state-of-theart infrastructure and modest costs of doing business, it has become the go-to country for growth-minded entrepreneurs and multinational companies.

Birzebbugia

300

days of sunshine/year

Temperature average: Winter 12ºC Summer 31ºC

Annual rainfall:

600mm

Languages: Maltese & English

Time:

GMT+1

Voltage:

240V

International Dialling Code:

+356

Religion: Roman Catholic

GAMINGmalta 2O17 EDITION

Country

23%

Foreign: 6%

Maltese: 94%

The Maltese Islands were, just a decade ago, best known as a holiday destination. However, over recent years, the country has sought to diversify its economy beyond tourism by promoting a range of sectors and activities.

Politics

Since gaining independence from the UK in 1964, two parties have dominated Maltese politics, both focused on attracting foreign investment and establishing a stable and competitive business environment. Form of state: Republic Two parties: Labour Party (PL) and Nationalist Party (PN) President: Marie-Louise Coleiro Preca, Head of State Prime Minister: Dr Joseph Muscat, Head of Government Opposition Leader: Dr Simon Busuttil

Tourism 25%

GDP Composition

Agriculture

Economy:

Population: 434,403

Financial Services 12%

Industry

Location: Southern Europe Official Name: Republic of Malta Area: 316 km2 Shoreline Malta: 200 km Shoreline Gozo & Comino: 71.2 km

Source: National Statistic Office, CountryProfiler

Transport 12%

Services

75%

iGaming 10%

GDP Growth:

Inflation:

(2016)

+4.1

1.0%

Deficit:

Unemployment rate:

Debt to GDP:

(2016)

0.7%

5.0%

62.1%

(2016 Autumn European Economic Forecast)

FDI Stock: €152.3 billion (December 2015)

Major airlines flying to the country

FORECAST n MALTA n EU28 Source: 2016 Autumn European Economic Forecast GDP

2017 3.7% 1.6%

Double Taxation Treaties:

70+

Unemployment

2018 3.7% 1.8%

Accounting Standards:

IFRS

2017 5.2% 8.3%

2018 5.2% 7.9%

Corporate Tax: 35%. However, through Malta’s full imputation system, shareholders can claim a tax credit for the tax paid by the company.

Deficit

2017 0.6% 1.7%

Fiscal Year: Calendar Year

Debt

2018 0.6% 1.6%

2017 59.9% 85.1%

2018 57.2% 83.9%

Sovereign Ratings: A/F1 (Fitch, 2016) A3 (Moody’s, 2016) A-/A-2 (Standard & Poor’s, 2016)

CSB Group offers its clients a spectrum of specialised business and commercial services that guarantee a complete turnkey solution to clients wishing to setup or relocate their business to Malta. Working hand in hand with a selected network of international partners, the Group aims at exceeding clients’ expectations through a sound and results-oriented business approach.

CSBGROUP.COM

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GAMINGmalta 2O17 EDITION

iGaming sector (all figures as of June 2016 unless otherwise indicated)

GAMINGmalta

2O17 EDITION

GAMINGmalta 2O17 EDITION

iGaming Jurisdiction Overview

Heading for

Global Growth As the gaming industry goes virtual, Maltaâ&#x20AC;&#x2122;s global gaming ambitions become more of a reality.

GAMINGmalta

2O17 EDITION

alta is on the move and is going global in its ambitions. Long viewed as Europe’s iGaming capital, the island is increasingly the destination of choice for the world’s largest operators and a bridge to Europe for Asian and Latin American companies. The presence of some 250 plus iGaming companies is proving an irresistible draw for platform providers, game developers, payment services, support firms and start-ups, who are flocking to the island in droves to join Malta’s thriving iGaming ecosystem. This trend has not gone unnoticed by tech investors, venture capital firms, hedge funds and more recently global investment banks, who are competing to fill the funding needs of the industry as the pace of consolidation is accelerating and transforming the marketplace. Meanwhile, the Malta Gaming Authority (MGA) is also rising to the challenge of untangling the ever-growing web of regulatory, legislative and compliance challenges that iGaming companies have to deal with by rewriting the rulebook to provide a more business friendly environment.

iVision Pays Off

As the first EU country to license online gaming, Malta can now look back at almost two decades of uninterrupted growth in the iGaming sector. Over this time Malta has gained possibly the best understanding of the environment iGaming companies need to flourish and be successful. The first online gaming businesses arrived on the island in the late 1990s, well before the online 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, with the first online betting businesses established under the Public Lotto Ordinance in 2000. The government quickly recognised the need for a dedicated regulatory framework, set up a regulatory authority for this young industry and released the Remote Gaming Regulations in 2004, just before Malta

GAMINGmalta 2O17 EDITION

GAMINGmalta

2O17 EDITION

the past 10 years, many of Malta’s first arrivals have grown from small start-ups to global giants, who are now acquiring the innovative brands of their smaller, faster growing rivals. Freshly minted, having sold their companies, this next generation of gaming executives and founders are themselves funding promising start-ups whose market strategies, products and technologies have the potential to disrupt the global gaming scene. There is also a new army of start-ups emerging from the gaming giants, having cut their teeth working for the bigger companies. These start-ups are hoping to make a big splash, and some are already being looked to as acquisition targets by the more established outfits.

Gaming Ecosystem joined the European Union. This move gave licensees the added benefit of being located in and regulated by a jurisdiction that forms part of the largest single market in the world. In spite of its modest size and numbers – the island is just over 316 square kilometres in area and is home to 435,000 people – Malta has emerged as a leading iGaming hub. The gaming industry contributes around 10% to Malta’s GDP and employs more than 6,000 people directly, with an additional 3,000 to 4,000 providing ancillary services such as web hosting, security auditing or legal work.

Industry Heavyweights and Start-ups Converge

Malta is now widely regarded as the most prestigious address for gaming operators. The list of new companies joining Malta’s thriving iGaming sector is growing by the year. Industry heavyweights, such as Betsson, Paddy Power Betfair, Interwetten, Unibet, betat-home and Tipico to name but a few, have long understood Malta’s unique advantages as a gaming jurisdiction. In more recent times, industry leaders such as Pinnacle Sports and bet365, as well as US fantasy sports giant DraftKings, have received licences from the MGA. In total, some 250 operators are now based in Malta holding 490 licences for online offerings such as casino-style games, lotteries or sportsbooks. With consolidation in the iGaming industry now moving at a faster and more discernable pace, much of which is being driven by Maltese licensed operators, the island is quietly becoming home to the largest and most powerful operators in the business. Over

The country’s main draw card is the ease of doing business and a very supportive regulatory environment. Malta’s gaming industry is incredibly international and diverse, attracting people from all corners of the world and offering companies the benefit of being physically close to a critical mass of gaming companies and network of professionals. A deep talent pool, strong business support services such as experienced gaming law firms, accountants, corporate service providers, and industryspecific infrastructure have cemented the island’s position as the leading EU jurisdiction for iGaming operators. 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. The island also boasts technical expertise to support critical operations in areas such as search engine optimisation and affiliate management companies, with experienced consultants always on hand. Equally, the island’s lawyers and accountants have a wealth of experience, thus ensuring that a vibrant and creative cluster of talent and knowhow is in place to help companies manage their operations. This is unique in Europe and goes a long way towards explaining Malta’s identity as a gaming location.

Global Recognition

A recent survey ranked the iGaming sector as the most attractive sector for foreign direct investment in Malta. Service providers report that many companies are currently analysing the option of setting up in Malta as they finalise their contingency plans to deal with

GAMINGmalta

2O17 EDITION

I don’t think that it is necessary or desirable to impose specific regulation on affiliates. They are advertising deals in which a product (that of the operator) is being promoted through a specific advertising channel (the affiliate). Malta’s approach should be to beef up its remote gaming advertising code, requiring operators to ensure that the advertising standards and applicable consumer laws are upheld by the affiliates they work with. James Scicluna Board Member - GamingMalta

Brexit. The island has also emerged as one of the big winners of the global M&A frenzy as newly combined companies are injecting fresh capital and hiring more people for their Malta offices. In addition, legal uncertainty in many European countries and a fragmented regulatory landscape have led to a surge in interest from both EU multi-licensed operators as well as non-EU companies that are looking at Europe as the next frontier for growth. The Maltese licence is the only licence in the EU that does not restrict the licensees to the particular jurisdiction of the licence, which gives iGaming companies the opportunity to exploit white and grey areas in the rest of the world. On an international level, Malta’s service providers are regarded as being among the most competent and experienced experts in the iGaming sphere. Many of them service licence application in other countries than Malta and offer multijurisdictional support on a wide range of issues.

MGA Makeover

Excitement and anticipation are currently rising in the iGaming sector as a new regulatory framework is expected to come into force in late 2017 or early 2018. The increasingly maturing industry demands smoother processes, as well as better regulation for new forms of gaming. This has encouraged the MGA to initiate a complete regulatory overhaul to streamline, consolidate and future-proof all gaming sectors under one legislative umbrella. The new Gaming Act promises to be as revolutionary and innovative as the Remote Gaming Regulations were in 2004. Eliminating unnecessary bureaucracy,

simplifying pre- and post-licensing processes, and speeding up time to market for operators are some of the key changes to be envisioned. A new licensing framework has also been designed, which will introduce only two different licences: a Business-to-Business and a Business-to-Consumer licence. The MGA is also proving to be a dynamic, on-the-ball-player: a new skill games licence for fantasy sports operators was singled out as a top priority and introduced in January 2017, ahead of the new regulatory package. The hopes are high that this will lead to an explosion in demand in skill games comparable to what the industry experienced when online poker came to the fore in the early 2000s.

The Best and the Brightest

Having attracted a large pool of talent, which has evolved over the years, Malta offers a strong skill base with a wide range of specialisations that companies can tap into. Yet for all the positives, Malta faces some challenges. There are signs of strain in the talent pool given that the industry often requires specialist knowledge that cannot be sourced locally. Demand for top talent outstrips supply, which inevitably creates an upward pressure on wages. 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, and a fast-track service for work permits of highly specialised third-country nationals employed in Malta, which was introduced in 2016. This was welcome news given that many companies have extended their search for talent beyond Europe’s borders. However, more must be done to address the talent shortage. Due to difficulties finding the right people and fierce competition for the best graduates on the island, companies have already started to move positions out of Malta, mostly to Eastern Europe. Malta must produce more home-grown talent fit for employment in the sector to ensure companies do not need to fight tooth and nail for talent. As a short-term measure, upskilling initiatives are being put in place. For instance, a new gaming academy – the European Gaming Institute of Malta (EGIM) – seeks to provide training and development opportunities for non-experienced personnel wanting to join the gaming industry.

GAMINGmalta 2O17 EDITION

Banks Remain Cautious

The negative outlook of the international banking sector on gaming is currently presenting one of the biggest challenges to gaming companies in Malta. There are only a handful of banks servicing the sector, however, in 2016 a new bank – Catella – moved into Malta with the intention of building up a portfolio of iGaming clients. 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 iGaming has become a market far too big to be ignored. The same can be said about the future of cryptocurrencies. Convergence between digital currencies and mainstream financial products has the potential to transform the entire payments system in the coming years. While Malta is currently assessing whether or not to accept, and possibly regulate cryptocurrencies, many within the industry believe that Malta could reap multiple first-mover advantages by paving the way for digital currencies, cryptobanks and blockchain technology in general, which has moved on from its bitcoin past and is being seen as a key tool for information and business process sharing in a wide range of industries.

Innovation Drivers

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 products in areas such as virtual and augmented reality, cloud platforms based on artificial intelligence, as well as new and innovative payment forms. 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. The competitive pressures of recent years have seen the customer service function become more important when it comes to player acquisition and retention. There is a strong case this trend will continue, and Malta is expected to benefit. Big data is also playing a key role in back office support, and Malta has

the opportunity to become a leader in this fastemerging field. With the right investment and a stronger focus on big data applications from an educational perspective, Malta could become a key hub for data scientists and analysts.

The Malta Package

When it comes to taxation of gaming companies, Malta’s approach is widely seen as to be within the acceptable range and can be as low as 0.5% on the gross amount of bets accepted for a sportsbook. In addition, tax is capped at €466,000 per year, whereas taxation under other licensing regimes makes it difficult for operators to generate profit. It is not only Malta’s gaming tax that is attracting operators; the island’s corporate tax regime is also doing its bit. While companies are taxed at 35%, a refund system brings down the effective tax rate to around 5%.

Making Malta Great

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; the influx of companies and capital, as well as an inflow of expat workers, are also putting pressure on Malta’s infrastructure. To enable the iGaming sector to attract the best talent to the island, Malta urgently needs to

Cryptocurrencies are here to stay, and it is only a matter of time before they become part of our daily lives. If Malta wants to remain a game changer, it needs to act fast and be a pioneer by exploiting this development. Other jurisdictions, such as the UK, are already opening up to cryptocurrencies. Maria Micallef Board Member - GamingMalta

The industry has a set of very specific requirements that can be taught and trained in vocational training facilities and should also include education services for a more mature student base. I am also still unimpressed by the lack of female Maltese staff in medium and high managerial positions. Birgit Bosch Council Member – Malta Remote Gaming Council

GAMINGmalta

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Illustrations by Moira Scicluna Zahra

Malta needs to continue strengthening and developing its educational system in order to ensure that it maximises the potential of local human capital. This requires continued synergy between all educational institutions, coupled with the efforts put forward by the European Gaming Institute of Malta (EGIM). This said, Malta is an EU state, hence we shouldn’t limit ourselves to local talent. Heathcliff Farrugia Deputy Chairman – Gaming Malta

If I were calling the shots in government, I would implement a retention policy to ensure that the operators already in Malta are provided with enough reasons to remain here. Secondly, I would solve the issues of multiple licences and audits immediately. Thirdly, I would hold meetings with operators and industry associations to get a feel of what operators in Malta expect from the MGA. Alan Alden General Secretary – Malta Remote Gaming Council

address certain capacity constraints in terms of schooling and kindergarten facilities, which reduce the island’s competitiveness. iGaming professionals report that there had been cases in which foreign professionals had not taken up positions being offered because they could not find schooling for their children. Most iGaming companies choose to locate in Sliema and St. Julian’s, which thus have become popular residential areas for iGaming executives. The high demand has driven up rent for both offices and apartments. Investment in highquality office space in other localities, coupled with improvements in transport and road infrastructure, would enable the sector to grow out of its traditional hotspots and spread across the island.

Future Outlook

Malta is in the enviable position of being the author of its own destiny, but this defining moment will not last forever. The island saw strong growth on the back of its regulatory framework, which was revolutionary at that

time and lured the sector’s strongest companies to the island. However, the future will be written by the level of regulatory, financial and technology innovation prevalent in Malta’s iGaming industry. 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 startups. However, to fit into the business plans of these companies, Malta needs to continuously make sure it has all the right elements in place: the availability of cross-sectorial talent, the depth and breadth of industry clusters, good air transport links and ICT infrastructure, as well as a reputation as a good place to live. 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 understands the current and future value of the iGaming industry and is truly embracing it to unleash the sector’s full potential. n

GAMINGmalta 2O17 EDITION

MINISTRY FOR COMPETITIVENESS AND DIGITAL, MARITIME AND SERVICES ECONOMY MINISTER: EMMANUEL MALLIA

Level 6, Palazzo Spinola, St. Christopher Street, Valletta T: +356 2291 7300 • E: info.mcdms@gov.mt www.mcdms.gov.mt

MALTA GAMING AUTHORITY

executive chairman: JOSEPH CUSCHIERI Building SCM 02-03, Level 4, SmartCity Malta, Ricasoli SCM1001 T: +356 2546 9000 • E: info@mga.org.mt www.mga.org.mt

GAMINGMALTA

Industry Representatives

Chairperson: CHRISTIAN SAMMUT

Building SCM 02-03, Level 3, SmartCity Malta, Ricasoli SCM1001 Email: info@gamingmalta.org

Malta CHAMBER OF COMMERCE

Malta REMOTE GAMING COUNCIL Chairperson: George DeBrincat

(Remote Gaming Business Section) Chairperson: Olga Finkel

Tower Business Centre, Tower Street, Swatar Tel:+356 2546 6672 Email: info@mrgc.org.mt www.mrgc.org.mt

Enterprise and Industry, The Exchange Buildings, Republic Street, Valletta Tel: +356 2123 3873 Email: info@maltachamber.org.mt www.maltachamber.org.mt

Responsible Gaming Foundation Chairperson: Silvio Schembri

90/91, Second Floor, Psaila Street, Birkirkara T: +356 21499030/1 • E: info@rgf.org.mt www.rgf.org.mt

GAMINGmalta 2O17 EDITION

Home to Gaming Excellence GamingMalta is intent on raising Malta’s profile as a gaming jurisdiction. Set up as an independent non-profit foundation by the Government of Malta and the Malta Gaming Authority (MGA), GamingMalta serves as the promotional arm, and one of its primary functions is to bring all the different stakeholders, including operators, intermediaries and service providers, together to further enhance the communication between them.

GamingMalta is committed to: • Promoting ownership of the Malta brand among all stakeholders to strengthen Malta’s position with the gaming industry; • Engaging with stakeholders and providing business support to ensure that Malta is the most attractive environment for the gaming industry to thrive; • Standing out through innovative ideas and leading the iGaming industry through research and promotion of the Maltese jurisdiction so as to be a proactive, dynamic catalyst for change; • Accelerating growth in the gaming sector by creating a dynamic marketing mechanism anticipating market changes; • Bringing stakeholders together – ensuring close cooperation while creating business and networking opportunities for firms working in the sector; • Establishing the necessary expertise and foresight to future proof the gaming sector in Malta; • Supporting the MGA in implementing the brand strategy and road map development for the gaming industry; • Collaborating with other Maltese sectoral promotion bodies to promote the overall image of Malta.

GAMINGmalta

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Christian Sammut, Chairperson of the GamingMalta Foundation

Bringing the Industry together

to Shape its Future To raise Malta’s profile as a centre for all things gaming, 2016 has seen the official launch of a new promotional body: GamingMalta. Its chairperson Christian Sammut says that this was just the start of a journey, which would lead to greater cooperation and help the sector speak with a unified voice.

Can you give us an overview of GamingMalta and its main aims?

What are your major plans and priorities for 2017?

GamingMalta is an independent non-profit foundation set up by the Government of Malta and the Maltese Gaming Authority. Our mission is to promote Malta as a centre of excellence in the remote and digital gaming sector globally and to accelerate its growth. But accelerating growth can only happen if we continue to foster the current ecosystem. This means that liaising with the local relevant authorities to improve Malta’s attractiveness as a jurisdiction, while spearheading efforts to enhance the ecosystem surrounding the gaming industry, are of perennial importance.

We have identified four major strategic drivers: engagement with all stakeholders; serving as a communication hub for the sector; working closely with the public sector to continue to step up our game; and ensuring growth within the sector. 2017 will see us intensifying efforts to complement all of this and have our foundation more at the forefront of the industry. The iGaming sector can expect more thought leadership events, a specific sector-focused conference, information sessions with key public sector entities and targeted promotional efforts.

Malta already has a number of formal and informal gaming industry bodies. How will GamingMalta be different and what will it bring to the table?

Compared to the finance industry, C-suite gaming executives do not seem to be actively involved in shaping the future of the industry in Malta. How will GamingMalta look to engage these key decision makers?

It’s not just a question of being different; it’s also about being effective. We not only bring to the table a strong commitment, but also a will to continue engaging with all stakeholders. We champion thought leadership in the industry, especially on the innovation front, ensuring that there is full engagement with all stakeholders and ultimately being a dynamic catalyst of change. 2016 was focused on creating the right structures and the launch of the GamingMalta brand. We exhibited in Berlin, Israel and Migs & Sigma in Malta, where we not only promoted the jurisdiction, but also introduced Malta to a number of start-ups – the oxygen of any sector. Additionally we started to liaise more with the public sector on day-to-day issues affecting the gaming industry. This served as a litmus test of how we can continue doing this on an ongoing basis and created the right momentum moving forward in 2017.

By putting into practices the saying: ‘If you want to go fast, go alone. If you want to go far, go together.’ We want to present a unified voice. Primarily, it’s important that we bring the key leaders together, create the talking space, encourage discussion and ultimately, shape the agenda so that we are all on the same page. Ultimately it’s a known fact that the industry has had a positively unique impact on our society, and as an industry we need to shout out more about it. Get in touch with GamingMalta: GamingMalta Foundation Building SCM 02-03, Level 3, SmartCity, Ricasoli SCM1001 - Malta T: (+356) 2247 3000 E: ivan.filletti@gamingmalta.org W: www.gamingmalta.org

GAMINGmalta 2O17 EDITION

SiGMA GO Gaming, Tel Aviv “Malta’s professional iGaming environment is rich in talent, competence and opportunity.” Daniel Bradtke Co-founder & CEO @ Wetten.com

“Malta has the most efficient business environment that I have ever seen.” Valery Bollier CEO @ OulalaGames Ltd

Screening of the GamingMalta promotional video / Azrieli Center, Tel Aviv

“The workforce in Malta is very professional, innovative and passionate.” Kevin Norville Director of Human Resources @ Tipico Co. Ltd

“There is a lot of talent in Malta and it has become the hug for iGaming in Europe. Being so close to the competition guarantees that you have to perform to the best of your abilities all of the time.” Jesper Kärrbrink CEO @ MrGreen Ltd

“The quality of life on the island is very good and there’s always something to do, either as a couple or with a group of friends.” Johan Styren CEO @ LeoVegas Gaming Ltd

“The great thing is the climate and the English language combined with the fact that it is part of EU. There are no other countries that tick all those boxes.” Erik Bergman Chief Strategy Officer & Co-Founder @ Catena Media

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“The industry gives me the opportunity to work hand in hand with highly experienced professionals coming from all over the world.” Martin Schillig HR Manager @ Betsson Group

SiGMA “Both existing and new iGaming companies can take full advantage of numerous benefits including: the continued strength of the ever-growing ecosystem; a Maltese Gaming Authority that embraces innovation; a general business ‘can-do’ attitude; the Maltese lifestyle coupled with great all round weather and excellent education and health systems. On the other hand, the industry needs to continue embracing innovation on all fronts while managing its corporate reputation, especially with key financial stakeholders. One major challenge for the industry is to continue hiring and retaining key staff, but this a resilient and entrepreneurial industry, which will continue its quest of finding the best solutions.” Ivan Filletti Head of Operations & Business Development – GamingMalta

GO Gaming, Tel Aviv

“As a startup, Malta fits our initial requirements in a number of interesting ways.” Jonas Eneroth CEO @ Karmafy GamingMalta Pitch Theatre, EIG Berlin

GAMINGmalta 2O17 EDITION

Emmanuel Mallia - Minister for Competitiveness and Digital, Maritime and Services Economy

Embracing Innovation is the

Key to Future Growth The iGaming industry has been a great success story for Malta, how would you describe the industry today?

Malta’s rapid expansion over the years as a global iGaming hub shows little signs of slowing down. We were the first EU member state to introduce iGaming regulations and this, together with the regulatory approach adopted by the Malta Gaming Authority (MGA), created a framework demanding professionalism without undermining efficiency and innovation along the way. The growth has been facilitated by an ancillary service industry that has positioned Malta as a one-stop shop jurisdiction. Malta has a competitive advantage by being a EU member state, so that operators don’t face the same difficulties as offshore jurisdictions are dealing with.

What are the Government’s policy priorities and objectives for the iGaming industry?

Our vision is clear; and we want to nurture the ‘Silicon Valley’ concept of our business climate with competitive frameworks that foster innovation. The overall framework must remain relevant, robust and streamlined to embrace innovation and growth. From a regulatory perspective, we aim to reduce duplication of requirements for operators across iGaming sectors and other markets, while we also hope to facilitate market entry in other jurisdictions via bilateral agreements. The social considerations shall not be underestimated, we want to understand any harms associated with gaming to measure and regulate the problem. We believe that the industry is a key partner in this area, and that the sustainability of their business depends on their ability to promote responsible gambling, to avoid more intrusive and prescriptive regulation. This is a sensitive area and individuals too should carry responsibility together with the state.

“Our vision is clear; and we want to nurture the ‘Silicon Valley’ concept of our business climate with competitive frameworks that foster innovation.” Essentially the objectives are clear – fostering a gaming environment that is socially responsible and free from crime. Admittedly, there is always a trade-off in regulation between consumer welfare and industry welfare with resultant spin-offs on state revenues. Jurisdictions who prohibit or restrict remote gaming do so on the premise that it is not socially acceptable and that it is riddled with risks of fraud and crime. Malta wants to continue to be recognised as a jurisdiction with adequate controls and safeguards to support our argument in the EU fora, that providers legally established in Malta, should not require licences in other member states to provide their services cross-border.

What initiatives are planned for the iGaming industry in 2017?

2017 will obviously be the year of the legal overhaul. Beyond that, we must keep up our participation and political position on the gaming front in the EU and international fora in the wake of any potential challenges hindering the freedom within the internal market, and remain committed to defending our right to offer cross-border services. We must also look beyond the EU and foster bilateral relationships with other jurisdictions in the best interest of the sector. n

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The Lawyer

tor The Opera

The Banker

The Game Developer

PERSPECTIVES1

The Regulator

The Accountant

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Joseph Cuschieri - executive CHAIRMAN OF the malta gaming authority

The Value of

Thought Leadership As the iGaming industry faces a period of unprecedented and rapid change, innovation is becoming mission critical, says Joseph Cuschieri, Executive Chairman of the MGA.

Despite the fact that many predicted a slowdown in activity, Malta continued to attract new gaming operators in 2016. What makes Malta so attractive and how do you explain the latest influx of gaming companies? The figures for 2016 are indeed exceeding our initial predictions. Many within the iGaming industry have argued that the sector is saturated and will grow at a slower pace, however, new products, channels and business models are continuously being brought in. Companies from outside Europe are increasingly looking at establishing a presence in Europe, while the Brexit vote has also created a lot of uncertainty for companies established in Gibraltar. Malta, in this scenario, is attractive because we have developed a sophisticated eco-system with specialised corporate services, technical specialists, data centres and other service providers. Furthermore, Maltaâ&#x20AC;&#x2122;s reputation and integrity as an online gaming jurisdiction, coupled with a transparent regulatory framework makes our jurisdiction attractive as a place of primary establishment. The sector has been developing over the past 12 to 15 years. Malta started regulating iGaming way back in 2004 at a time when it was a growing, novel economic activity, yet nomadic and largely unregulated, which required a more specific approach in order to address the risks usually associated with gambling. Our framework was designed to make Malta a remote gaming hub of repute, and we have put a lot of effort into promoting Malta internationally. Today we host gaming companies that are considered as top tier operators internationally. At the end of 2016, a total of 257 companies held 490 licences in Malta. The industry now contributes 12% of Maltaâ&#x20AC;&#x2122;s total economic value added, while more than 6,000 people are directly employed in the industry.

The iGaming industry is eagerly awaiting the new regulatory framework. What are the main changes that you are proposing? We are talking about a completely new Gaming Act, the first in 12 years. The law as it now stands imposes certain duplication of administrative requirements and compliance processes across gaming sectors both online and offline. We have many times announced that we will streamline our licensing structures under two main categories, namely, Business-to-Business (B2B) and Business-to-Consumer (B2C). This framework aims at

The Regulator

simplifying pre- and post-licensing and compliance processes to eliminate any duplication of checks for the operator; while focusing compliance efforts, dependent on the risk profile, type of gaming products and business models at hand. We are also proposing a new tax and administrative fee structure and are looking at extending the licence period from five to ten years. This, we believe, will create consistency between both sectors as well as give operators more certainty, eliminating any red tape in the interim. In addition, we are proposing to widen the scope of competence of the MGA, with a view towards regulating or monitoring developments on all types of games, depending on the risks posed to consumers, and whether such risks require regulatory intervention or codes of conduct. In the interim we have prepared a new skill games regulation, the first in the European Union, which will cater for daily fantasy sports and other forms of skill games we aim to supervise.

When, realistically, can the industry expect the new framework to be in place and how will the transition affect iGaming companies? We have drafted the primary and subsidiary legislation and presented it to the responsible Minister - the Minister for Competitiveness and Digital, Maritime and Services Economy. The Ministry shall on its part present it to Government and follow other due procedures followed by public consultation. Should the public feedback unveil any issues or constructive proposals, these will be taken into account and addressed accordingly. Our aim is for the bill to be presented to the Maltese Parliament before the summer recess. However, we are also aware that the first six months of 2017 will be very busy for Malta due to the fact that Malta is chairing the EU presidency. Taking all these factors into consideration, I hope that the new legislation would be enacted and passed through Parliament by the end of 2017 at the very latest. The transition to the new regime will be completely seamless for the operators. While new licensees will obviously fall under the new regime, operators that are already licensed have nothing to worry about. There will be a transition period, and the change should not disrupt their operations. Paid fees will also be taken into account and absorbed in any new fee structure.

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You scaled up the MGA’s resources quite significantly, with 150 people now employed by the authority. Many within the industry do not seem to see the need for so many people. Why is that? In early 2013 the MGA was operating with a critically low level of internal resources which were by far insufficient to effectively supervise and monitor such a large sector, both land-based and remote. Hence the Board felt there was a need to ‘right size’ and strengthen the authority’s organisational capacity, mainly in enforcement, compliance, authorisations and support services such as revenue assurance, finance, information management, legal and other administrative support. Furthermore, with the ambitious three-year strategy we laid out in early 2014, we needed adequate resources and technical capacity to execute and deliver on our mandate, reforms and targets. Our jurisdiction aims for excellence and hence the ecosystem that exists in Malta has to be supported by an authority that strives for excellence and mirrors the industry’s competences. People from outside the organisation often don’t realise the amount of work that is involved in regulating the sector adequately and ensuring compliance with other related legal instruments. Also falling under our remit as a supervisory authority of this important sector is the eradication of crime such as money laundering, and suspicious betting linked to match fixing. Added to this, the size of the sector, which has kept growing over the years, has been an influencing factor, along with the high level of service and customer experience we are thriving to achieve as a top tier regulator. One of the aims of the new legislation is to give the MGA more power and latitude than it had before. Hence, we need a strong organisation which can sustain such a dynamic sector in the long run. Today, the authority bites more than ever before. We are very strict on player complaints and disputes, as well as in taking enforcement actions. We scaled up our player support unit, with more developments yet to be announced on this front and it has become a very important source of information for us. Added to this, disputes are investigated in a timely manner as much as possible, and we give technical feedback. We are often asked why it takes so long to develop a new gaming framework. The reason is that I wanted to make sure that the new regulations are well thought out, innovative and future-proof, which of course takes time. We issued a number of consultation documents over these past two years, which are feeding into the framework we will present shortly. We also aimed at strengthening the authority ahead of the overhaul as part of the exercise. We needed to ensure that we have a

strong enforcement and compliance culture and that we put risk management at the centre of everything we do.

Gaming is considered a high-risk sector by banks and other financial institutions. What is the MGA doing to ensure that the sector is free from crime, and what are the areas that you think could be improved? We have made substantial investment in our processes and systems, and I am pretty confident that our due diligence process is robust enough to minimise the risks to the jurisdiction as much as possible. We have also established a thorough risk management system which helps us manage and assess risk on an on-going basis and not just at on-boarding stage. Furthermore, we are more efficient and effective in intelligence gathering with respect to individuals and companies, which gives us more information with which we can supervise our licensees. We closely collaborate with the Financial Intelligence Analysis Unit (FIAU) and the economic crimes unit, as well as the Malta Financial Services Authority (MFSA) and the banks. In fact, the criticism that we receive from operators is that we are going into a lot of detail prior to granting a licence or renewal. The new Enhanced Automated Reporting Platform (EARP) that we are currently implementing will also give us more information to facilitate and improve our processes in a timely fashion. One area that we can definitely improve is our consumer protection blueprint; I would like this to be world class. The MGA is ready to take the lead and work together with the industry in developing this further. Malta can, and needs to be a thought leader in this regard.

BIO: Joseph Cuschieri is the Executive Chairman of the Malta Gaming Authority. He is a certified public accountant and fellow member of the Malta Institute of Accountants, specialised in management and finance. Prior to joining the MGA, Mr Cuschieri was Chief Commercial Officer at Vodafone and senior consultant at Ernst & Young. He has also spent five years as Chief Operating Officer at the Malta Communications Authority.

GAMINGmalta 2O17 EDITION

Many iGaming operators would like to use cryptocurrencies. What’s the MGA’s position on Bitcoin & Co, and what developments can we expect during 2017 in this regard? While innovation is key, we always need to assess the risks involved in new developments prior to roll-out. Currently, we do not accept cryptocurrencies, although we have received a few requests from operators who are keen to use Bitcoin. There are many concerns surrounding the anonymity and stability of these systems. However, we are now actively exploring the opportunity and preparing an in-depth study on cryptocurrencies and blockchain in order to embrace technological advancements on this front. Furthermore, we are looking towards alignment with other authorities so that we adopt a national approach on digital currencies. The MGA is championing this initiative, but given that it’s a financial instrument, we are collaborating with the Central Bank, the FIAU and the MFSA. We need to know more about this technology and must cut through the hype about blockchain. Our decision needs to be based on a proper risk assessment, and we will probably make some key announcements in 2017.

eSports and Daily Fantasy Sports are becoming increasingly popular. When can the industry expect Malta’s new skill-gaming licence? Under our current licensing system, we are already regulating the betting on eSports, but not eSports itself. We are of the opinion that when it comes to skill games, with or without a negligible element of chance, regulatory intervention should not go beyond what is necessary to ensure a safe and fair environment for consumers. Our new regulatory framework will account for this, as we believe that this is an exciting growth area for Malta. In August 2016, we also exempted daily fantasy sports operators from the requirement of obtaining a gambling licence. This actually allowed us to bring in a brand new set of skill-gaming regulations which are being rolled out. The skill-gaming package went live in January after following due process, including notification to the EU Commission and other member states. However, it will also be included in the new regulatory package.

Finding a bank, as well as sufficient human resources, are the industry’s two biggest issues at the moment. What role can the MGA play in addressing these challenges? We closely collaborate with the banks that are servicing the industry, so that we align with our respective obligations, which albeit being different in certain respects have common objectives in the economic and public interest. We explain our checks and due diligence processes and are actively working towards raising Malta’s jurisdictional profile. The industry would certainly welcome more banks moving into Malta. There could be an opportunity to set up a new bank specifically to service the digital economy in general, given that it makes

up such a large chunk of our economy. However, this doesn’t fall under our remit, and while we can only advocate for it, we cannot realise it. When it comes to human resources, we are actively working on establishing the European Gaming Institute of Malta (EGIM), which will become an educational body in the years to come. Its aim will be to raise awareness of the industry’s ecosystem and to ensure that persons working in the gaming industry will have the necessary skills.

How do you expect the gaming industry to develop in Malta in the coming years? A ‘do nothing approach is not an option’. We must anticipate and prepare for the technological change and developments ahead. Technology-neutral regulation will improve the effectiveness of decision making with flexibility for the regulator, while we must also account for the possibilities of growing convergence between channels and cross-sectoral businesses, no matter how disruptive or challenging this may be. The industry is on a healthy growth trajectory. Malta is the place to be for any start-up, as well as fully-fledged and operational gaming set ups. We have the know-how, the experience and the necessary regulatory logic to supervise, monitor and service such set ups. Malta is looked at as a jurisdiction of primary establishment, whereby operators choose to service their multinational operations in and from Mata. We recently carried out an economic impact assessment of the proposed regulatory package that shall be shortly published and the results look positive. The proposed new Gaming Act will play a major role in this regard, repositioning Malta at the forefront of gaming regulation. We hope that the measures we are taking now will ensure that the industry will continue to grow in Malta. Innovation is becoming mission critical, and our thinking as a jurisdiction has always been more forward-looking than other European countries. The fact that many companies based here are expanding their operations, while new ones are moving in, is very positive. This is no coincidence, but is a result of the trust and integrity enjoyed by our jurisdiction, as well as the strategic repositioning rollout which has taken place over the last few years under my watch. Furthermore, government support and keenness for change with respect to the gaming industry, has motivated and strengthened the authority to aim for new heights and build on past successes. I remain confident that in spite of all challenges and risks, with the support of all stakeholders, Malta has a bright future ahead, not just as a place of establishment, but as a thought-leader and innovator in gaming regulation. n

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GAMINGmalta 2O17 EDITION

Andrew J. Zammit, Managing Partner of GVZH Advocates

Efforts to fight illegal action need to be stepped up iGaming operators need to pay closer attention in order not to break the law; while tighter enforcement should be the new norm, says Andrew J. Zammit, Managing Partner of GVZH Advocates.

How would you describe the industry’s attitude towards matters such as regulation and compliance? The iGaming industry has matured significantly in recent years. In fairness, the attitude before was that operators could afford to be more relaxed because the regulatory framework was far more lenient. Now after almost 20 years’ existence of this industry, certain principles have been established. Operators have no choice, they have to comply. Very high profile cases have been referred to the European Court of Justice, which has essentially begun creating a framework of principles that affect gaming operators in Europe. Companies cannot afford to have their reputation tarnished. The truth today is that industry executives have also got to be very careful. Prison is a real risk for executives targeting certain markets in breach of applicable restrictions in those target markets. However, it is also true that the regulatory framework throughout Europe is still taking shape and several uncertainties still exist, thus offering opportunities to those operators willing to take higher degrees of risk.

What are the recent trends in the industry from a legal perspective? We can see that companies are still looking at Malta as a base to access European markets. They are not targeting a specific market, but are just seeking a European presence, picking up players on a ‘reverse solicitation’ basis. Our firm receives enquiries from operators based in several European countries, but also from other jurisdictions as far afield as the US, the Philippines and Australia. We have also experienced an increase in requests from operators in Gibraltar that are considering a back-up plan to hedge against the consequences of Brexit. It is in fact surprising that a Malta licence is still so much in demand since one would have expected us to reach a point of semisaturation. However, now that the dust seems to have settled after the introduction of licences in the UK, France, Italy and Spain, attitudes seem to have changed. Rather than rushing into licence applications in every country that introduces regulation, companies carefully assess their market share and the risk involved, as well as the potential revenue, before venturing into certain markets. In this scenario, they see Malta has a good entry point to Europe because it still offers access to many

The Lawyer

markets. It is absurd to expect small operators and start-ups to get licensed in every single country. The set-up and compliance costs would be astronomical and effectively unachievable for start-ups. Often companies only apply for licences in a particular country once their pool of players in that country grows. As lawyers we tend to maintain a very risk-averse position in guiding our clients through the regulatory minefield and establishing prudent business practices in the light of legal and regulatory developments and trends. Certain operators however tend to have a much higher risk tolerance and choose to undertake certain risks to achieve their commercial objectives. An entrepreneur is a risk taker by nature. This is how the industry has grown.

How has the nature of start-ups changed from the start-ups you were dealing with a number of years ago? Today’s start-ups are much more international. They are from further afield; as I mentioned earlier we see operators from geographical markets like the US, Australia and the Philippines, the latter two being markets we have not seen very much before. These companies are not necessarily start-ups; they are already established operators in these jurisdictions and are now looking to Europe as the next frontier they want to test. This is one of the most profound changes we are experiencing. A few years ago, we were almost exclusively dealing with companies that we were all familiar with because they were from continental Europe. Currently, we are also seeing companies based in Curaçao looking at Malta. They too want to find new growth avenues in Europe.

How is this trend influencing the way you work? Are law firms changing themselves to account for that? Yes, we certainly have had to adapt. Due to the cross-border nature of the business, we are now plugged into a strong network of correspondent firms that help support us. We actually belong to industry-specific networks and are very aware of the fact that we need to select counterparts in other countries based on their expertise. We are also continuously looking to improve our technologies and processes to keep improving the quality and efficiency of our offering.

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How would you describe the legal landscape in Europe to a start-up ready to launch? It is still very fragmented and confused because the European Union keeps disappointing us about the illusion of the single market that we are trying to build, and iGaming is an area where national interests take hold. There is an element of hypocrisy among member states, they don’t want to have gambling on their soil but are eager to grab the tax revenue from it. Every country has its own approach to iGaming. Malta is already depicted as the opportunistic bad boy. The truth is that the Malta Gaming Authority (MGA) has been a very proactive regulator. I am happy to say that even 12-14 years down the line we have not had any real high-profile scandals. Quite on the contrary, we are now seeing private equity houses look at iGaming operators as viable investment opportunities. This is indicative of how the general perception of the industry has changed.

What is your comment on the scandal that hit Malta’s gaming sector in 2015, when several iGaming companies were accused of money laundering and suspected links to the Calabrian mafia? As a small country, we have always been very sensitive about our reputation, but this was a collective failure. There are so many relationships that these companies must have struck in order to operate from Malta. Auditors, lawyers, service providers, banks and the MGA – all checkpoints appear to have failed, and this is what I find most shocking. This sent shockwaves across the industry. I think the key issue here was that most firms narrowed money laundering down to the client acceptance process with a check-box approach. However, it is crucial to also monitor how a client behaves in the course of their business relationship. I believe that this case really drove this point home, causing service providers to take a more pro-active approach towards money laundering risks.

Some say Malta has some of the best laws aimed at preventing money laundering and other forms of financial crime but lacks enforcement. What’s your opinion? I could not agree more. There are already rules that enable confiscation of assets in the law as it stands now, but little enforcement. With Malta as a financial centre, is it conceivable that we are having such low rates of investigations and

prosecutions? We must uphold the rule of law, and there must be enforcement if we are going to be perceived as a serious place to do business. The only way forward in my view is total openness and transparency.

What are the biggest issues that your iGaming clients are dealing with at the moment? The treatment of gaming services for VAT purposes is probably at the top of the list. The VAT landscape is so fragmented and inconsistent these days. Breaking down sales countryby-country is a lot of administration. When it comes to how you should be attributing the input part of your expense, VAT recoverable or not recoverable, things get somewhat nebulous and difficult to manage. It is a matter of constant discussion with our clients.

Have there been any cases where big countries like Germany, for example, have gone after people on VAT issues? We have not seen any of this happening, but it is an interesting perspective on how things could evolve. If a country has a weapon to use, they will resort to that weapon sooner or later.

Finally, we are seeing many iGaming companies doing Stock Exchange listings. Do you believe there is an opportunity for the Malta Stock Exchange (MSE) to attract business? This is a great vision, but realistically speaking, listing in the UK or Sweden is preferred among iGaming companies because of the immediate recognition of the London Stock Exchange or the Stockholm Stock Exchange by investors. However, I feel that the Malta Stock Exchange has potential to attract international investors, and the Exchange’s current board is working hard towards making the MSE more international. n

BIO: Dr Andrew J. Zammit is the Managing Partner of GVZH Advocates. Andrew heads GVZH’s corporate, mergers and acquisitions, technology, and banking and finance practices. He graduated from the University of Malta in 1999 (Doctorate of Laws) and subsequently pursued a Masters of Law degree at the London School of Economics and Political Sciences (LSE) in the areas of Company Law, Financial Services Regulation, The Law of International Finance and International Trade Law, which he completed successfully in 2000.

GAMINGmalta 2O17 EDITION

Jesper Kärrbrink, CEO OF Mr Green

Green Gaming Gathering

Momentum

t The Opera

Its holding company has just been granted approval to list its shares on the Nasdaq Stockholm main market, and Mr Green is now revamping its brand with a focus on player retention and responsible gambling.

Mr Green has been in business for 10 years. What has changed during this period and how would you assess the recent performance of Mr Green? Mr Green was set up by three Swedish entrepreneurs in 2007 under the name Lucky Luke. Happily, the name was later changed to Mr Green; otherwise I doubt that we would be sitting here today. I think Mr Green is a showcase of the importance of a strong brand. Though I am biased, it is beyond doubt that we have a very strong brand. Mr Green is a character, people can connect with his values, behaviour, looks, and most importantly, people tend to remember characters better than names and logos. From the start, we focused on ‘green gaming’, this is what everyone else calls responsible gaming. This, plus a well-defined user experience, helped us in quickly becoming the coolest kid on the block. However, even the coolest kid on the block can fall behind, and this is what happened to Mr Green during the last couple of years. Our growth has slowed, and we are seeing peers growing faster, but we have a plan to regain our market position. We are now in the Mr Green 2.0 phase. We want to revamp our brand, and we have some quite cool things in the pipeline, although I cannot yet share many details.

What is green gaming in concrete terms and how does the industry cope with it? Green gaming is a method to help customers consume the product responsibly. The downside of gambling is well known. Problem gamblers constitute 2% of the population in most countries. As a casino, we must relate to this, and offer help by making their

patterns visible through predictive methods. We are constantly working on improving our detection methods, not to police our customers, but to offer help to those who need some support tools. The industry at large has evolved from ‘Wild West’ into an extremely professional industry. Adventurism was common 10 or 15 years ago, whereas today, people choose working in the iGaming industry as a career path. It is not my intention that professionals have higher moral standards, but to some extent the problem is dealt with a bit differently today.

What level of importance do affiliates have when you have such a strong brand? Does your brand enable direct integration or do you still need affiliates for player retention?

We call our strategy BUD, which is short for brand, user experience and differentiation. If you want to stand out in a crowded marketplace, you need to have a strong brand, a good user experience, and differentiate yourself from other operators. Affiliates in this regard are to some extent benefiting from the fact that we are operating in unregulated markets with strong brands and cannot get PPC traffic from Google in those markets. Google is the largest source of traffic for most operators. Affiliate companies are widening their media buying and are doing a good job on the SEO side to drive traffic. So to answer your question, I think we will continue to see a combination of direct traffic and traffic from affiliates. But Jesper Kärrbrink has a long career heading companies we will also see how affiliates with a strong focus on long term leadership, change, transformation, management, culture, media, and will become operators and online presence. Before joining Mr Green, he was how operators will become CEO of Euroflorist. He has also been CEO of Svenska their own affiliates. As a Spel in 2004-2008, the Swedish gambling monopoly. business, we all want to have Additionally, he has co-authored the crime novels the customer relationship. Fatal Exit and Elisabeth Gripe: Angel and Demon.

BIO:

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Looking across the sector, how profitable are iGaming companies these days?

foreign professionals working in this sector. Don’t charge them inflated prices. Loyal customers are much more important.

Some companies are making zero profit, or even losses, but focus on growth. Other companies are growing more moderately while trying to have stable profits. One of the problems of this industry is that perhaps it has been too easy to make money; this makes you a bit lazy. In the e-commerce industry margins are often much lower, driving these companies to higher efficiency, higher focus on customer retention, better use of data, etc. They have realised you cannot afford to constantly acquire new traffic. The iGaming industry is catching up, and some companies are actually really good at this. And with taxes eating more of our margins, our business practices will change from short to long term views on growth and profitability and this will prompt us to focus more on green gaming and retention. Rather than draining our customers in the shortest time possible, it is better to build long-term relationships.

How does VAT and player pool segregation in various countries influence your operations?

How do you cope with the changing regulatory environment in the EU and how does it affect the value of the MGA licence? We welcome regulation, it is always easier to play a game when you know the rules. Regulation takes away the uncertainty that the referee would suddenly decide that you are not allowed to play any longer. The reason why all the iGaming companies are in Malta is that it allows us to enter European markets with the protection of EU legislation. The island is beautiful, the weather is fantastic, and taxes are low, but the licence is the top reason. Does this imply that whenever another country offers licences we will move there? No, I don’t think so, that opportunity is already lost for many countries, whereas Malta has built an ecosystem. There are hundreds of iGaming companies down here, with at least 10,000 people working in the industry. Having that many people in the same place creates momentum and provides for growth rates unparalleled elsewhere. Malta is a centre of excellence for the industry, and if Malta treats this well, there will be relatively few reasons to move.

Some companies say they like competing for customers, but not for resources. What is your comment on that, and how could Malta attract more people to work in this industry? We don’t see this as a problem, competing for talent is part of the game. If you have a problem competing for staff, then you most likely have a problem with your brand. Our philosophy is to pay well, but never pay top. We have chosen to compete with our brand, the family feeling of Mr Green, a good atmosphere and our core values. What Malta needs to do, is to keep the pearl shining and people will keep coming. So just keep the high standard. My advice would also be, do not try to make the last dollar today. Don’t drain your customers, which in Malta’s case are the many

We now spend more time on compliance and understanding the different jurisdictions and thus need more local expertise. The right balance is important. If taxes are too high, some operators will not apply for a licence, this will create a black market. If a country wants to create a regulated market, taxes should be somewhere between 15 and 20%. It has been proven in a number of studies that higher taxes will entice operators to access the market outside of the regulated system. The UK has a tax rate of 15%, and 95% of the players within the regulated realm; while the rate in Denmark is 89%, at a tax rate of 20%. Smart regulation will control gaming, stupid regulation will not.

Looking to the future, how do you see the gaming industry evolving and what role will regulation play in this regard? Gaming is such an integrated part of society, but it is also severely stigmatised. It is perhaps the most stigmatised legal industry in the world. If you compare what we are doing to fight compulsive gambling and money laundering, to what they are doing in luxury retail stores like Louis Vuitton, where someone can just buy a bag for €4,000, you see what I mean. In these stores, they do not ask their customers where they got the money from. We have extensive KYC procedures in place, and we ask players if they are playing too much, but still we are stigmatised. Because we are stigmatised, and it is a politically sensitive industry, regulation is necessary. Ideally, we would have just one EU-licence, which could be based on the model of the MGA or the UKGC. Unfortunately, this is just a dream that will never come true. We must cope with holding different licences in different markets that we operate in, but hopefully new regulators are smart enough to copy elements from the more experienced jurisdictions to harmonise the sector. n

We exist to empower our clients to move forward with confidence. To make confident decisions about the future, a growing business needs a different kind of adviser. If youâ&#x20AC;&#x2122;re a remote gaming business owner seeking added value, RSM can help you achieve more. Our Business Advisory service line offers a dedicated unit to help you understand the regulatory requirements and to implement controls effectively. We will help you exploit our knowledge to best implement your strategies and achieve your goals. Experience the power of being understood. Experience RSM.

rsm.com.mt

RSM Malta is a member of the RSM network and trades as RSM. RSM is the trading name used by the members of the RSM network. Each member of the RSM network is an independent accounting and consulting firm each of which practices in its own right. The RSM network is not itself a separate legal entity of any description in any jurisdiction. The RSM network is administered by RSM International Limited, a company registered in England and Wales (company number 4040598) whose registered office is at 11 Old Jewry, London EC2R 8DU. The brand and trademark RSM and other intellectual property rights used by members of the network are owned by RSM International Association, an association governed by article 60 et seq of the Civil Code of Switzerland whose seat is in Zug.

GAMINGmalta

2O17 EDITION

Kenneth Farrugia, Chief Business Development Officer OF Bank of Valletta

The Banker

Gaming operators need to promote good practices to give banks ‘comfort’

iGaming companies should further strengthen the level of communication within the industry on governance matters, highlighting processes and procedures they have in place to manage the various risks posed by this sector, says Kenneth Farrugia, Chief Business Development Officer at Bank of Valletta.

Can you give us an overview of BOV’s gaming portfolio and explain your stance on the gaming scenario?

What can be done to improve the industry’s reputational image and risk profile?

BOV is one of the leading banks in Malta. We have a very strong market share in the region of just under 47%, and service a number of economic sectors consisting of domestic and international personal and corporate clients. The gaming sector has become an important national economic enabler and a sector which is serviced by Bank of Valletta. We acknowledge that Malta has in effect become a centre of excellence for international iGaming business. Our focus is to provide a breadth of banking services to both the gaming operators and the gaming-related service companies that are based in Malta and provide their services in and from Malta.

I strongly feel that there is a need for a holistic industry outreach programme, which needs to be driven by the key operators in the market, or through an association that represents the various industry stakeholders. The industry needs to strengthen its communication to address and explain initiatives that they undertake to strengthen their business. These include standards on the way governance is organised within the organisation and how the risks associated with this industry, which include amongst others due diligence and AML matters, are being managed. A higher level of communication will instil greater confidence on both the regulatory and banking services fronts. Joint initiatives could also be organised by stakeholders, covering processes and procedures to combat financial crime and promoting know-your-client requirements. I appreciate that these operators are competitors but it is the concept of coopetition – cooperation between competitors. The position of the gaming industry in Malta may be further strengthened through complimentary political and regulatory outreach initiatives that are, in my view, equally and highly important to sustain the continued growth of this sector.

There is only a handful of banks servicing this sector in Malta. Does this put certain challenges on BOV and does it prevent the bank from taking more gaming business? When an economic sector is serviced by a limited number of service providers, this always creates a number of challenges in terms of the exposure that any bank would want to any one particular sector. Consequently, banks are very careful to maintain a balanced exposure. The iGaming industry poses its own challenges in view of the inherent risks associated with this industry and its fast-paced evolution. I sincerely feel that there is room in Malta for other banks to service this fast growing industry. This would be beneficial not only for the industry, but also for BOV, as any industry tends to grow at a much stronger pace when there is a commensurate increase in service providers.

BIO: Kenneth Farrugia joined Bank of Valletta in 1985 and has occupied various positions within the Bank. Kenneth currently holds the post of Chief Business Development Officer and sits on the Management Board. Kenneth is also the Chairman of FinanceMalta, Malta’s national promotional body for financial services, and serves as Chairman of the Malta Funds Industry Association. Additionally, Kenneth is the Chairman of Malita Investments which is listed on the Malta Stock Exchange.

GAMINGmalta 2O17 EDITION

I firmly believe that a banking relationship is underpinned by four key principles: honesty, integrity, trust and transparency.

Such initiatives should be driven by the Government of Malta, the Malta Gaming Authority, as well as other relevant authorities, to ensure that Malta is constantly viewed as a highly reputable jurisdiction to conduct international business.

Often companies say that it is as if certain shutters come down the moment they mention gaming. They even seem to struggle to get bank accounts for their employees.

What does a gaming company that is considering entering the Malta market need to do to comply with banking standards here, and what do banks look out for when dealing with potential gaming industry clients?

I am not in agreement that ‘shutters come down’ when it comes to the provision of banking services to gaming operators. Clearly the requirements to open and maintain a banking relationship have become more onerous given new and increased regulatory requirements. Industry practitioners need to ensure that the application and KYC documents for the opening of an account are executed in a proper manner, and that all documentation includes the necessary information to enable the bank to appropriately assess the requirements. This means that companies seeking banking services need to be fully prepared to provide the bank with all the necessary information.

We will only bank with an operator that has a licence. Consequently the processes and procedures governing the issuance of licences are of prime importance, as is the way the MGA monitors and supervises licensed entities. However, we do not just rely on the due diligence of the MGA. All banks are required to carry out their own due diligence, which amongst other things, will be driven by the assessment of the shareholders and ultimate beneficial owners, the governance structure of the organisation, their business plans and business model, target markets, location of the players, where the payment service provider is based and whether it is a regulated entity. The company’s client on-boarding procedures and money transmission mechanisms are equally assessed in the process.

Banking seems to be the biggest issue for the sector; however, Malta wants to grow this industry. What is the solution for this? At Bank of Valletta we have clearly defined the gaming business we are ready to service and have in place robust onboarding and ongoing monitoring procedures in this regard. However, disparities do exist between the risk appetites of various banks servicing this industry in Malta. Ultimately, I firmly believe that we all have a common objective to service legitimate business which fits with the respective risk appetite of each bank. On a general note, I sincerely feel that it is in the interest of all stakeholders of this growing industry to safeguard Malta’s reputation as a centre of excellence for the gaming business. Failing to do so will jeopardise the success we have achieved so far.

How do you think that the fourth AML Directive will play out? I believe it will play out positively, without any shadow of a doubt. Ultimately, serious operators want to be properly regulated. It goes without saying that the new obligations will prove to be onerous for all stakeholders. Nonetheless, I sincerely feel that this will enable companies operating in this industry to further strengthen their overall governance, with the end result that this will be more beneficial for the industry.

What would be your one piece of advice to the CEO of an iGaming company so that he can ensure a good relationship with his banker? I firmly believe that a banking relationship is underpinned by four key principles: honesty, integrity, trust and transparency. At the outset, an application to initiate a banking service relationship needs to be prepared with the required information and documentation readily available to facilitate the process. However, it is important that the company and the bank maintain an open communication channel and dialogue at all times, thus ensuring that the relationship is nurtured and that the bank will continue to remain supportive as the business of the client evolves and grows. n

Mazars Malta

32, Sovereign Building Zaghfran Road, Attard ATD 9012 Malta Tel: +356 21345 760 Fax. +356 21345 759 E-mail: contact@mazars.com.mt

Detailed information available on www.mazars.com.mt/iGaming

GAMINGmalta 2O17 EDITION

Fredrik Elmqvist, CEO OF Yggdrasil Gaming

Mobile, not Virtual Reality, will drive casino innovation in 2017

The Game Developer

The name Yggdrasil relates to an ancient tree in Norse mythology, and Yggdrasil Gaming has literally sprung up like a tree during 2016. Headquartered in Malta, it is now launching a back-end office in Krakow to cater for the growing demand for graphic and tech talent.

You are a relatively new player in the game development sector. Can you tell us more about the rapid growth of Yggdrasil and how you managed to carve out a niche for yourself?

iGaming operators are in desperate need of innovation. As a game developer, what do you believe is the recipe needed to make innovation happen within the walls of your company?

I created Yggdrasil in 2013 together with Cherry AB, the holding company of Cherry Casino. The board of our holding company consists of Cherry members and myself, and Cherry Casino was one of our first customers. It has been a rollercoaster ride since then. From the very beginning, we focused on quality. We saw the strategic value of not building on an existing thirdparty platform, but rather, to create a platform with direct integration. If clients want our games, they must interact directly with us. This approach has been key, and helped us win Mr Green, Vera & John and LeoVegas as clients based on a strategic understanding. We are now fast establishing ourselves as a serious contender to being the industry’s number one online casino supplier. We always strive to be the best, not necessarily the biggest, but the best. In February 2017, we will also inaugurate a new office for our back-end operations, in tech-strong Krakow. We will occupy 800 square metres there, and when I first saw it, I thought it was too big, now it seems too small.

It is critical that the company culture is focused on looking for the next big thing. I have a mantra: if you have an opinion, you must share it. It is also important to remember that it is okay to disagree. It must be absolutely permitted to hold different opinions, but it’s not okay to withhold your views. Anyone can say anything, and anyone can criticise any person in our company. If staff believe they can’t criticise the CEO, then we are doomed. Nothing is sacred. People should be able to pitch ideas freely, even if they do not know how to realise them. This is the strength of collaborative creativity and has enabled us to create innovations like iSENSE 2.0, which is an HTML5framework allowing operators to launch mobile and desktop games simultaneously. In the Malta office, we also have our own company chef. It might seem odd, but we see a clear correlation between our company kitchen and the level of innovation. When our employees have lunch together, they brainstorm in a relaxed environment.

BIO: Fredrik Elmqvist has vast experience within the gaming sector, from sports pools to casino and lottery. He is the former Head of Account Management and Chief of Global Market Operations at NetEnt. Elmqvist founded Yggdrasil Gaming, and built the business from idea to execution in less than a year.

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On the marketing side, it is not an issue to find local talent. But on the game development side, it is hard to find people with knowledge in areas such as 2D, 3D, concept art, and illustrations.

What is your opinion on virtual reality (VR) innovations and what would be the difference in providing VR games?

Why is it that only a few operators have inhouse game development units?

We take technological developments very seriously, but we haven’t found reason to believe that the time is ripe to jump into virtual reality. Customers still lack the equipment, and we are not yet seeing widespread usage. Current trends run in favour of mobile gaming. The opportunity of adding VR will mature once more people have mobile glasses instead of phones. However, I don’t think casino games will drive VR. Sure, it is possible to use VR to make bonus games for slots, but how often will players actually use a VR casino? While VR will allow the player to walk around the slot, they must still watch what happens once the slot spins. I believe VR will be driven by video games, rather than casino.

To put it simply, I believe most lack the expertise. We recently launched a new initiative, which we call ‘White Label Studios’. The studios allow us to collaborate with operators on the development process, lending them our expertise to create something unique and tailored to their needs. Differentiation is more important than ever. Operators don’t want the same content everywhere. We can now offer content that is in line with a brand’s core values. We have one client that has signed up already, and we are planning to scale up this year. White Label Studios requires a strategic commitment from both sides, but the potential of the project is huge.

Within the supply sector, what have been the key topics in 2016? The key thing has been optimisation. We have always focused on finding better ways of utilising technology to offer our customers as rich an experience as possible. Methodology, processes and attitude outperform the technological side of it. The trend now is moving towards mobile casino, which is more challenging than desktop. We are skilled at mobile and aim to acquire market share from our competitors. As of October 2016, 54% of our game win has been generated from the mobile channel.

How does regulation affect the development side of iGaming and do the provisions of responsible gaming already apply at a development stage? Regulations have an impact on both back-end development and front-end development in terms of compliance. Responsible gaming comes into play, and we need to adjust both the back-end and the front-end to accommodate that. We are regulated in Malta, Gibraltar, the UK and Romania. Since we entered the regulated sector rather late, we are still in the process of gaining a licence in a number of jurisdictions. We are still catching up in Europe, both in the dot-com and regulated markets.

How easy or difficult is it to recruit the right talent in Malta? On the marketing side, it is not an issue to find local talent. But on the game development side, it is hard to find people with knowledge in areas such as 2D, 3D, concept art, and illustrations. In our Malta team, we only have one 3D artist and one game designer from Malta; the others are from South Africa, Canada, Serbia, Colombia, Belarus, Poland, Czech Republic and Ukraine. This is one of the reasons we set up the office in Poland. Krakow has a direct flight connection with Malta, and getting a workpermit for non-EU nationals is also easier there. We had to wait a year here in Malta for a recruit from Ukraine. One advantage of Malta, however, is the English language. Our plan is to make it very easy for our employees to move within the company. We want them to be able to work from a different location whenever they are looking for a new adventure.

Yggdrasil Gaming has had a remarkable 2016. What are your plans for the future? We are a lot bigger than we were a year ago, but in comparison to our major competitors, we are still 20 to 50 times smaller. However, we have invested heavily in technology, and the core focus now is to release more high quality games. Investment in infrastructure is also high on our agenda because demand is increasing. We need to deliver games server-to-client quicker than anyone else, otherwise we will lose market share. n

GAMINGmalta 2O17 EDITION

Vladimiro Commodini, Partner of RSM Malta

Countdown to

Compliance Malta’s iGaming industry is evolving from fledging upstart to mature market, but companies may have a thing or two to learn from the island’s successful finance sector, says Vladimiro Commodini of RSM.

RSM has been operating in the iGaming industry since its inception in Malta. Can you give us an overview of your services and explain how you have seen the industry evolve and develop throughout the years? The iGaming industry isn’t the same as it was some 10 years ago. RSM was set up in 2005 – at a time when iGaming really started to take off in Malta. In the industry’s early days, many people thought they could make a quick buck by owning a gaming company and didn’t really see the bigger picture and the implications of such a business. I was a manager at that time, and together with one of the firm’s partners, started to build up our iGaming service line. We are one of the few firms providing a 360-degree-service to gaming companies. We assist clients with corporate structuring and licensing, while also providing IT advisory and compliance support. Audit, accounting and payroll also come into play once the company is operational. Throughout the years, the industry has matured significantly. Most companies that reach out to us today know very well what it means to operate in this industry, although some need help tweaking their paperwork or documenting their business processes.

How would you describe the state of the industry today and what are the pain points iGaming operators often ask you to address? This is a highly competitive industry and increasingly stringent regulations are emerging. While more countries are regulating this industry, there are also a number of EU directives that businesses need to comply with. Operators today often seek advice on compliance issues when entering new markets, and compliance costs have increased significantly. Although I cannot comment on exact figures, I can tell you that the profits are not what they used to be. It is a well-known fact that player loyalty is minimal and the cost of acquisition is high. Intermediaries and other middlemen are also putting pressure on profit margins.

The Accountant

What are the key challenges when accounting for iGaming companies these days? One of the most challenging aspects with respect to accounting for gaming companies relates to how a company accounts for bonuses. Bonuses offered by gaming companies can typically be divided into two types: those that are immediately payable or available as credit to the player, otherwise known as cashable bonuses; and those that will only become so once the player has satisfied a number of pre-set criteria, such as, for example, the number of bets placed. These are referred to as non-cashable bonuses. Cashable bonuses are accounted for by debiting the profit and loss account and creating a liability. On the other hand, the company would typically consider the likelihood of the realisation of the non-cashable bonus in order to determine to what extent a provision should be accounted for, with the excess being possibly disclosed as a contingent liability. This places a significant burden on a company’s management to ensure that appropriate historical data is monitored and updated in a consistent manner that would enable the management to make such distinction in a timely and accurate manner.

The iGaming industry has seen substantial changes in recent years as a result of regulatory and fiscal reform on a European level. For instance, 2015 saw the introduction of new VAT rules. How has the sector reacted to this new reality? The new place of supply services rules engaged most gaming operators, but not to the level expected. The majority of operators just expected the regulations to be postponed to a later date – something that did not happen. It was written on the wall that this was going to happen, but many companies left it to the last minute. In 2016, we then saw a catch-up process by those operators who adopted a wait-and-see approach and a re-alignment by the operators in the industry.

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2O17 EDITION

What needs to be on the radar of iGaming companies in 2017?

What advice would you give to iGaming operators ahead of the regulatory reforms?

Primarily, 2017 will be the year of the Fourth Anti-Money Laundering (AML) Directive. The AML Directive is supposed to be transposed into national law by July 2017, and it stipulates that online casino operations are now classified as subject persons, and therefore a more rigid Know Your Client (KYC) process is to be followed by the operator. Malta’s Remote Gaming Regulations currently require due diligence documentation upon cumulative withdrawals of €2,330. The AML Directive requires a more risk-based approach to be adopted based on level of transactions. The transactions may be carried out in a single operation or several operations, however once the €2,000 mark is reached, enhanced due diligence needs to be carried out. As a result, operators need to get on board and step up their game in this respect to prepare for the changes. Furthermore the revised FATF recommendations demonstrate that operators should maintain the necessary information obtained through customer due diligence measures for a period of at least five years. This is, in fact, potentially in conflict with the Data Protection regulations that allow for the ‘right to be forgotten’. In July, we will see how different authorities and supervisory authorities will deal with it and what level of enforcement we can expect. There will be consequences for non-compliance; Malta, if it wants to uphold its reputation, has to be seen as taking action against anyone who is in default. However, I would expect enforcement to be taken across the board because there needs to be a level playing field.

Start preparing; do not play the waiting game. In today’s regulatory reality, the industry needs to be more proactive when it comes to meeting new regulatory obligations. They need to step up the pace of change. There are analogies with the financial services industry, which has experienced a similar wave of regulation. iGaming companies can certainly learn from the very proactive approach of financial services companies when it comes to implementing new compliance standards.

What other regulatory changes does the industry need to watch out for? The General Data Protection Regulation becomes law in May 2018. It will introduce a number of changes which will result in increased responsibilities for businesses which process personal data, as well as the introduction of fines as high as €20 million for non-compliance and for personal data breaches. iGaming operators servicing jurisdictions outside of Europe also need to inform their national data protection authority that they are sending data outside of the EU. In addition, companies will be required to appoint a competent data protection officer and carry out an impact assessment.

Malta has developed a new regulatory framework that is to hit parliament later this year. What’s your opinion about it and what other areas should Malta look into? I think the market has matured and is ready for a transition to a business-to-consumer and a business-to-business licensing system as envisioned by the new regulatory framework. This will ease the process of applying for a licence, and it will reduce the number of licences required by an operator. It is a pity that cryptocurrencies are not included in the new legislation. The MGA does not accept bitcoin at this point. This is an area that Malta definitely needs to address as many operators who are keen to use cryptocurrencies are approaching us. They are seeing this as a way to boost their revenue streams because they will be able to target other markets and offer more flexible payment solutions. I understand that there are security concerns regarding the transparency of the source of funds and the stability of cryptocurrencies, but I think these risks are manageable.

What are your expectations for the iGaming industry in the coming years? Mergers and acquisitions will continue. I am also in favour of regulating affiliates, after all they are the people who bring players to the operators. There needs to be some level of control, in particular if we want to put more emphasis on KYC processes. The industry requires full visibility of the entire cycle. I think a regulatory function at affiliate stage would help in achieving this. n

BIO:

Vladimiro Comodini is a Certified Public Accountant and partner of RSM Malta who’s responsible for business advisory and back office services. He also heads the unit that provides services to iGaming clients. Vladimiro has extensive experience in remote gaming and is heavily involved in the licensing, pre-certification and compliance processes. Prior to joining RSM Malta in 2005 as a business advisory manager, Vladimiro worked with one of the big four firms on long-term secondments overseas.

GAMINGmalta 2O17 EDITION

TOPTRENDS2O17 Industry Review & Outlook

This was 2016… and what we will be talking about in

2017 We run through the stories that mattered most over the past 12 months and explore what will likely shape the industry in 2017 and beyond.

Mobile

2016 has been a monumental year for mobile gaming: Pokémon Go has taken the world by storm. It was reportedly downloaded an incredible 10 million times in its first week and became the fastest app to reach that level of downloads. It is only natural that everyone within iGaming has since then begun to closely watch developments within Augmented Reality and their application for mobile gambling. There is widespread agreement that the next generation of mobile games will offer more appealing visuals, as well as increase engagement and interaction. Google’s decision to rank mobile sites ahead of desktop in search results has also caught the industry’s collective attention. Studies show that in 2016 mobile accounted for almost 33% of total gambling gross wins, and this figure is estimated to reach close to 43% by 2020. The fact that operators are facing a rapid growth of mobile deposits has also led to improved mobile payment solutions. Operators highlight that there is untapped potential when it comes to handling cryptocurrencies given that such payment methods are increasingly finding regulatory approval. There’s little doubt that the mobile gambling economy will continue to grow. The fact that many operators venture into new markets in parts of the world where mobile technology is leapfrogging desktop, just goes to show the importance of investing in mobile. An excellent mobile product is crucial for iGaming companies that want to make a big splash in Africa and South America. However, some argue that the term ‘mobile first’ is outdated and that such a strategy is becoming less and less relevant because players increasingly want a seamless experience across all devices. Developments such as the ‘internet of things’ will mean that player interaction across devices is only going to get more fragmented. Many agree that the ultimate gaming experience in 2017 and beyond needs to feel consistent and unified across all channels.

We are staying ahead of the curve within mobile gaming simply by being focused on it and following our mobile first approach. I still see that all our competitors don’t have a mobile first approach even if they think they do. Being mobile is advantageous, especially when launching a sportsbook. The internet has obviously gone from desktop to mobile in the same way that customers have moved from offline to online. Johan Styren CEO at LeoVegas

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2O17 EDITION

Virtual reality technology has been an interesting topic in the iGaming industry and discussed at great length during conferences. The bottleneck preventing the VR revolution to take place is that consumers still lack the VR technology on a broader scale. Therefore, augmented reality (AR) holds more upside since it can be used with mobile technology that consumers already possess. We see a huge potential with AR for 2017. Alessandro Fried CEO at BtoBet

Virtual Reality / Augmented Reality

2016 never really saw the anticipated revolution of virtual reality (VR), and many industry professionals remain sceptical on VR’s impact on iGaming in the coming years although some iGaming products with VR elements have already hit the market. While last year VR was mostly an eye-grabbing sensation, there now seems to be a focus on how to get it into the hands of the masses. Although the attraction for using VR for iGaming may not trump that of video gaming, products such as Oculus Rift, PlayStation VR, Samsung Gear VR, and HTC Vive are now available in the market and mass-market adoption might happen faster than many within the industry anticipate. However, before VR will become mainstream and make its way into iGaming on a broader scale, many predict that augmented reality (AR) will significantly surpass VR in market size for a number of years. VR and AR, although similar, are distinct technologies with unique characteristics. VR lives strictly inside a headset and transports people to anywhere in real or imagined digital worlds. AR, on the other hand, layers digital objects on top of real-life settings, for instance by using a mobile phone camera. The fact that it doesn’t require expensive additional hardware is seen as the key advantage of AR. Pokemon Go is seen as a catalyst in this regard, and many game developers are now starting to adapt their games, including AR applications that could be used by landbased casinos and iGaming operators. AR is already being used in a marketing background. Malta-based BtoBet for instance has created an app to showcase their AR product. It gives operators the opportunity to increase their users’ experience by personalised gaming and betting offers. BtoBet has created a Virtual Assistant, Simone, that comes out from the AR and interactively promotes - through a recommendation engine - bonus games on preferred games to players.

GAMINGmalta 2O17 EDITION

TOPTRENDS2O17

3 Start-ups

A new breed of iGaming startups is emerging, keen on cashing in on the innovation boom, or rather the lack of it, within the industry. Consolidation means that we are already seeing fewer, but larger, operators in the marketplace, and growth opportunities through mergers and acquisitions are going to become even more limited in the future. In this climate, larger operators are turning to start-ups in an effort to ‘buy’ innovation and creativity to increase their market share. The side-effect: the iGaming sector has turned into the perfect platform for serial entrepreneurs, who fund multiple start-ups only to scale fast and then sell high. However, starting an iGaming company today with less than a million euro in the pocket is no longer possible according to industry consultants. Those who do kick off with a decent amount of startup capital – typically five million euro – have great chances of succeeding. Many larger iGaming corporates looking to fund innovation gaps or to reinvest surplus cash are also pioneering new ways to collaborate with fast-growth businesses. They have begun to systemically engage in and support R&D projects as well as early-stage companies. Some have even set up their own incubators and innovation labs. At the same time, governments in many countries are becoming more ‘switched on’ in terms of taking positive steps to create entrepreneurial ecosystems in which start-ups can thrive and team up with angel investors and venture capitalists. Malta is no exception in this regard. In the past months, the country has seen the creation of incubators, the introduction of seed-financing schemes, as well as the set up of lobby groups organising informal get-togethers to share good practice and to pave the way for further governmental support. The prime example of this network is the Silicon Valletta initiative, a private organisation bringing together the most influential CEOs in the young Maltese digital ecosystem with the aim to raise awareness of the digital sector.

$$ $

At Karmafy, we have developed a new gamification concept, which we call freemium philanthropy. The core idea is to create an overlay that converts the time spent in a game into actual philanthropy by a tripartite revenue share between a charity, a game developer and us. We improve retention and engagement through motivating players to do good while having fun. Jonas Eneroth CEO at Karmafy

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Operator M&A

The industry will consolidate more and more, with the big companies swallowing up the smaller ones. The new markets are also very interesting. I think you will see a lot of the mainstream European companies starting to focus quite heavily on either buying brands in South America or opening up offices in South America. Motti Colman Director of New Business at Optimove We would welcome affiliate regulation given the consolidation of the sector. It could be a way of making the sector more transparent, which would be beneficial for both affiliates and operators alike. We always play with open cards and would prefer everyone else to do the same, because we as an affiliate network can often be stuck between affiliate and operator. Further transparency could only be a good thing for all parties. Dennis Dyhr-Hansen Director at MachingVisions It would be a good idea to give affiliates the opportunity to have themselves approved and show that they are genuine and are following a code of conduct set up by a recognised and reputed body. It should not be obligatory. Operators can then enter into agreements with affiliates conforming to the code with a certain level of comfort. DANIELA GRIOLI Deputy Chairperson – Malta Remote Gaming Council

Consolidation within the iGaming industry continued during 2016. Until recently, there was very little consolidation in the industry, and even smaller operators were able to make significant profits. However, regulatory costs, marketing costs and IT costs have all grown significantly in recent years, making scale increasingly important. But the industry did not only see smaller operators selling out to larger ones. One of the largest ever mergers within the iGaming industry was completed in February 2016 with the merger of Paddy Power and Betfair becoming an £8 billion company. Fantasy sports giant DraftKings pursued an aggressive approach during the year and acquired the MMA-combat DFS-competitor Kountermove in February 2016, followed by TransferKings in June. They raised an additional $153 million of venture capital in September and eventually confirmed merger plans with FanDuel in November 2016. Gaming Innovation Group has also expanded rapidly by striking a deal in March 2016 to acquire sports betting tech company OddsModel, which was followed by the acquisition of Betit in August. Cherry acquired 49% of the shares in ComeOn in May 2016, and bought the additional 51% in December. This deal made Cherry the third largest operator in Scandinavian markets. On the other hand, William Hill and Amaya have ended talks of a possible merger after shareholders criticised the tie-up. An IPO of Atlantis Gaming Corporation (AGC) is expected in the US in the first months of 2017. The higher costs of compliance due to the Fourth Anti-Money Laundering directive along with rising taxes mean that consolidation will likely continue and even exacerbate as advantages of scale are becoming ever more pronounced.

Affiliate Consolidation

Following a merger mania among operators in 2015, affiliates followed suit with a year of remarkable consolidation. Malta now hosts a trinity of affiliate giants with Catena Media, RakeTech and MatchingVisions on centre stage. Catena Media made it to the Nasdaq Stockholm equity market in February 2016, much inspired by the XLMedia IPO in 2014, and proceeded with a bullish race of acquisitions. To name a few, Catena acquired AskGamblers.com (€15 million), Casinouk.com (€12.7 million), and a number of US affiliaterelated assets amounting to €14.3 million. There is reason to believe that consolidation of the affiliate sector will continue in 2017. From the perspective of affiliate managers, operators see both pros and cons with affiliates consolidating. The upside being the possibility to buy bigger chunks of traffic from single affiliate partners. The downside being loss of affiliate innovation.

GAMINGmalta 2O17 EDITION

eSports

TOPTRENDS2O17

The eSports market has grown substantially during 2016. Large tournaments, an infusion of venture capital and mainstream media coverage have propelled eSports from the sector’s best-kept secret to a worldwide phenomenon, while the betting on eSports has also gained popularity. eSports wagering is in particular seen as a way of attracting Millennials, and an increasing number of iGaming companies no longer consider eSports as niche or novelty, but offer eSports betting markets alongside mainstream sports like soccer and basketball. The expectation is that this market will continue to grow in the coming years as more eSports enthusiasts will reach the legal age to gamble. The market was estimated to be worth some $900 million in 2016 and is expected to hit $1 billion this year. The Digital Media Briefing has reported that Asia remained the biggest market for eSports, valued at $328 million in 2016. North America and Europe lag behind slightly, with markets valued at $275 million and $269 million, respectively. The biggest eSports games are League of Legends (LoL), Dota 2, and Counter-Strike: Global Offensive. The sector has seen the arrival of a number of industry bodies and associations, while a newspaper has been set-up dedicated to report on it, The Esports Observer. An intriguing fact is also the immense popularity of eSports across Asia. Alibaba, the Chinese online giant, launched no less than 1,200 events across 15 Chinese cities during the year as part of the tournament AliSports World Electronic Sports Games. Forbes has reported that professionals are even leaving jobs in finance to follow an eSports career. It is estimated that there are 100 million Chinese eSports fans. The growth of eSports in Europe has drawn the attention of many regulators. The UK Gambling Commission (UKGC) published a paper in August on eSports, while an eSports Integrity Coalition (ESIC) was launched in London in July with the aim of addressing match fixing in eSports. The Italian regulator has also prepared itself to issue further eSports licences to betting operators. Malta’s MGA is of the opinion that eSports are sports and therefore not subject to licensing, while the betting on eSports is no different from any other event and therefore requires a licence. The island is also attracting local and international gamers and has already hosted a range of eSports festivals and tournaments, which were organised by Maltese eSports event organiser Gamers. com.mt.

eSports is like any normal sport, requiring tactics, training and physical exercise. Players need to eat well and need mental training. Whether it is played for fun among friends or in a cashprize competition, it is a sport. An eSports career is usually quite short, from 15 until 25, after 30 you are considered a veteran because your reflexes would have slowed down. The streaming hours of eSports can be longer than other sports and viewership is massive. In five years from now eSports will be booming, and it is already a billion-dollar industry. Andre’ Mizzi Director of Sales & Marketing at Gamers.com.mt eSports is slowly but surely developing into a mainstream industry, and in order to ensure sustainable growth, a regulated framework is necessary and crucial. eSports needs specific regulations to monitor and address issues such as child protection, integrity of the games; and a cohesive plan involving all industry partners to come together and discuss the issues affecting eSports. Roger A. Strickland Jr. Board Member – Gaming Malta

GAMINGmalta

2O17 EDITION

Daily Fantasy Sports

The MGA is taking a deliberate, and clearly thoughtful view towards regulating games of skill in order to ensure that operators such as DraftKings can conduct business within a regulatory framework that makes sense to both operators and consumers. I appreciate the MGA looking towards the future, at emerging consumer trends and technology, to create an infrastructure that will allow Daily Fantasy Sports operators invested in Malta to continue growing and innovating within this new category. Jeffrey Haas Chief International Officer at DraftKings The skill games regulation is an initiative that should again put Malta at the forefront of regulation of the gaming industry. Malta’s objective should be to continue to lead and shape the regulation of the online gaming business. George Debrincat Chairperson – Malta Remote Gaming Council

Daily Fantasy Sports (DFS) launched on a broader scale in Europe in 2016. In fantasy sports, players compete against each other by building a team of athletes from a real-world sport. Based on the players’ statistical performance, they earn points and a cash pay-out. The business model is typically based on the operator charging a commission, but jackpot prizes have also occurred in the US. While fantasy sports have been present in Europe for years, they have not yet succeeded in winning a strong market share from traditional gambling and sports betting. In fact, many argue that the reason for the success of fantasy sports in the US was the absence of traditional gambling products, which paved the way for companies such as DraftKings and FanDuel to offer players DFS within basketball, American football and ice hockey. However, the sector came under pressure in the US after state regulators questioned whether the companies’ cash-prize games constituted illegal gambling. Although a number of states regulated or legalised DFS since then, the sector has taken a hit. The industry’s largest companies, DraftKings and FanDuel, which are estimated to have 5 million users together and make up 90% of the market, are not profitable at the moment after incurring heavy expenses for legal battles according to media reports. The companies are currently seeking approval for a merger, which is expected to help them reduce marketing and lobbying costs and boost revenue growth. Developments such as these have also led to a revised growth forecast for the sector, which was once aiming for triple-digit growth. The newspaper ‘The Economist’ now speaks of a growth rate of 20% year-on-year, while research firms Eilers & Krejcik says sector growth will range between 5 and 15% annually till 2020. It comes as no surprise that both FanDuel and DraftKings are keen to tap new markets and expand into Europe, where the fantasy sports market has seen increased interest on the back of the UEFA European Championship 2016. The hopes are high that future fantasy sports activity will centre in Malta. Fantasy football operator Oulala, the first to be based in Malta, has been instrumental in promoting the introduction of a skill game licence for fantasy sports by the Malta Gaming Authority (MGA), which came into force in January 2017. Industry experts foresee Malta to become the European base for skill game operators, and the fantasy sports sector in Malta shows strong potential for growth. There are also plans in the pipeline for an International Fantasy Sports Association to be based in Malta to accommodate the expanding sector.

GAMINGmalta 2O17 EDITION

New Markets

TOPTRENDS2O17

iGaming companies beware, the European regulatory landscape is more fragmented than ever as increasing number of countries started regulating or, in some case, re-regulating online gaming. Portugal adopted new regulations already in 2015 and finally opened its market in the summer of 2016. However, only a few iGaming companies have thus far been granted licences. Romania, which introduced gambling in 2010, initiated gambling reforms in 2015 and lowered its tax rates, a move that prompted quite an interest from operators. In 2016, a large number of iGaming operators have been awarded Romanian gaming licences, including NetEnt, NYX Gaming Group, Scientific Games, Tain, GVC, Yggdrasil, Relax Gaming, and Bit8. On January 1, 2017, the Czech Republic’s new Gambling Act has entered into force, while Poland also announced its intention to regulate the sector. In 2017, all eyes will be on the Netherlands where licence applications could start this year. Sweden is anticipated to present a public investigation regarding iGaming regulation in March 2017. The German market also seems to be seeing some movement after the heads of Germany’s 16 states have finally agreed to modernise the country’s online gambling regulatory system so that is conforms with EU rules. Outside of Europe, Asian countries are also busy regulating the sector, In India, a Supreme Court panel has recommended the introduction of legalised sports betting, while the Philippines first opened the sector but keep sending mixed signals. A new gambling bill was also passed in the Brazil Senate in November 2016, taking the huge market of over 206 million people a step closer to introduce iGaming regulations. In fact, many within the iGaming industry have their sights set on the growing Latin American online gaming industry. With a population of more than half a billion people combined, Latin America is a virtually untapped resource with massive potential. The same applies for Africa. With 67% mobile penetration across the continent, and a market of almost a billion people, iGaming operators have just started to gain traction in a prospective new boommarket. Malta has always been an advocate of online gaming within the EU’s single market, believing that an operator licensed on the island should be allowed to provide services across Europe. While the introduction of national licensing regimes might seem to make Malta less attractive as an iGaming hub, due to the small size of the local market, the island continues to receive new applications given that the Maltese licence is the only EU licence that does not restrict operators to one particular country. Service providers are reporting that they are registering increased interest from non-European gaming companies keen to expand into Europe.

Emerging markets are a constant focus within the iGaming industry and I think 2017 will be the year we see an explosion in the Latin American market. The infrastructure is already there, Columbia and Brazil have been making regulatory progress and the entire region is hungry for reliable iGaming options. Rebecca Liggero Industry Reporter at CalvinAyre

The next battleground will be the 4th Anti-Money Laundering (AML) Directive, which could be used by countries that want to prevent service providers from entering the market. I hope I'm wrong, but I've seen it in the payment sector, and these companies do have licences and passporting rights. If countries like Germany could use AML to stop a regulated harmonised payment sector, what could they do to iGaming? PETER HOWITT Founder of Ramparts European Law Firm

GAMINGmalta

2O17 EDITION

iGaming Stocks

Our sector, particularly from the operator perspective, is increasingly well represented on international markets, with a special focus on London. However, the iGaming sector will underperform the market in 2016, with new taxes, duties and other potential operating constraints adding to cost-headwinds and overall sector sentiment. Certainly, many listed operators will be hoping for a better 2017. Lee Richardson CEO at Gaming Economics

2016 has been a year that has seen a bunch of iGaming companies gone public, while increasing numbers of investors were adding iGaming companies to their investment portfolios on the back of steady industry growth rates. However, some of the biggest names in the industry underperformed in 2016 according to sector analysts, who are already counting on 2017 to turn the tides. There are now no less than 38 iGaming stocks related to Malta-licensed companies on the equity markets. However, none of the companies chose to list on the Malta Stock Exchange (MSE) and instead listings have gone to Stockholm, Oslo, Frankfurt, Stuttgart, Toronto, New York, London and Dublin. Most iGaming companies with Swedish holding companies are listed on Nasdaq OMX Nordic, the Stockholm Stock Exchange. Companies currently on the list First North Premier include LeoVegas, Evolution Gaming, and Kambi Group. On the main markets one can find Betsson, Cherry, PlayHippo (EveryMatrix), Kindred Group (formerly Unibet), Mr Green & Co and Gaming Innovation Group. During 2016, we saw the IPO of LeoVegas and Mr Green. Mr Green first listed on the First North Premier but took a further step in November 2016, listing at the main market of Nasdaq OMX Nordic. When it comes to referral companies, services, and suppliers, 2016 has also seen the IPOs of Catena Media in February and Catella Bank in December. In just five years, many iGaming stocks have risen over 200%. Cherry AB has even soared over 500% in two years. Facebook Inc, by comparison, has risen by 245% in the past five years. All major Scandinavian banks, including Swedbank, Danske Bank and Skandiabanken and even some pension funds, have shown interest in iGaming stocks. Another frequent iGaming-trader among the prominent global investment banks is Merrill Lynch International. In addition to equity, some ETFs have sprung up with the sole purpose of acquiring assets in iGaming. One of them is VanEckâ&#x20AC;&#x2122;s BJK - Market Vectors Gaming ETF which is traded on the NYSE with total assets worth of $19,574 million and a YTD return of 11.47% as of September 2016. Among the MGA-licensed assets of the BJK are shares in Paddy Power Betfair, which as of September 2016 stood at 6.10 % of the portfolio. As the industry is becoming ever more accepted in the eyes of private equity houses, iGaming IPOs will surely be a continuous trend as sources tell us there are many more already in the pipeline.

GAMINGmalta 2O17 EDITION

TOPTRENDS2O17 Symbol Company List Market Cap Stockholm KINDSDB:SS Kindred Group PLC (Unibet) Large Cap 18.951 B SEK NETB:SS NetEnt AB Large Cap 17.109 B SEK BETSB:SS Betsson AB Large Cap 12.594 B SEK EVO:SS Evolution Gaming Group AB First North 9.640 B SEK CHERB:SS Cherry AB Large Cap 3.676 B SEK LEO:SS LeoVegas AB First North 3.639 B SEK KAMBI:SS Kambi Group PLC First North 3.189 B SEK NIO:SS Gaming Innovation Group Inc First North 2.546 B NOK MRG:SS Mr. Green & Co AB Small Cap 1.083 B SEK PLAY:SS PlayHippo AB AktieTorget 58.796 M SEK SPIFFX:SS SpiffX AB First North 13.800 M SEK Oslo GIG:NO Gaming Innovation Group Ltd Oslo Børs 2.554 B NOK New York IGT:US International Game Technology PLC NYSE 5.323 B USD AYA:US Amaya Inc NASDAQ GS 2.060 B USD SGMS:US Scientific Games Corp NASDAQ GS 1.353 B USD ITTNF:UF Intertain Group Ltd OTC US 537.580 M USD NXXYF:US NYX Gaming Group Ltd OTC US 100.676 M USD PDYPY:US Paddy Power Betfair PLC OTC US - BTSNY:US Betsson AB OTC US - EVVTY:US Evolution Gaming Group AB OTC US - NTNTY:US NetEnt AB OTC US - Frankfurt & Stuttgart UNBA:GR Kindred Group PLC (Unibet) FWB 1.955 B EUR OAY:GR Amaya Inc FWB 1.918 B EUR KTOR:GR NetEnt AB FWB 1.791 B EUR V72C:GR Betsson AB STU 1.318 B EUR TJW:GR Scientific Games Corp FWB 1.273 B EUR E3G:GR Evolution Gaming Group AB STU 1.067 B EUR ACX:GR bet-at-home.com AG XETRA 594.916 M EUR 35I:GR Intertain Group Ltd FWB 513.729 M EUR 3LV:GR LeoVegas AB FWB 380.367 M EUR 9NY:GR NYX Gaming Group Ltd STU 80.692 M EUR Toronto, Dublin, London AYA:CN Amaya Inc TSX 2.714 B CAD IT:CN Intertain Group Ltd TSX 729.833 M CAD NYX:CN NYX Gaming Group Ltd VENTURE 113.422 M CAD PPB:ID Paddy Power Betfair PLC ISE MSM 8.443 B EUR PPB:LN Paddy Power Betfair PLC LSE Main 7.309 B GBP PTEC:LN Playtech PLC LSE Main 2.637 B GBP GVC:LN GVC Holdings PLC LSE Main 1.831 B GBP Quotes as of 2017/01/19. Only companies with MGA-licenced subsidiaries are included in the list. Average

1 YR Return

-12.54% 0.52% -32.99% 5.08% 148.36% 17.50% 3.30% 44.44% -24.19% -61.76% -51.56%

30.43%

92.99% 27.02% 158.71% -39.87% -23.87% 0.33% 1.48%

-15.24% 29.12% 1.44% -35.05% 157.76% 1.80% 99.07% 33.06% -1.47% -48.09%

16.14% 20.24% -52.61% -17.17% -5.65% 13.98% 37.81%

14.40%

GAMINGmalta

2O17 EDITION

Bitcoin as a payment method has a lot of structural benefits for iGaming. First, transactions are much faster than traditional payment methods. Secondly, they are irreversible which eliminates a lot of fraud risk such as credit card chargebacks. Finally, fees are lower for the merchant, which brings costs down for the end consumer. Bitcoin does facilitate privacy and anonymity. However, a casino accepting bitcoin payments is required to do the same KYC as for other payment methods. This is the practice adopted for the licencing regime of the UK Gambling Commission. Benedikt Manigold CFO at Cubits Right now there are 202 cryptocurrencies out there, with bitcoin being the one that is ready to make the jump into mainstream and accounting for 99% of the market. There is so much confusion surrounding bitcoin. We are now bringing bitcoin into the light. Through KYC we know as much about you as your bank. As someone who has been in the payments world for 30 years, I now see there is a big need for what Bitcoin delivers: a safe more secure and better way of moving money. T. Jack Williams President at Paymentcard Services Convergence between online and retail is a major trend. Many operators are considering this approach as it has huge long term potential, and Playtech can provide operators with true omni-channel capabilities. As a player, you can now choose what channel you like to use to access the offer. In the UK and Italy, for instance, you can now go to a betting shop and deposit money in your iGaming account by paying cash to the betting shop. Francesco Rodano Chief Policy Officer at Playtech

Cryptocurrencies

2016 was also the year of wider adoption of cryptocurrencies, and 2017 will be even bigger as acceptance is expected to grow. Bitcoin is a blockchain infrastructure and works like a decentralised open ledger consisting of a vast number of nodes. New bitcoins are issued through a process called mining, and there is a finite amount in the mining shaft of 21 million bitcoins, making it deflationary as a currency. Bitcoin and cryptocurrencies are now accepted currencies for payments in the jurisdiction of the UK Gambling Commission, while Malta is currently looking into the question whether to accept it or not. More regulators are expected to give the green light on bitcoin in 2017 as many operators find the technology suitable for iGaming due to its irreversibility, making it more resilient against chargeback fraud. It would also allow easier access to markets such as Africa, where customers might have mobile phones but often lack bank accounts.

Twitching

On the back of eSports, Twitch has been gaining popularity both as a streaming service and marketing tool within the iGaming industry. It is a world-leading video platform and community for gamers. As much as 45 million people use Twitch monthly for broadcasting, streaming and watching of eSports and chatting. Top channels can have as much as 50,000 live viewers and 1,500,000 followers, allowing viewers to watch the host play games like League of Legends while chatting in a sidebar-function.

Payments & Convergence

The world of payments in 2020 will look very unlike today, and market transformation has already begun. From wearable devices and connected gadgets to cryptocurrency, payment technologies are changing in ways that were once unimaginable, and iGaming companies should watch the payments space closely. Besides transformation, the industry is experiencing major convergence around products and solutions linked to payments. 2015 had already been the year that saw iGaming companies as well as game providers turning to their land-based competitors to source new growth opportunities and launch omni-channel strategies. In 2016, the payments industry brought this symbiotic relationship to the next level by offering solutions that allow players to access their online accounts from betting shops. iGaming operators see the opportunity in strengthening player retention by allowing players to access their gaming account wherever and whenever, providing multiple payment solutions.

GAMINGmalta 2O17 EDITION

Blockchain Technology

TOPTRENDS2O17

Blockchain technology has become one of the hottest topics within the industry, and many operators agree that the blockchain tech revolution has just begun. More than just a distributed database for bitcoin, the technology’s ability to send, receive and store information has the underlying power to truly disrupt the status quo of the iGaming industry in the years ahead. The implications of decentralised ledger technology mean the industry could address a myriad of transparency issues and re-design its business processes. For instance, experts argue that smart contracts offer the ability for random number generation (RNG) to take place in a decentralised and verifiable way, and even where RNG is not fully decentralised, blockchain technology would allow players to review the RNG process in order to allow them to verify fairness for themselves. While the use of decentralised blockchain technology will pose a number of regulatory challenges that the industry will need to address, blockchain’s relevance will only continue to grow. The intelligent adoption of blockchain could well prove to have the biggest non-product impact on iGaming companies in 2017 and beyond.

Skin Gambling

While skin gambling is still far from mainstream, it experienced a surge in popularity in the past two years. Skin betting refers to wagers that use Dota 2 or Counter-Strike: Global Offensive (CS:GO) items that are acquired in the video game and have a purely collectible and cosmetic value in lieu of currency. The term ‘skin’ is derived from the typical function of these virtual items: changing the appearance of a player’s in-game avatar, weapons or equipment. Some skins are extremely rare, which makes them more valuable. Players can transfer their skins from the game developer’s platform and then trade and bet these in tote pools, either on the outcome of eSports matches or in casino-style jackpots. More than 3 million people are reported to have wagered $2.3 billion worth of skins on the outcome of eSports matches in 2015, while figures for 2016 were estimated to be as high as $7.4 billion, although the legal issues and controversies that emerged surrounding skin gambling might have led to a drop in wagering activity. Skin gambling sites are largely unregulated, and the majority of skin gambling sites offer no user verification process, opening the industry to widespread accusations of facilitating underage gambling. Skin gambling is still a grey area and due to the nascent nature of the industry, its future seems uncertain. Industry experts say that the crucial question will be whether supervisory authorities are able and willing to fit skin gambling offerings into their regulatory frameworks. There is reason to believe that the new, emerging generation of gamers might be more interested in this form of ‘digital betting’ as opposed to traditional gambling products, presenting an opportunity to promote regulated eSports trading and betting products.

Cryptocurrencies have the potential to continue raising the bar in terms of innovation, and position Malta at the cutting edge of regulation and technology. However, the use and circulation of cryptocurrencies does not come without the associated risks. Russell Mifsud Council Member – Malta Remote Gaming Council

Technology is an enabler, and cryptocurrencies could be the future online payment method especially if costs keep rising and banks become less inclined to accept the industry as a customer. Malta should carry out serious and detailed risk assessments and then decide whether or not to accept cryptocurrencies for the industry. Alan Attard Treasurer – Malta Remote Gaming Council

GAMINGmalta

2O17 EDITION

Brexit

A list of 2016 would not be complete without a mention of Brexit. Britain’s exit from the EU will probably just be a pinprick to the world economy, but it is expected to have a much larger effect on the iGaming industry. Although access to the UK market is already restricted due to the presence of the UK’s own licensing framework, there still might be effects on tax, movement of fund and staff while the UK-tied industry could undergo considerable internal changes. Change will most likely also hit Gibraltar, and the gaming hub might experience serious strains if the Spanish government continues with its plan to put stricter controls at the borders upon Brexit, especially when keeping in mind that the majority of Gibraltar’s gaming companies are run by employees who cross the border daily. For many, the silent killer is the current uncertainty, which forces leading companies to prepare fall-back plans. 2016 has already seen the start of re-structuring activity of businesses with UK interests. Malta seems to be one of the winners of this development. The island’s iGaming community has already reported a surge in enquiries from iGaming companies seeking a Malta licence as a hedge against Brexit.

Artificial Intelligence & Recommendation Engines

An increasing number of iGaming companies are betting their future on artificial intelligence (AI) to offer players highly customised content and to market their products based on player preferences. Computer simulations of the human brain, called neural networks, mimic humans’ capacity to learn. Using massive amounts of data and complex algorithms, an AI system gradually learns to recognise similarities and distinguish differences. It is taught to recognise patterns within massive amounts of data. Many operators are currently exploring ways to grow market share on the basis of content personalisation and recommendation engines. Personalisation becomes even more important with the growth of ‘In-Play’ markets and players desire to be able to bet in real-time on in-play events. A clever gaming intelligence solution allows operators to automate their operations, which will save time and costs, while giving players exactly what they want should increase customer loyalty, brand respect and revenues.

GAMINGmalta 2O17 EDITION

QUICKFIRE

Francesco Rodano CPO Playtech

Eman Pulis Managing Director SiGMA

Benedikt Manigold CFO Cubits

Joseph Borg Senior Adviser WH Partners

Veronique dos Reis Legal, Compliance and Regulatory Affairs Manager, Pinnacle

Ian Pellicano Director APCO

Opportunity

Hub

Sun, sea and business

Pragmatic

The best

The future

Exciting

Unlimited potential

Innovative

Interesting

Money

Collaboration

Are here to stay but need to get their house sorted

Old School necessity

Complex

Buzz

Just an evolution, not a revolution

Augmented Reality will be first

Very interesting

Opportunity

No one beats generation X

Not been exposed to them yet

A way forward

Innovative

Innovation

Fanobet

Cloudy

Mobile

Itâ&#x20AC;&#x2122;s going to rain soon, winter is coming.

Conflicting interests

No innovation

Malta? Shiny

eSports? Overrated

Affiliates? A pillar

Virtual Reality? Scary

Innovation

Millennials? Hard to catch

Coming into gamingÂ

Start-ups? Hard to succeed

In need of more platforms to bring them closer to investors

A noticeable trend? Convergence

Twitching in the affiliates line

GAMINGmalta

2O17 EDITION

James Scicluna Senior Partner WH Partners

Ramona Mifsud Sales Executive BMIT

Trevor de Giorgio Managing Director Greentube

Mathias Larsson Managing Director Tain

Reuben Portanier Founder & Executive Advisor AVVIZA – Gaming Advisory

Kristina Hambardzumyan Regional Director BetConstruct

A growing topic

Wild West

Asia

Take up... with a question

Future

Bitcoin? Add it on to your payment systems

Daily Fantasy Sports? Really cool for non-gamblers

Not sure if it will work or not

Relaxation

Social

New kid on the block

Fun

Developer of the regulated system

Reliable

Very good

Responsive

Authority

A must

Important

Cumbersome

Key

Something we always look at

Grey Markets

Africa and Asia

Latin America

Worldwide

Back-end of the system

Problem

Difficult

Slow

Trustly

Competitve

High

Big chunk of your cost

Competitive

MGA? Increasingly efficient

Anti Money Laundering? Must be applied with sense

Something which everybody tries to control

Growth Markets? Latin America, Asia, and Africa

Banking? Think long-term, build relationships

iGaming Salaries? Don’t let them overheat

Not as high as people think

GAMINGmalta 2O17 EDITION

QUICKFIRE

Nikolai Livori CEO Yobetit

Angelo Dalli CEO Bit8

Motti Colman Director of New Business Optimove

Sue Schneider Egaming Brokerage

Russell Mifsud Senior Manager KPMG

Alessandro Fried CEO BtoBet

Optimisation

Even scarier than VR

A reality

Insight

Online operators have it

Important

In evolutionary process

Complex

The way forward

The US answer to sports betting

Mergers (US)

Oulala

Worked in the USA

They need help

An important segment to focus on

A priority

NOSES (National Online Self Exclusion Scheme)

Small percentage

Promotions

Bonus abusers

Question mark

Expensive

Product is more important

Not enough of them

Critical

Essential

50% of BtoBet

Women in gaming

Possibly Brexit or Skill Games

eSports

Big Data? In vogue

Regulation? Pretty good

Necessary

Daily Fantasy Sports? A lot of fuss

Fantasy

Problem gamblers? Quite rare

Bonus? All the same

Women in Gaming? What about them?

Fantastic

The biggest opportunity? Start-up investing

Lotteries

Leveraging player data

GAMINGmalta

2O17 EDITION

te The Affilia

Up The Start-

The Recruiter

The Consultant

PERSPECTIVES2

The Investor

The Industry Titan

GAMINGmalta

2O17 EDITION

Carla Maree Vella, CEO/COO OF Optimizer Invest

Funding

the Future As the iGaming industry has matured and consolidated over the last couple of years, some of the veteran operators have stepped up another level and become venture capitalists, sourcing much needed start-up angel investment for whoever manages to prove traction.

The Investor Can you briefly introduce Optimizer Invest and tell us about your experience in funding iGaming start-ups? Optimizer Invest kicked off in 2012 and was founded by the Swedes, Henrik Persson and Mikael Riese Harstad; and Norwegian AndrĂŠ Lavold, all of whom have previously managed a number of successful iGaming companies, including Betsafe, NordicGaming Group (NordicBet) and BestGames Holdings. We are a fully founder-funded investment firm. I was appointed CEO in April 2016. To date, Optimizer has invested in more than 20 companies. We are involved in some major online gambling-related investments and have stakes in Gaming Innovation Group (GIG), Hero Gaming and gambling-focused affiliate publishing company Catena Media, which grew from just four people to now over 200 people. Catena Media was actually one of our first investments. Betit, which was recently sold to GIG, is another start-up that we incubated from the ground up. But it is not all iGaming, we also have companies from other sectors in our portfolio, for instance fintech and eCommerce.

BIO: Carla Maree Vella is the CEO/COO at Optimizer Invest. Her entrepreneurial and innovative drive is supported by 10 yearsâ&#x20AC;&#x2122; experience in online marketing, and 5 years in iGaming. She specialises in digital marketing, user experience, technology, operational efficiency, data, and CRO.

What makes you invest in a company, and how do you see the role of a VC? We want to be involved in digital companies. In the iGaming industry, a company must be able to grow within the first three years to be of interest to us. When we started out, we were more adventurous and supported people who just had ideas. But right now, we are looking for companies that have established their prototype and already have customers. We want to see a little bit of traction before we invest; however, there are exceptions to this rule. For instance, we currently have a company in our portfolio that developed a mobile phone wearable watch for kids, with calling and smart location features.

BIO:

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It would be wonderful if C-level staff of the large gaming companies such as Unibet, LeoVegas, Cherry and Betsson could visit start-ups once a month. Just to walk around and ask them what they are working on. This could lead to healthy innovation.

They approached us when they needed funding for the next development stage. Start-up investing is about more than just funding. This distinguishes us from other venture capital (VC) firms. We do get involved on an operational level and hold executive positions within the firms that we fund. We all come from different backgrounds and share our experience and knowledge, but we phase-out once the necessary skills have been built up within the start-ups. We even incubate some startups to work from our office.

What is your exit strategy? Exit strategies are part of our business, but not our only motivation. It’s important for us to understand where the entrepreneur wants to go with their business, and in most cases when we invest we can already sense where something is going to go. We have taken companies all the way to an IPO. Of course, as a VC, we are about entering and exiting.

Start-up investing is becoming a global asset class, however for a long time the iGaming sector didn’t receive much attention. How would you describe the current investment climate? Funding remains an issue for start-ups, despite the recent focus on early-stage investments and excitement around what is being achieved in the world of tech. Raising capital was very difficult and it is still difficult. However, there are a lot more angels and VCs out there today than there used to be 10 years ago. The hardest part is probably not the financing but finding VCs that are ready and available to give entrepreneurs and early-stage companies advice and support during the crucial phases of their start-up.

What advice would you give to an iGaming start-up trying to raise capital? For us at the stage we are interested in investing in, it is all about traction and returning customers. If people are coming back, then you are onto something. I think there are a lot of things left to tackle in the iGaming sector. Timing is everything in this regard. Start-ups also need to keep in mind that investors are not just about money, you need to see what they can teach

you and what they can expose you to. When I had my own business, one of the biggest mistakes I made was not letting a smart investor in.

How do you see Malta as a place for start-ups? Malta has a thriving iGaming community, and it has many other benefits such as its EU membership, the English-language and the great weather. While the Maltese authorities are seeking to attract new companies to the island, I don’t believe they will succeed by just offering them €10,000 in seed funding. This is not enough to entice incubation in Malta. While for start-ups the money they can get is important, they are looking for other things too, such as the network they can be supplied with and the office space. Unfortunately Malta is not London, but we are seeing new initiatives, including the creation of a lobby group, ‘Silicon Valletta’, and the KPMG eSummit. We do not need more thinkers, we need more doers. That is what it all comes down to.

The iGaming industry is in consolidation mode. What are the prospects of investing in start-ups? The large conglomerates need to buy start-ups because they do not have the flexibility of grand innovations in-house. They simply do not have the models to nurture innovation. The innovation within these companies is stagnant, and they really struggle. They must think about their day-to-day bread and butter. Start-ups are agile enough to work on their own ideas and thoughts and maybe take some advice. In fact, it would be wonderful if C-level staff of the large gaming companies such as Unibet, LeoVegas, Cherry and Betsson could visit start-ups once a month. Just to walk around and ask them what they are working on. This could lead to healthy innovation.

Do you have plans to invest in more iGaming companies? We have invested a lot in iGaming companies, and we are pretty saturated in this sphere. We must respect the competitive nature of the companies in our portfolio. However, there are three areas that are of interest to us: game content providers, data/AI platforms and eSports. The reason I believe specifically in eSports is because I see volume, and how different iGaming needs to be for future users. n

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GAMINGmalta 2O17 EDITION

Erik Bergman, Chief Strategy Officer & Co-Founder of Catena Media

Affiliate Duo Optimised for Success Consolidation in the affiliate sector was one of the big themes in 2016, allowing for larger volumes of traffic being negotiated with single partners. Catena Media is the obvious example, going through an IPO that raised €25 million followed by several prominent acquisitions.

Catena media is one of the most visible companies these days. Could you outline the roots of the company? Catena Media started more or less by accident. The founders are Emil Thidell and myself. We were born on the same day in the same hospital in Sweden. Our first step into iGaming was creating rate-back affiliation for poker sites. In 2007 we went into bingo and focused all energy into understanding how to advertise through Google. In 2009, we managed to strike a deal with a friend of a friend who had a platform, and we launched our own bingo brand. We then decided to move to Malta and apply for jobs but no one wanted to hire us. So we started comparison sites of all kinds: mortgages, fashion and hotels. This was the first chapter of Catena Media, and it was all about SEO. We hired our first employee in 2011. Through my girlfriend, we met the people who founded Optimizer Invest and moved to Marbella and Gibraltar in 2012 together with them. At the end of the year they bought half of our company, their initial investment. At the time, we had a monthly profit of circa €50,000. Optimizer Invest pushed us out of our comfort zone and assisted us in scaling up. We hired 10 employees, started what later became Betit Group, and for the first time we had red numbers in our books. Our business was so stretched that we had to streamline and separate the business into different companies. Results improved by the end of 2013. We moved back to Malta in 2014. It was a struggle initially, but since then we have rocketed up to about 200 employees with offices in London, Belgrade and a HQ in Malta.

Can you tell us a bit about the sites you run and how they differ from each other? We have many websites. AskGamblers.com, for instance, is focused on helping players with customer complaints and player reviews of online casinos. If a player experiences issues with a casino, we allow both the casino and the player to send in their version of the story with print screens and evidence. This has resulted in millions of euros paid out to players from casinos on issues that were previously disputed and unresolved. FreeSpins. se and SlottiMania.com have more of a social approach. One is a blog, and the other is a casino chat room. Another site is PlayNJ. com. Since the United States are fragmented with different iGaming laws for every state, this site explains players in New Jersey the options and legal requirements there.

te The Affilia

As profit margins are increasingly being squeezed, how would you describe the relationship between operators and affiliates these days? It is a love-hate relationship. In the defence of affiliates, I must say it is a very weird approach thinking that online casinos should do their own marketing. In any industry, very rarely do operators execute their own marketing. Weirdly enough, in iGaming they think it makes sense to do their own advertising.

Between three payment methods: set fee, set fee & revenue share, or complete revenue share, which one do the operators usually prefer to negotiate with affiliates? It varies among operators. Primarily, online casinos and sportsbooks prefer complete revenue share due to the low risk involved. From our perspective, we prefer different fees depending on the source of traffic. We prefer a set fee due to our marketing costs for paid advertising. We need to make sure we get our marketing costs back, so we can reinvest the money. We usually charge a set fee that is lower than the revenue share would be, enabling us to scale up quickly instead of waiting the entire year. For SEO and other sources of traffic we usually have a mix of set fees and revenue share. We have different deals with every operator, but on average we split net profits fifty-fifty.

You started your business from a novice level; how did you manage to gain insight into Google search engine algorithms? By trial and error, as well as reading. Google releases 500 small updates per year, but the basics do not change. Therefore, we don’t focus too much on analysing every little change because we see ourselves working with Google and not against it. There are no shortcuts, it is better working on what Google thinks is the best. Of course, we are making sure Google sees us in the best possible light.

What is the churn rate of customers and what are the general behaviour patterns? We often see players returning for another casino. Customers prefer those casinos where they believe they will be lucky and win. They

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start playing at one casino, and when they lose, they come back to us and find another one. Suddenly they might win, so they stay there until they start losing again. This pattern explains why the iGaming industry is so differentiated with so many different companies. There is reason to believe that there will always be demand for a large number of brands, even if they are all owned by the same company.

Given that you can become an affiliate basically from your bedroom, how important is scale within the affiliate sector? There are always pros of being big. We can reduce costs for hosting and development by scaling the product and negotiate larger volumes with the operator. It is easier to start small within affiliation compared to most other sectors. With €1,000 in the bank you are not going to be able to start an airline, but you would be able to start a website. So truth be told, it is a lot easier being small here than in most other businesses.

There has been talk of licensing referral companies to strengthen the reputational image of the industry, what are your thoughts on that? I don’t think it is necessary, and I don’t think it makes sense. We are an advertising company that provides information. We don’t do KYC, and we don’t manage funds. We don’t know anything about the visitors on our site, we only provide a comparison service.

You became publicly listed at the First North Premier in Stockholm in 2016. What was your main goal for becoming publicly listed, and what advice can you offer others based on your experience? The idea developed after we saw XLMedia listed in March 2014. My main drive has always been to build a real and significant company and becoming publicly listed is an important goal. I think listing is suitable if the goal is scaling up at a rapid pace. For an entrepreneur looking to preserve independence, it should be avoided. Our IPO raised €25 million. As of 2016 we peaked at 135%.

Why did you decide to list in Stockholm and not in London, where you actually have an office? In Sweden, iGaming has almost become the norm in the stock market. Acceptance rates are high among the population, with companies like Betsson and Unibet having been around for a while. Evolution Gaming went on the First North Premier before us. They performed tremendously well. We asked ourselves what our opportunities would be in London, where XLMedia is listed. I mean, we are Swedish, we know the Swedish market, and Swedes love iGaming at the moment. Therefore, Stockholm was a much better choice.

What was the IPO strategy in terms of finding the best initial buyers? The demand for our shares was high before the listing, so we were able to choose. We obviously chose respected names and those likely to be in it for the long run – which is hard to know in advance. We aimed for shareholders who would stay loyal and provide trust. Having Swedbank on board, one of the major Scandinavian banks, provided a lot of credibility.

What makes the iGaming industry attractive for institutional investors? I would say that risks are quite low and returns are high. The iGaming industry is mature but still lacks a dominant player. This opens room for growth. Taking Catena Media as an example, we are one of the biggest marketers for online casino traffic. But we are still a very small company from a corporate perspective. If you look at affiliates within tourism and travel, such as Expedia, we are nothing in comparison. However, iGaming is a huge industry and someone will become the Expedia of iGaming at some stage. Obviously, our goal is to be that company.

Considering the future, what do you think about the emergence of eSports and the possibility of monetising it? Although I believe in it a lot, it will probably take some time for eSports to become profitable. In half a century from now, I think more people will watch eSports than football. People will watch whatever they can relate to. In my generation, every guy basically grew up playing football. That is why we love watching football. Today, 95% of 13-year-olds spend more time playing video games than football. It has become a passion for them, so there is a paradigm shift on the horizon. n

BIO:

Erik Bergman was born in 1988 in Sweden. Starting out as a young poker player, he made his way into iGaming at an early stage and found a way of mastering affiliate marketing. He is now the Co-Founder and Chief Strategy Officer of Catena Media. He is also the Co-Founder of Flamingo Marketing and a partner of THEM Design HB.

GAMINGmalta 2O17 EDITION

Valéry Bollier, CEO and Co-Founder of Oulala Games

Fantasy Start-up Edging

Closer to Reality

Up The Start-

As fantasy sports kick off in Europe, all eyes are on Malta-based fantasy football start-up Oulala. The platform has already attracted more than 20,000 registered clients, built partnerships with major football brands and launched a plug-and-play white label solution for iGaming operators looking to enter the growing market.

For those who are not familiar with fantasy sports, can you give us your elevator pitch? Oulala is the first game to enable you to prove to your peers that you are a better football manager than they are. Build your team with players from the major European leagues, then watch the real matches on television. Yes, Oulala sticks closely to reality, so any of a player’s actions on the field will add or remove points from your team. At the end of the day, since the game is monetised, having more points than your friends will mean you don’t just gain pride, but you also win your friends’ money.

Many believe that Daily Fantasy Sports (DFS) is the next sensation in online gaming. Oulala was one of the first companies to offer fantasy football in Europe. Can you tell us how it all began? Some years ago, when I worked as Marketing Director for a French horse racing company called ZEturf, I realised that younger customers were progressively seeking a richer gaming experience than the one offered by games based on luck. Fantasy sports are social skill games that perfectly cater to this need. When I met Benjamin Carlotti, who would later become co-founder and managing director of Oulala, he introduced me to the concept of fantasy sports. Ben had just returned from America and was looking at ways of adapting fantasy sports to the European market. After closely studying the success of FanDuel and DraftKings in the US, Ben and I launched Oulala in 2014, however unlike the American games, which are mostly based on American sports, we created a game based on European football. DFS is making a simple but strong promise to its customers: when playing, you will be able to prove to your friends that you know the sport better than they do. However, in order to do so, our game needed to be a real skill game, not a game of luck. To solve this issue, we hired a team of statisticians that spent six months creating a scoring system that would allow our game to be a real skill game. We then ran the game as a free version for two years. Two years is a long period for a start-up; two years without creating any revenue. However, it was imperative

to prove that Oulala is a real skill game. It was only at the end of 2015 that we launched a monetised version of the site that is now used as a case study to show future B2B partners the efficiency of our game.

How did you rise to the challenge of securing investments to launch Oulala? It was a challenging journey, as is the case in most start-ups. At the time, one of the disadvantages was the lack of venture capitalists and business angels in Malta; so we had to look overseas, though this is currently changing. We had to find people who had an interest not only in investing in a start-up, but also in the fantasy sports sector. Eventually we raised €1.8 million in investment from business organisations and business angels. In 2016, we were also able to close an intermediate round of funding of €1.35 million. The European DFS market’s recent spurt of growth made that funding essential in order to give Oulala more instant traction on the market, while also cementing Oulala’s position as the first DFS network specialising in European football. We now have investors from four different continents. We have also received financial support from the Maltese Ministry of Economy, and from Google when we were an innovative start-up business in 2014.

What would you highlight as the main advantages of starting up in Malta? Malta is one of the best places in Europe to launch a start-up. It is an English-speaking country, a member of the European Union and just a few hours away from most European cities. Malta also boasts a professional gaming eco-system, competitive labour regulations and salaries. It is also relatively easy to hire people in Malta, or to attract them from abroad. If you think about it, when your job consists of working in front of a computer, why live in an expensive, crowded and polluted city with bad weather? Malta is currently becoming a major digital hub in Europe, and there is no doubt that more and more startups will, in the near future, use Malta as their base.

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The regulation of fantasy sports is a hot topic. What’s your experience in this regard? When we launched Oulala, there was no skill-game regulation in place in European countries. By default, the game was considered a sports betting activity. It was therefore essential that we aimed for a legal frame from the gaming authorities that was tailored to our specific function. Our industry clearly needs a more suitable DFS licence, one that would be granted only to companies who can prove with certainty that their game is based on real skill. It is crucial that legislators exercise caution during the selection process of operators, and base their decision on the quality of their game and scoring system, while maintaining the accuracy of the DFS game as the feature of chief importance. A DFS licence should therefore only enable verified skill games to offer a white label version of their game to third parties. Right now, Oulala is one of the few that has a white label version available on the market, however other companies will almost certainly follow suit in due time, with the aim of launching their game through numerous partnerships. It is in both the operators’ and the players’ interest that a proper legislative frame is put in place. This would help prevent the system from going down the same road as poker did. This means preventing the system from allowing unfair advantages that would benefit professional players over casual players. We have already discussed our sector’s needs with European legislators. As expected, Malta was the first country to welcome our suggestions. The result was the launch of a specific game licence, which will most definitely push the development of fantasy sports in Europe an enormous step forward.

What role do you believe Malta can play in building up this sector? There is no doubt that Malta will soon become the epicentre of DFS in Europe, thanks to its tailor-made skill game licence. Anyone hoping to penetrate the European DFS market will likely choose to base their company in Malta. This will create jobs, tax income and growth for the country. We are very proud to have been the company that initiated this movement four years ago.

What kind of disruption can the iGaming industry anticipate from the advent of the European DFS sector? The iGaming market is entering a critical stage, wherein most of its current customers are those who were raised playing video games; a post-70s generation that most likely owned an Atari, Nintendo

or PlayStation. There is much that can be learnt from the video gaming industry, including the notion that one should always push the boundaries of quality and that skill is paramount, but the most important lesson is that customers expect to play against each other. The social factor is thus becoming the foundation of all successful games. Despite this, however, iGaming operators such as sports betting and casino operators in particular, are struggling to embrace this. The reason for this is the notion that after playing against their own customers for years, a complicated relationship has developed. When the goal has been taking their money whenever they lose, one would expect them to harbour a certain sense of aversion towards the operator. Thus, when the ‘social’ revolution began to flourish, the iGaming sector quietly ignored it, fearing the countless consequences that this could hold for its optimised business models. We are aware that many operators do not believe in social games. However, millennials do indeed desire good skill games. DFS are just the first step in this development.

Many start-ups want to scale quickly in order to sell out. Where do you plan to go from here? Oulala was not created to be sold quickly. Our initial plan was to become the major DFS network in European football. Milestone after milestone, we are gradually moving towards that position. 2016 will go down as the official birth year of DFS in Europe. After years of reluctance, the iGaming operators have finally come to acknowledge that DFS is indeed a perfect response to the specific needs of the new generations, both in the skill and social aspects, and that not responding to these ever-accumulating needs could gradually result in a critical situation. Oulala is the partner that will allow them to offer DFS more quickly and easily on their site. 2017 will be a year of serious growth for DFS, and Oulala will definitely benefit largely from it. n

BIO: Valéry Bollier is the CEO and Co-Founder of Oulala. He worked for 9 years in media and online marketing and 12 years in online gaming. He is a regular speaker at industry conferences and seminars, as well as a contributor to various B2B publications. Valéry is also shareholder and former CMO of ZEturf.

GAMINGmalta 2O17 EDITION

Dean Nicholls, CEO OF iGaming Elite

iGaming talent impossible to recruit, needs to be headhunted

Retention of staff in the iGaming industry is starting to mature. However, finding talent is increasingly difficult as salaries are no longer enough of a draw for talent to move to Malta, according to professional headhunting and talent acquisition firm iGaming Elite.

Malta’s iGaming sector has hundreds of unfilled vacancies. Can you briefly tell us about the roots of iGaming Elite and explain how you can help companies find the best and the brightest? I arrived in Malta about seven years ago, originally as internal acquisition manager for another company. However, they were not massively committed to keeping their office open in Malta and after a while wanted to move it back to the HQ in the UK. I had only been in Malta for one year then, and there was no way that I was going to move. So I started my own business – in my living room with a whiteboard up against the wall. I only had two interns helping me. Malta’s iGaming industry was already thriving, and I came up against a market with a few established recruitment companies. However, we differ by being a headhunting company. We take on talent acquisition assignments as full-exclusives. It allows us to do things methodically and not rush it because we are up against somebody else. I bet we are the only recruitment company on the island without a database. We now have 13 staff and are aiming to employ 25 people by the end of 2017.

BIO: Dean Nicholls is the Founder and CEO at iGaming Elite. He is also the Founder and CEO of Yellow Brick Investments, assisting start-ups with services such as management training, launch capital and expertise.

The Recruiter

How are the recruitment procedures within the industry structured at the moment, and what advice would you give companies struggling to find the right people? You don’t find top talent by advertising vacancies on job boards in Malta and across Europe. You need to headhunt the right people and offer them the right package. For example, designers and developers might go only for greenfield projects. They fit well in a start-up or medium-sized business, but it is difficult getting them to go into a remit with half-finished projects. To attract them, you need to offer them creative freedom. If I were an operator myself, an internal talent acquisition team is the first thing I would create. But it needs to be done with caution. Ultimately, the most important people for your business are the people who work there. Talent acquisition teams therefore must be the most talented people themselves to build a resilient business.

From what we understand, the gaming industry seems to be in a constant recruiting mode. What are the reasons for high employee turnover? Yes, it is, but there have been some changes over the last three years. Retention is improving. When I first started, retention was so poor that people were leaving after three to six months. Competitors could pull them out for €3,000 extra per year, it was an absolute mess. Now companies are starting to realise that people are working for them. Employees are looked after a whole lot better than before. The new players that have popped up in the last years have changed the game. They differ by not simply doing well financially but also by looking after

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their staff. Six years ago, you could recruit an affiliate manager for a basic salary of €35,000, and there was an abundance. Today you will have absolutely no chance at that salary, because they are worth a lot of money.

How have salaries changed within iGaming in the last three to four years?

Changes have been felt across the board, starting with entrylevel customer service roles. For developers, we have seen an increase of 10 to 15%. Starting salaries range between €30,000 and €50,000, depending on coding languages and front-end or back-end development. When it comes to more artistic roles, everything has changed completely. Five years ago, everyone employed a graphic designer to do flash banners on Photoshop, while art assets were acquired from the suppliers. Now it is a completely different kettle of fish. Today you can have a graphic designer for €35,000-40,000, while for an animator companies need to fork out an additional €10,000. There is no limit for C-suite salaries. We recently assigned a COO at €200,000 basic. Companies are also giving equity, especially the start-ups.

How important are salaries for staff retention?

Competing with salaries on a mid- to senior-level is lot more difficult today. For instance, you cannot recruit an affiliate manager only with a salary. They carry a huge network of affiliates with them. If they have a network with hundreds of affiliates that can bring an additional €5 million a year, how do you monetise that value? They need to be looked after with soft measures.

Apart from money, what are operators offering employees now?

They offer proper health insurance, free lunches or an internal restaurant. Some have subsidised apartments or company apartments. If someone relocates from another country, they accommodate them in a company apartment for a few months until they get settled. This makes it a lot better financially for new employees. Designers today are not only given a laptop, but a bunch of tools. As I already said, for them it is all about greenfield and the pay only comes at the later stage of the conversation.

What is the most difficult talent to cater for?

It depends on whether you look at operators or suppliers. Suppliers in terms of slot game providers can be complicated; for instance mathematicians to develop the algorithms for the games are difficult to find. They do have a low churn since they are very loyal, but are hard to find. Many are non-EU nationals, and it takes a long time to get a visa for them. We’ve clearly got a skills shortage here, and suppliers are starting to build satellite offices in other countries because of it.

What are the top five skills that are impossible to source in Malta at the moment?

Norwegian customer service agents are difficult. I think in Norway they make about €30,000 a year working for McDonalds. For them to take a €15,000 pay-cut to come to Malta and work in customer service is not an option. Scandinavia in general is hard, while Italians are probably the easiest. On the supplier side, you’ve got the mathematicians, designers and developers. A HTML5-game developer is ridiculously hard to find. If you find one, then you’ve also got to convince them to go from doing advanced video game design to designing a slot image. Among affiliates, there is a massive demand for PHP-developers. When headhunting candidates, we usually start with Malta, then look in other EU countries and then globally. On average, two or three out of five positions can be filled from within Malta.

The new players that have popped up in the last years have changed the game. They differ by not simply doing well financially but also by looking after their staff.

What is the turnover of staff within the industry at the moment?

In general, the churn in these positions is higher than anywhere else. However, there are two elements one needs to consider: internal relocation and pre-defined temporary work. We have people entering the sector to be a customer service adviser with the aim to be promoted and move around within the structure of iGaming companies. When the client – the operator – can retain that person but in a different, higher level, then for us it is retention. The other element is talent coming over to sunny Malta to enjoy themselves. They take a job for six months to a year and then they are gone. As a recruiter, it is challenging but we don’t offer a rebate. We have given a free placement only in a few cases when we felt it was not fair on the client, but within ten years, we have had only four persons leaving within three months.

How is Malta welcoming people who move here to take on positions?

Accommodation is actually the hard part, but it is relative. When you show someone a €1,000 penthouse, a person coming down from London will think ‘oh what a cheap penthouse’, while someone from rural Poland will fall off their chair. The island offers a little bit of everything. Therefore, I don’t think anyone will arrive and feel completely lost. Obviously, we stay in touch with them or meet them on the day of arrival. We have got a network of people in real estate and usually give them choices. n

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The Consultant

Alan Alden, CEO OF Kyte Consultants

Skill game regulations promise an explosion in demand After ten years of assisting iGaming licence applicants, Alan Alden of Kyte Consultants remains optimistic about the future of Malta as a gaming centre and anticipates that skill gaming regulations will further strengthen the countryâ&#x20AC;&#x2122;s position.

You celebrated your 10th anniversary this year. Can you tell us more about the roots of Kyte Consultants and your operations? From the very beginning, our focus was on iGaming but we also had plans in place to get involved in the payment card industry. In 2007 we applied to the Payment Card Industry Security Standards Council in the US to become a Qualified Security Assessor (QSA) company. This actually meant that payment gateways, processors and merchants no longer needed to acquire the services of an overseas firm to be certified as being Payment Card Industry Data Security Standard (PCI DSS) compliant. Insurance requirements proved hard to satisfy but even that was eventually sorted. To this day, we are still the only QSA on the island. But the Maltese market is too small to justify the costs associated with such an accreditation, so we have also expanded into Europe, Middle East, Africa, and Ukraine. On the iGaming front, we were practically the first to be accredited by the Malta Gaming Authority to carry out reviews of gaming operations. We also offer full licensing assistance to those wishing to obtain a Maltese licence.

What would you highlight as the most remarkable trends and developments of 2016? At the beginning of 2016 we were hardly receiving any new licensing requests. However, from October 2016, demand picked up substantially. While some of our clients applied for additional licences, we have also seen a lot of new interest from Asia, South America, Greece and Cyprus. We have also seen clients coming from Mexico and China. They are particularly interested in the licensing of fantasy sports and other skill games. Maltaâ&#x20AC;&#x2122;s new skill game regulation will probably come into force during the first quarter of this year, and I am certain that it will create a lot of interest. Skill game operators, as well as skill gaming platforms, are keen to receive a licence in Malta as they are handling player funds and need some sort of recognisable rubber stamp of approval.

What is the value of the Maltese licence as more European states start introducing their own regulations? I must admit that I have been proved wrong in saying that the days of the Maltese licence are probably over. Despite the fact that more member states started regulating this industry, we are still receiving new licence requests and it took a while to understand why. The applicants obviously saw a value that I could not see. I realised that the Maltese licence is the only licence in the EU that does not restrict the licensees to the particular jurisdiction of the licence. It allows an operator to exploit white and grey areas in the rest of the world. We also contend that other EU countries are going against the EU treaty by not accepting operators holding a Maltese licence. This is not a fight that we intend giving up on.

BIO: Alan Alden began his career at a bank in 1979 and later developed into an Information Systems Auditor. In 2000 he left to join Deloitte. In the same year, he also began assisting and advising the first remote gaming companies arriving in Malta. In 2006, he and another co-founder launched Kyte Consultants Ltd, specialising in remote gaming and the payment card industry. In 2016, Kyte celebrated their 10th anniversary. Alan is also the current General Secretary of the Malta Remote Gaming Council.

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I actually anticipate an explosion in demand for skill games similar to the boom in online poker that we experienced in the years between 2005 and 2013.

What are your thoughts on the new Anti-Money Laundering (AML) Directive that will be implemented in 2017 and what advice would you give to operators? There is a lot of speculation and discussion, but until we know what the Financial Intelligence Analysis Unit (FIAU) is going to demand from the operators, we cannot form a concrete opinion and can only speculate. The FIAU must handle this transition very carefully because any mismanagement can literally destroy the iGaming industry. The fact that the exact requirements are still unknown is already a big challenge. Most operators want to become obliged entities since they are already following AML procedures, but they want to make sure that the Directive is implemented in a sensible manner. What most people do not comprehend is that while gaming companies transact millions of euro, the value of the individual transactions are fairly small. Most customers are depositing between €20 and €100 monthly. Does that mean that an operator with 50,000 customers each depositing €20 a month is exposed to a high risk of money laundering? My advice to an operator would be to watch their VIPs. They need to make sure the money they are gambling with is not stolen, and therefore they need to establish the source of their wealth.

How well are the iGaming operators prepared to comply with the new AML Directive? We know that every operator is going to need a Money Laundering Reporting Officer (MLRO). The MLRO must be registered with the FIAU, he/she will need to submit annual reports and attend training, as will all relevant staff. These things will be an additional cost and overall compliance overhead to the operators. Furthermore, operators will also have to understand what a suspicious transaction report is, and make sure that there are controls in place to be able to monitor accounts on an ongoing basis. Many believe AML is just about verifying the identity of the players, without understanding that they also have an obligation to monitor the activity of the player. In those cases where large amounts are involved, operators are obliged to identify the source of these funds. Due diligence will become continuous, and not a one-time procedure. Another misconception among operators is that if the source is a bank or a credit card, the money can be considered clean.

Malta has always emphasised that the Remote Gaming Regulations are both game and technology neutral. Why, in your opinion, was the need felt to develop a new regulatory framework? The technology and game neutrality of the Remote Gaming Regulations has been key to Malta’s success as a gaming jurisdiction. However, the regulations were designed for the systems and products at that time. There is no doubt that there are some updates and additions required for Malta to retain its position as the iGaming world leader, but many times I also notice that certain demands imposed by the MGA are not required by the Remote Gaming Regulations. These are practices and procedures that have just evolved over time. For instance, the regulations do not state that an operator needs to have a separate licence for each gaming system. In theory, I can get a class one (casino) licence and have 10 gaming systems operating under that class one licence. Current practices are that an operator needs to have a separate class one licence for each casino product they want to offer. Then they need a system audit and a compliance audit for each licence. It has become a bit too much compliance work and effort without any further assurance provided to the Authority. New regulations have now become urgent and overdue.

There has been talk of licencing referral companies like affiliates, what are your thoughts on that? Affiliates are truly unregulated. There is no official code of conduct or code of ethics they are obliged to follow. However, we should not overregulate. Regulation for affiliates should not be compulsory. The MGA could perform a due diligence test and issue a quality label for approved affiliates. Anyone dealing with affiliates lacking this accreditation will do so at their own risk.

Looking to the future, what are your expectations for the coming few years? I expect fantasy sports and eSports to be the next big things. I actually anticipate an explosion in demand for skill games similar to the boom in online poker that we experienced in the years between 2005 and 2013. n

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Morten Klein, Board Member of Cherry AB, Founder & Chairman of Klein Group AS and Chairman of Klein Holding AS

Buying what is

not for sale Morten Klein, Board Member of Cherry, was in the right place, at the right time, with the right idea back in 2007 when he launched his first local online casino brand. Today, he is one of the industry’s titans, and although Cherry has recorded a remarkable growth curve, Klein asserts it is only the beginning.

Could you tell us how your relationship with Cherry started? It is quite an entertaining story. In 2001, when I was 32 years old, I was a bartender in Oslo. One day a guy from Cherry walked into the pub and asked if I wanted to have one of their slot machines there, I agreed. After a short while, I realised that the slot machine was earning more money than I did. I just thought ‘wow, this is an interesting business’. I first started working for Cherry on the land-based slot machine business in Norway. By that time, Cherry had also started an online casino called CasinoEuro. I then became the country manager for this product and worked in that role until 2006. This was when I came up with the idea to localise the online business by creating different brands for specific markets. This is pretty much what we see everywhere today. However, when I presented my idea to Cherry’s management, I actually got fired. They did not share my vision. However, I really believed in Cherry and liked the people there, and I realised that they just did not understand me. I returned some months later and pitched my idea to launch a local brand called ‘NorgesAutomaten’ – the Norway automat. This time, I was more successful, and we agreed on setting up a joint venture. We launched in 2007 and had a streak of luck. At that time, the Norwegian government decided to outlaw slot machines. As many as 19,000 slot machines were taken out of business almost on the same day we launched our online brand. It was one hell of a start for us. We were able to give players an online version of the same slots that they knew and liked to play.

The Industry Titan How did the company evolve from there? In 2010 Cherry came back to me and thanked me for the joint venture. At that time, Cherry was still mostly focused on landbased business. However, by then, they believed in the online business and acquired AutomatGruppen. I stayed on as a board member. In 2012, we sat down within Cherry and decided to build our own platform to become one of the biggest players in the iGaming sphere. We started a five-year project to build our own affiliate system, while making our way into performance-

BIO: Morten Klein is a Member of the Board at Cherry AB and the Founder & Chairman of the Board of Klein Group AS. He invests in gaming, e-commerce and real estate. His largest investment is in Cherry, one of the major publicly listed gaming companies on the Scandinavian market. Cherry’s iGaming business is operated by fully owned subsidiaries in Malta. In 2012, he was recognised as one of the 50 most significant people in the world within the Gambling Industry by Gambling Intelligence.

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based marketing by acquiring Game Lounge. We did this because we really believed in these guys. We have done some other acquisitions with the same strategy. Last year, for instance, we acquired 49% of ComeOn, with the option to acquire the remaining 51% later. I really want the people of ComeOn to stay in the company. We do not want to buy companies that want to sell. If you get a ‘no’ from a start-up the first time you approach the company, then you are onto something. We don’t just buy the body; we need the brain, too. Our strategy is actually to get the good people that are driving these companies. Cherry is now in 27th place of the EGR list of the biggest companies in the business, so obviously, we have achieved some great things.

How do you see the industry forming itself in the coming years? Will there be a few big players or a lot of small players as fragmented as the market? There will always be small players in the iGaming industry. However, I believe, it will not only be larger companies buying smaller ones, we will also see smaller players merge. From a regulatory perspective, I expect that nearly all EU countries will have their own licence quite soon. However, I also think that within five to eight years there will be a harmonised, panEuropean licensing framework.

What is your view of consolidation within the industry, are some of the start-ups just running after market share in order to get bought? I have spoken with some 500 companies. Some of them say that they want to sell, and the next thing they ask is how long they have to stay in the company if we acquire them. In most cases, this is a deal-breaker. As I already said, I am looking for companies that believe in what they do; companies that can be a strategic acquisition. In Cherry, we now have a multi-brand strategy. For many companies, multi-branding does not work. The reason is that every brand in that multi-brand strategy needs a heart. Someone needs to care about the brand. Even if you are a big company, you need to have a lot of small start-ups inside. It is this approach and philosophy that also helps keep the good people inside the company. Many start-ups today also want to build their own platform. I think they are wasting their time. There is a high probability that the platform is already outdated once it is finished. It is better if start-ups focus on doing what they are good at: delivering new products.

In terms of the investment community out there, why would you tell them to have iGaming assets in their portfolios? Investors should consider iGaming because it is a strong industry. Today the industry is generating over €368 billion worldwide annually. Most investors think it is already too late to go into gaming, but the industry is growing at 4%. There is still a lot of potential. For instance, online alone is growing at 8%, and only 10.3% of the worldwide gaming revenue is generated online. I believe this figure might go up to 50 – 60% in the future. In a country like Norway, the state monopoly Norsk Tipping still accounts for 93% of gambling activity. This shows the sector has a lot of runway for expansion.

What is your opinion on virtual and augmented reality, and do you see them playing a role in your business in the near future? I am keen on learning more about those technologies, but it is not our number one priority at the moment. However, if we see that companies start making money with it, they could become an interesting acquisition target.

How is Cherry preparing itself for the future? We want to offer a 360-degree solution and pool as much knowledge and resources in-house as possible. Regulation is arriving in different European countries, and this means the rules of the game are changing. I believe media companies will play an important role in this regard as they are interested in building up their own gaming brands as soon as a market opens up. They are losing income against Facebook and other social media outlets and must look at new ways to earn money. We are ready to partner up with these companies and help them build their business. This is part of our strategy for the next five years.

What are your thoughts on Malta as a location for the iGaming industry? Malta is amazing. I have been doing business in Malta now for more than 15 years and I love it: the Maltese people, the location and the regulation. I trust the Maltese; and I’ve developed many good relationships here and employed many Maltese. Malta is very well set up for this industry, and, on a side note, the healthcare system in Malta is even better than what we have in Norway. n

Many start-ups today also want to build their own platform. I think they are wasting their time. There is a high probability that the platform is already outdated once it is finished.

GAMINGmalta 2O17 EDITION

Benjamin

The Silent Interview

Reuben

SEAL THOSE LIPS

AND TELL US

WHAT YOU

THINK OulalaGames Co-Founders Valéry Bollier and Benjamin Carlotti, gaming executive Robert Dowling, as well as Reuben Portanier, former regulator and founder of gaming advisory firm Avviza, say nothing but reveal a lot when they let pictures speak about their businesses, the iGaming industry and Malta.

Robert

Valéry

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1. What do you really do?

If your company was an animal, what would it b e?

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3. W hat is the best p art of working in th gaming industrye ?

...and the worst part?

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4. I am an advocate forâ&#x20AC;¦

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5. Malta needs toâ&#x20AC;¦

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If you were to send a selfie to your competitor, what would it look like?

The current stat of iGaming in one e expression?

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8. The gaming indu stry has a rainbow of ima ge Show us its real s. face.

9. What is the next big shiny thing?

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10. What are you doing when you are not working?

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Cyber Security:

Protecting Your Crown Jewels The infamous Sony breach was dubbed the ‘hack of the century’ for a reason. The intruders stole and dumped all of Sony’s confidential information to public file sharing sites, exposing a large amount of sensitive data about customers, employees and the organisation itself. They also wiped out half of Sony’s global network, driving the company to the regressed usage of fax machines, communication through postal messages and the cumbersome payment, with paper cheques, to several thousand employees. The hack repairs cost the company €14 million in addition to lost revenues and reputational damage.

E Eric Muscat Partner IT Advisory +356 2563 1013 ericmuscat@kpmg.com.mt Eric Muscat has over 25 years experience working in various Information Technology functions covering the entire spectrum of the systems development lifecycle, IT project management, IT strategy, selection and implementation of IT solutions, process re-engineering, IT risk management, learning strategies and change management. Eric is responsible for a team of professionals engaged on IT Advisory projects covering IT project management, systems implementation, business intelligence, data & analytics, IT assurance, IT governance and IT security within the Financial Services, Transportation and Gaming sectors. Eric founded the KPMG CIO Agenda in Malta, which brings together CIOs and CTOs into a community to exchange ideas, explore emerging trends and question avant-garde technologies.

very year there are large-scale cyber security breaches and events reported in the media. Cyber attacks against online giants such as Ebay, LinkedIn, Sony and Yahoo have made global headlines in the past few years. In addition to the multi-million euro financial losses that these companies have incurred, they also suffered reputational damage which has significantly harmed their brands. Once customer confidence is broken, it can take a long time to regain that trust. The gaming industry thrives online. Its size is expected to rise to €53 billion in 2018 from €24 billion in 2009 according to figures published on statista.com. The online presence of video games, competitions, virtual reality games and large international and sports events attracts both customers and criminals from around the globe. From script kiddies, who see breaking into a system as a game in itself, to lone wolves, activists, organised crime and national governments – their main aim is to make financial gain. Statista.com reported that the average annual damage to organisations caused by global cyber-crime in August 2016 reached €10 million in the global technology sector and €15 million in the global financial services sector. Some gaming companies still choose to believe that the chance of a breach is fairly low, yet it takes one cyber attack to cause a significant business disruption. Others put their faith in expensive technology, hoping that it will solve their cyber security problems. In fact, adequate technology could prevent a number of external

threats. However, a single click on a rogue link in a phishing email by an employee from within the organisation could breach its external security perimeter. Breaking into an organisation from outside requires effort and resources for cyber criminals, yet phishing campaigns continue to grow due to the simplicity and the effectiveness of its business model. Cyber underground even offers platforms for Phishing-as-a-Service (PHaaS), Malware-as-a-Service (MaaS) and Ransomware-as-a-Service (Raas) – a threemonth subscription which could cost as little as €6.

Employee Risk

Employees are often the weakest link in many gaming companies. A relaxed atmosphere helps to be innovative and creative, but it increases the risk of cyber security breaches that could be avoided with the implementation of comprehensive policies and awareness training. Appropriate identity and access management controls help to prevent fraud, money laundering and insider trading within the company, yet it could also stop the spread of ransomware across the internal network and save a company from a potential disaster. An employee is not the only insider that poses a threat to a gaming organisation; significant risk could also reside within the supply chain due to a high number of affiliates and outsourced services. The telecom giants T-Mobile US and TalkTalk experienced large-scale information security breaches due to insecure technologies of third parties. As a result, these companies suffered exorbitant fines, a heavy financial

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impact, irrevocable reputational damage and loss of customers. Being the controllers of that data they have a legal responsibility to secure the information about their customers. Strong supply chain management could have prevented significant reputational damage and lost business opportunities.

result, organisations would achieve a significant reduction of risks related to data processing as well as potential costs associated with the implementation of controls to protect that data. Increased confidence and transparency in data processing practices could have a positive effect on customer retention and growth.

Data Protection Regulation

Valuable Advice

Gaming companies try to meet the legal and regulatory requirements related to cyber security, but because of its complexity and multifaceted nature, it is often approached as a tick-box exercise. Yet new legislation is meant to make organisations rethink the way their business operate and to make the necessary improvements. The new European Union General Data Protection Regulation (EU GDPR), which comes into effect on 25 May 2018, is an example of such legislation. GDPR sets out strict requirements for data controllers and data processors, and has stringent fines for non-compliance. Offending companies can face fines of up to â&#x201A;Ź20 million or 4 per cent of companyâ&#x20AC;&#x2122;s global revenue, whichever is higher. Compliance with GDPR will be hard for those gaming companies that do not have a comprehensive register of the data they hold, where that data is stored or what it is used for. However, the implementation of industry standard records management practices and data mapping would go a long way to enable compliance with GDPR. It would also provide for a better understanding of the data flows within the organisation, the systems it resides on and which individuals have access to that data. As a

The number of cyber threats that organisations are exposed to every day could seem daunting. KPMG offers professional help through its knowledge, skills and expertise to tackle the complex cyber security problems. Our global reach and broad experience in the field brings value-adding insights as we work shoulderto-shoulder with our clients to address their business needs for cyber security. Innovative gaming companies can achieve a successful security posture with an appropriate strategy, understanding of the adversary and knowledge of the weakest links within the organisation. Combined with effective performance monitoring of implemented controls it could be turned into a rewarding business improvement process and new opportunities. In the world of cyber security, an understanding of the risks that businesses are exposed to and building a plan of action to address those risks helps to defend the business from cyber threats. Effectively managed, cyber security can give organisations a competitive advantage against their peers because customer confidence and trust is an important driver for successful online businesses. n

Milda Petraityte Cyber Security Advisor +356 2563 1205 mildapetraityte@kpmg.com.mt Milda Petraityte has over seven years of experience working on a variety of projects related to system implementation, optimisation and administration, IT governance and risk management as well as information and knowledge management. Milda has gained a wealth of experience working with clients from diverse industries such as banking, telecoms, retail and technologies, helping clients to assess their cyber security posture, the quality of their third-party risk management, data protection, identity and access management, business resilience and incident response. Milda is a certified auditor of ISO27001:2013, which is a leading information security management standard and is a Systems Security Certified Practitioner (SSCP).

GAMINGmalta 2O17 EDITION

INSIDERTIPS

If youâ&#x20AC;&#x2122;re a start-up in the iGaming industry, look for partners that can help you grow and that support you in this early and delicate stage of your business venture. Whether it is a purpose-built data centre, internet connectivity provider, office space or other gaming provider, these relationships are likely to shape your success.

I would reassure anyone looking to invest in Malta by saying that the country offers an excellent business environment. Furthermore, in a global market it is also crucial to have good connectivity and Malta has that as well. DHL Express is part of global network that can transport urgent documents and goods on time to more than 220 countries and territories. Charles Schiavone Malta Country Manager DHL Express

Malcolm Briffa Director of Business Services Melita Data Centre

Some people tend to forget that getting the online gaming licence is the easier part of the whole project. The real work starts once you have the licence. Hiring the right people, finding the right partners and putting your brand on the map are the hard parts and you must have the budget for it. Having the right partners will at least ensure that you get off to a sound start, and with the right structures in place to build a solid operation. Angelo Vella Director Contact Advisory Services

What key piece of advice would you give to someone joining Maltaâ&#x20AC;&#x2122;s iGaming industry. My advice when looking to get ahead in the Maltese iGaming industry is to make yourself known. Go to the conferences, push yourself forward and introduce yourself to companies based here. Weâ&#x20AC;&#x2122;re a friendly bunch and happy to help anyone who is as passionate as us about the industry. Darren Moore Director Betting Gods

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Seek to determine what are your regulatory, operational or technical requirements in as much detail as possible prior to taking key decisions. For example, a decision on where to host your infrastructure should obviously factor in technical aspects but it should also extend to matters such as taxation – issues such as materiality can come into play from a fiscal perspective. Jack Mizzi CMO BMIT Never stop seeking to learn more about the industry and the sector within which we operate or work in. Ours is a dynamic sector which is in constant evolution and hence we cannot afford to let developments pass by us without taking any action. We would advise that you think long-term and invest in planning ahead, in terms of foresight and structure; and that you find the right Malta-based potential partners for the provision of know-how in local knowledge and support. Within Malta’s sophisticated iGaming ecosystem, you will find all the resources required to run your operation successfully, while enjoying a quality Mediterranean lifestyle. ALAN CRAIG Partner – Business Advisory Mazars

Trevor De Giorgio Managing Director Greentube Malta

Malta has forged its position as a key authority within the iGaming industry, one that attracts top talent and the sector’s leading companies, like NetEnt. Any individuals or organisations heading to the jurisdiction will find a thriving and competitive marketplace with all the ingredients for growth and success. Great emphasis should be placed on creativity and innovation to stand out and maximize the opportunities available. Enrico Bradamante Chief of European Market Operations and Managing Director NetEnt Malta

There is a lot of misinformation being put forward when it comes to the Mobile Communication and Engagement market. It is of paramount importance to choose a partner who has the required expertise and experience in the sector. Chase value and ROI before price; positive client engagement is everything. Glen Warren CEO Fortytwo

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INSIDERTIPS Get ready for a fast-paced, innovative and ever-changing environment. Our industry is competitive and we must be on the lookout for the next practices and trends. If youâ&#x20AC;&#x2122;re looking for status quo, then donâ&#x20AC;&#x2122;t join iGaming. Kevin Norville HR Director Tipico

Malta is a gaming hub of choice for many, and the Malta Gaming Authority is one of the most preferred global remote gaming regulators. Having chosen Malta for these reasons, we have cheerfully discovered Malta and its people as exceptionally hospitable and friendly, blessed with incredibly rich history, culture, and striking scenery.

Welcome to the island that does not stand still. Malta has successfully created an eco-system that meets both individual & company expectations. In Malta, this thriving industry always provides the right springboard for personal development as well as company growth. Growth through innovation is true to word here also as the sector keeps pace with technology and industry developments. My recommendation for an individual or company joining Maltaâ&#x20AC;&#x2122;s iGaming industry would be to choose and work with providers that have a good track record and that can meet your needs effectively & efficiently. Roger Strickland Jr. Director CSB Group

Vahe Baloulian CEO BetConstruct

Obtain knowledge and recruit people. Apart from making sure you invest wisely in the best people, it is essential to get smart fast! Heavy research and study combined with an innovative, collaborative team and the right advisers provide an unparalleled competitive edge. The next few months will be exciting times for the gaming industry in Malta. We will see new laws being proposed and hopefully implemented by Q4 2017. Industry players should keep looking at Malta as the ideal home where the Government, the regulator and the independent service providers are jointly working hard to create the ideal environment for the industry to grow, innovate and establish itself. Do not be discouraged by the challenges. Let us together transform them into opportunities. Joseph F Borg Senior Advisor WH Partners

Christopher Dalli Partner Gonzi & Associates, Advocates

Servicing a gaming industry that comes in different shapes and sizes

REMOTE GAMING LICENSING • GAMING COMPLIANCE • PCI DSS • ISO 27001 • ASSURANCE & CORPORATE SERVICES TAX ADVICE • MANAGEMENT CONSULTANCY • ACCOUNTING & PAYROLL • FIDUCIARY SERVICES • IT AUDIT INTERNAL AUDIT • DATA PROTECTION • FINANCIAL INSTITUTION LICENSES

Contact Advisory Services is the company that you can depend on for professional, across-the-board consultancy services in Malta. Specialised in the remote gaming sector, we are dedicated to providing you with an efficient and dependable service that ensures all of your needs are met - no matter how challenging or complex.

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GAMINGmalta 2O17 EDITION

Malta:

European Hub with Global Relevance

Malta was the first EU state to introduce specific regulations and to bring forward new concepts in the iGaming industry. The country has created a flexible framework that places great emphasis on player protection, responsible gambling and antifraud measures; benefiting operators and players alike. The Malta Gaming Authority (MGA), the sole regulator responsible for the governance of all forms of gaming in Malta, has continuously upped the ante in establishing the country as the jurisdiction of choice for remote gaming.

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alta made a bold and visionary move back in 2004 when the Remote Gaming Regulations were launched. State gambling monopolies across the European Union suddenly faced disruption from an agile iGaming industry rising from Malta. Betting services previously established under the Public Lotto Ordinance found their new forte in the Remote Gaming Regulations and the Malta Gaming Authority, previously named the Lotteries and Gaming Authority. The stringent obligations put on iGaming operators in Malta created a level playing field and helped the authority develop into a respected regulator. The legitimacy of the iGaming industry in Malta has contributed to the creation of an entire eco-system, and Malta is often praised as the iGaming capital of Europe and a global centre of excellence.

The Benefits of Regulation

All gaming companies operating in Malta require a licence, either issued by the MGA or another regulatory authority given that Malta fully respects the EU’s single market and recognises licences issued by authorities of its fellow EU member states. Malta’s strict regulation of the industry is seen as a feature, which gives Malta-based operators a winning edge over iGaming companies based in other jurisdictions. One of the major advantages of regulation is consumer trust. Regulation provides players of Malta-based operators with the added comfort of knowing that their monies are secure and that the games offered by such operators are fair and free from fraud and other irresponsible gaming practices.

Executive Management Committee

Edwina Licari

Heathcliff Farrugia

Chief Officer - Legal & International Affairs

Chief Officer – Authorisations

Retaining Pole Position

Malta’s regulator is aware of the fact that past successes are not a guarantee for the future. A new regulatory framework is currently in the making that is intended to be more responsive to the fast-changing digital environment and to a wide range of market innovations in the iGaming sphere. A key change envisioned is the design of a new licensing framework and the introduction of two different licences: a Business-toBusiness and a Business-to-Consumer licence. The MGA is also embracing growth opportunities as it plans to cater for new and innovative gaming products such as eSports and Daily Fantasy Sports (DFS). New skill game regulations for fantasy sports have already come into force in January 2017 ahead of the new Gaming Act. Many within the industry feel that this will secure Malta first-mover advantages, similar in size and scale to what the country experienced when it first started out regulating the iGaming industry.

Rachel Mifsud Bonnici

Dominic Micallef

Chief Officer – Compliance

Chief Officer – Enforcement

Patrick Caruana

Andrew Naudi

Chief Officer – Finance

Chief Officer - Programme Management & Development

MGA STRUCTURE Joseph Cuschieri Executive Chairman

MGA Board Members

Chris Cilia Caesar Grech Ruth Trapani Galea Feriol Juliana Scerri Ferrante Board Secretary - Matthew Bondin

Christopher Formosa Head - Human Resources & Corporate Affairs

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Year

2016 in Review January

March

February

April

At ICE 2016, MGA-licensed companies topped the international league table placing Malta in the number one spot in the list of countries represented with no less than 34 exhibitors. The second largest exhibitor was the United States with 23 companies.

On the 16th of February 2016, the MGA inaugurated their new office in SmartCity. The new site is a Dubai-inspired state-of-the-art building complex of 2.562 square metres located on Maltaâ&#x20AC;&#x2122;s South-Western shores. The office meets the needs of cutting edge technological infrastructure, the latest corporate work environments and high environmental standards.

The Chairman of the MGA, Joseph Cuschieri, participated in the Enada Spring 2016 International Amusement and Gaming Machine Show in Rimini. The expo boasted more than 25,000 attendees and is considered among the major gambling conferences in Southern Europe.

The Remote Gaming Regulations were amended on the 22nd of April. The new changes specify a minimum return to player rate (RTP) of 92% for licensed casino operators. It also empowered the MGA to implement a monitoring system called the Enhanced Automated Reporting Platform (EARP) following consultation feedback published in March 2016.

June

The Joint 2016 Conference for the Gaming Regulators European Forum (GREF) and the International Association of Gaming Advisors (IAGA) was hosted by the MGA between May 31st and June 2nd at the Westin Dragonara Resort in St Julianâ&#x20AC;&#x2122;s. Panels touched upon the topics of lotteries, match-fixing, anti-money laundering, compliance, and emerging markets. The MGA also launched a public consultation exercise on the 20th of June regarding the Policy on Outsourcing in Remote Gaming.

July

The MGA participated in the World Gaming Executive Summit (WGES) in Barcelona between 5th and 7th of July 2016. The Chairman made use of the opportunity to present the new generation of gaming regulation and its focus on simplicity and efficacy, as well as the strategic thrusts behind the reforms undertaken.

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August

Malta’s fantasy sport exemption was announced by the MGA and prospective or active operators were asked to notify the regulator about their operations until further notice. The MGA also published its feedback on the public consultation of the draft Code of Commercial Communications. The aim is to replace the former code on advertising from 2004 in order to better safeguard consumer protection following changes brought about by social media.

October

The MGA travelled to Berlin to take part in the Excellence in iGaming (EiG) Conference between 18-20th of October. Dr Corinne Valletta, Head of EU & International Affairs, formed part of a panel discussion titled ‘Between regulation and taxation, the right way to defeat illegal gaming’. Another panel on the topic of Daily Fantasy Sports was moderated by Dr Michele Magro, Senior Legal Advisor at the MGA. October was a busy month for the MGA, also participating in the IMGL Autumn Conference in Dublin on the 24-25th of October, the East meets West Regulators Summit in the Philippines 25-28th of October, and the International Association of Gaming Regulators (IAGR) Conference in Sydney between 31st of October and 3rd of November. Topics included regulatory challenges, compliance methods, match fixing and technical standards.

November

The MGA Chairman Joseph Cuschieri participated in the Malta iGaming Seminar (MiGS) and the Summit of iGaming Malta (SiGMA) in November. At MiGS the Chairman presented the fundamentals of the regulatory overhaul expected in 2017. At SiGMA, held at the InterContinental Arena between November 16-19, the Chairman participated in a panel session titled ‘Catapulting Malta into the future’ which focused on the ongoing changes in the regulatory sphere and the needs for maintaining Malta’s attractiveness.

December

An Interim Performance Report for the first six months of 2016 for the Maltese iGaming industry was published by the MGA. It showed that the industry directly contributed 12% of total economic value added to the Maltese economy. Gross value added increased by 11,9% in the first half of 2016 compared to the same period in 2015. Tax revenues were shown to be €28 million during the period, collected from the 250 registered operators holding 490 licences in Malta.

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Licensing Overview

APPLICATION PROCESS

MGA Performs Probity Checks

Applicants are requested to submit all the required information in one go, and the MGA commits itself to the analysis of all information through multiple internal process streams. The MGA stresses that the submission of an application for a remote gaming licence should be the end result of thorough considerations made by the prospective applicant. Applicants should acquire knowledge of the Remote Gaming Regulations and ascertain themselves whether they are committed to complying with the high standards. The implications of getting a Maltese licence - such as taxation, human resources, operating costs and legal implications to name but a few - should also be taken into consideration. There are four different classes of licence, and companies setting up in Malta will need to obtain a licence to the class appropriate to their operations. Once granted, a licence is valid for five years and can be renewed thereafter for further periods of five years.

Probity Checks OK?

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MGA receives Remote Gaming Application

In the application stage the MGA assesses whether an applicant: 1. Is fit and proper to conduct gaming business. 2. Is correctly prepared from a business strategy perspective. 3. Has the operational and statutory requirements to meet the obligations prescribed by law and policy. 4. Has correctly implemented what has been applied for, on a technical environment before going live.

We have streamlined our processes and restructured the Authorisations department to become more efficient, and process applications without any unnecessary delays, provided that all the required documentation is duly submitted. In 2016, the class one and the class one-on-four were the most popular licence classes in terms of new applications. In the meantime, we are constantly updating our due diligence procedures at on-boarding stage and run extensive background checks on all shareholders owning more than 5% of the business. A purposely set up Fit & Proper Committee is nowadays taking due diligence decisions, ensuring consistency and transparency. Â Heathcliff Farrugia Chief Officer Authorisations

Application Process Terminated

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MGA receives Remote Gaming Application

MGA carries out review of Business Plan

➋

MGA obtains from applicant any clarification required

MGA carries out review of Statutory & Operational Documentation

➌

MGA obtains from applicant any required clarification

Business Plan accepted?

Statutory & Operational accepted?

Go Ahead

12-16 weeks This process is usually completed within 12 to 16 weeks, assuming all information is complete and correct. Inconsistent and low quality applications are dropped and the respective applicant will have to re-apply.

System Audit is conducted

Review OK?

Licence is issued

Application Process Completed

Application Process Terminated

➊ The MGA conducts a fit and

proper exercise on the applicant by assessing all information related to persons involved in finance and management and on the business viability of the operation. As part of this process, the MGA conducts probity investigations with other national and international regulatory bodies and law enforcement agencies. Any non-disclosure of criminal records or misleading information will result in automatic disqualification.

➋ The MGA conducts an in-depth

financial analysis of the applicant’s business plan. The applicant’s business plan is expected to have a detailed forecast of the operation, inclusive of marketing and distribution strategies, HR plan and growth targets.

➌ The application is examined

on the instruments required to conduct the business. This process includes examining incorporation documents; the games, the business processes related to conducting the remote games; the rules, terms, conditions and procedures of the games; the application architecture and system architecture of the gaming and control systems. Furthermore, a remote gaming applicant is subject to minimum issued and paid-up share capital requirements. Class 1 and Class 2 licence holders are required to retain a minimum share capital of €100,000 whilst Class 3 and Class 4 licensees are required to retain a minimum share capital of €40,000. Companies with multiple licences are required to meet the above share capital requirements cumulatively up to a minimum capping of €240,000.

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Licence Fees

Account Executives In 2016, the Authorisations Directorate, which is responsible for the management, approval and processing of all applications received by the MGA, has been restructured in order for it to better reflect the needs of the industry. A dedicated Remote Gaming team has been established, which is made up of four Senior Account Executives, who, together with their respective team members are responsible for a group of Companies/Licensees. These Senior Account Executives are today the main point of contact for the Authorisations Directorate, for all requests related to this unit. Every Key Official is now being assigned to a Senior Account Executive.

• Application Fee: €2,330 (on submission of application for a remote gaming licence) • Licence Fee: €8,500 (on issuance of licence and subsequently per annum) • Licence Renewal Fee: €1,500 (on submission of application for renewal)

Compliance Fees • Compliance Review: €3,500 (paid in advance for execution by the Authority’s approved third-party certifiers/auditors). • System Review: €2,500 (paid in advance for execution by the Authority’s approved third-party certifiers/auditors).

Types of licences A remote gaming licence for operators managing their own risk by offering players repetitive games, the results of which depend on random number generation. This class includes the licensing of casino type games and online lotteries. Class

System review & Issuing of the Licence The final phase consists of a detailed audit of the applicant’s completed and operating business. Once the MGA informs the applicant that the application was successful, the applicant will be allowed 60 days to complete the technical roll-out. If the applicant does not complete such technical roll-out within the mentioned 60 days, the application will be considered as suspended and subject to reapplication unless a reasonable justification is submitted for the MGA to consider. At any stage within those 60 days, the applicant must request an external systems review (performed by an independent third party contracted by the MGA against a fixed market price). The systems review will audit the live environment against the proposed application. To test whether the applicant complies with the regulations, the auditor will have a close look at the front and the back-end applications as well as how they manage and maintain policies and procedures. Further documentation required includes copies of signed agreements with all third parties that may affect the gaming or control system, such as the agreement with the equipment hosting providers and payment processers, as well as any other contract where functions are outsourced clearly outlining the responsibilities to be carried out by such providers. If there are significant changes to the gaming system, the applicant shall resubmit all updated documentation and will have to undergo another systems review. Once the review is complete and approved, a five-year licence will be issued.

A remote betting office licence for operators managing their own risk by offering bets on events based on a matchbook. Fixed odds betting fall under this class. Class

A licence for operators taking a commission from promoting and/or betting games. This class includes P2P, poker networks, betting exchange and game portals. Class

A licence to host and manage remote gaming operators, excluding the licensee himself. This is intended for software vendors who want to provide management and hosting facilities on their platform – a business to business gaming licence. Class

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Compliance at a Glance

COMPLIANCE REVIEW

The MGA’s rigorous application process is designed to ensure ethical behaviour and fair play, from the strict due diligence process each company undergoes prior to being issued with a licence, to the monitoring and supervision of the operations once they are set up and running. The MGA mandates that after going live a licensee undergoes a number of compliance reviews in order to ensure that the licensee is compliant and operating in accordance with the applicable requirements. Therefore, licensees need to be aware that the licence application process is just the beginning when it comes to compliance requirements.

The MGA requires the following reviews:

• After the first year of operation once licensed by the MGA. • On the third year of operation after being licensed by the MGA, following a riskbased assessment. • Prior to the expiry of the five-year licence for its renewal. • At the discretion of the MGA when this is deemed necessary and specifically in cases where the licensee is suspected to be conducting its operations in breach of the applicable requirements. Failure to carry out or successfully undergo a compliance review may lead to administrative action from the part of the MGA, including the suspension of a licence.

SUSPENSION AND CANCELLATION

The MGA may order the suspension or cancellation of a licence for a number of reasons, including but not limited to: cases where the licensee or the Key Official is convicted in any country of an offence which is punishable by imprisonment; the licensee fails to comply with a material term or condition of the licence, fails to pay taxes and other fees or is insolvent; fails to meet commitments to players; has obtained the remote gaming licence by providing false or misleading information or is in breach of the laws or regulations for the prevention of money laundering.

KEY OFFICIAL

Every licensee is obliged to appoint at least one Key Official who is responsible for supervising operations and to ensure that the licence holder complies with all laws, regulations, conditions and any directives issued by the Malta Gaming Authority (MGA). The official must assist the MGA with any investigations and queries relating to the licensed operations; oversee and audit processes, ensure that all games are fair and correct, and that the remote gaming system is well-kept and maintained. The Key Official role holds great responsibility, and therefore the selected person should be readily available in Malta, appointed as a director of the gaming company, and has to be approved by the MGA.

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GAMING SYSTEM AND CONTROLS

During 2016 we persisted in our mission to enhance the compliance process and this has led to improved monitoring of our licensees, as well as more transparency and accountability. Throughout this process, we have extended our focus to the financial performance of our licensees. Our aim remains that of ensuring that player funds are safeguarded at all times and we consider the financial stability of the business as one of the key factors in achieving this objective. Rachel Mifsud Bonnici Chief Officer – Compliance

In applying for a gaming licence, the applicant must present to the MGA the software used and the specifications of the control system that will be used to conduct gaming operations and which will be subject to verification testing. The operational manual must include the following details: game description, software, reporting requirements, and a full list of the terms and conditions with the rules of the games. It should also include the general procedures to be followed for the operation of remote gaming software where applicable, the procedures for recording and paying prizes won in remote gaming, and the accounting systems and procedures to be followed to play a game. The MGA also requires the following to be submitted: the procedures and standards for the maintenance, security, storage and transportation of equipment to be used to conduct remote gaming; the procedures for the setting up and maintenance of security facilities including general compliance and internal controls relating to access to critical systems, a disaster recovery plan and an adequate system of data backup. Before a new gaming system becomes operational, a licensee must provide adequate certification to the MGA to confirm that the gaming system was tested within the previous six months and found to comply with all technical specifications. These requirements confirm that the system is technologically sound, secure and unbiased. More specifically, the data in the gaming system must be randomly generated, unpredictable and unable to be reliably reproduced. The operation of all gaming equipment must have the prior approval of the MGA. The requirement for randomly generated data means the system must pass appropriate statistical tests of randomness to prove that the data is unpredictable and that it is computationally unfeasible to predict what the next number will be. If, for example, the sequence generator is activated again with the same input, it must produce two completely unrelated random sequences. Moreover, the outcome of the game event, and the return of the player, must be shown to be independent of the CPU, memory, disk or other components used in the playing device. Nor must the game event outcome be affected by the effective bandwidth, link utilisation, bit error rate or any characteristic of the playing. Operators must seek prior approval of the MGA before making any changes to the system. The gaming system

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must also be capable of producing monthly auditable and aggregate financial statements of gaming transactions, and calculate accurately all taxation and other monies due to the MGA. The gaming system must maintain information about all games played and the identity of the player.

REGISTRATION OF PLAYERS

The regulations require players to submit certain information to the licensee before they can be registered as players and participate in the games. These include the following details, which the operator is obliged to obtain from each player: that the player is over 18 years of age, the player’s identity, the player’s place of residence, and the player’s valid e-mail address. The database server must be physically located within the European Economic Area or any other approved jurisdiction and could be subject, if necessary, to inspection by the MGA. The MGA also requires the presence of a mirror server in Malta that replicates in real-time the data on the database.

PLAYER ACCOUNTS AND PAYMENTS

Operators granted a Malta licence must set up and maintain a player’s account for each player registered, and the licensee cannot accept a wager from a player unless a player’s account has adequate funds to cover the amount of the wager. The licensee is barred from accepting cash from a player, and funds can only be received from the player by credit/debit cards, electronic transfer, wire transfer, cheques or any other method approved by the MGA. It is a strict provision that a licensee must not provide credit to a player or act as agent for a credit provider to facilitate the provision of credit to that player. When a player requests to withdraw funds from their account, the licensee must remit such funds within five working days, if practical, and a licensee must not personally deal with the credit of a player’s account. A licensee cannot make a payment in excess of €2,329.37 to a player’s account until the player’s identity, age and place of residence have been verified. A payment may only be remitted by the licensee to the same account from which the player’s funds originated. Inactivity for 30 months on a player’s account permits the licensee to remit the balance in that account to the player or, if the player cannot be satisfactorily located, to the MGA. The licensee must keep players’ funds separate from the licensee’s own funds in a client’s account

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held with an approved credit institution. The licensee must instruct and authorise the credit institution at which a player’s account is held, to disclose any information as may be requested by the MGA in respect of a player’s account. The licensee must also submit to the MGA a Player Liability Report on a monthly basis, to confirm that player funds are controlled in accordance with the applicable requirements.

PROTECTING PLAYERS

One should always play fair when one has the winning cards.

The regulations oblige all licensees to display at all times, in a prominent place on the entry screen of the website, a warning of the addiction possibilities of gaming and links to other websites assisting compulsive/problem gamblers. In addition, every hour an automatic reality check that suspends play must appear which: indicates how long the player has been playing, displays the player’s winnings and losses during such period of time, requires the player to confirm that the player has read the message, and gives an option to the player to end the session or return to the game. All amounts displayed must be quoted with the symbol of currency that the player is playing with. Full-screen games cannot be offered unless a real-time clock is displayed on the screen at all times and players are given the facility to exit the game.

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of compulsive players who feel they should exclude themselves from playing for a period of time. Self-barring also includes provisions such as limiting the amount per wager, or limiting losses.

ABORTED OR MISCARRIED GAMES

A licensee is to take all reasonable steps to ensure that its computer system enables a player whose participation in a game, after they have made a wager, is interrupted by a failure of the electronic communications system or a failure of the player’s computer system, is able to resume playing, when the system is restored. If a licensee’s computer does not enable a player to continue, the licensee shall ensure that the game is terminated and the amount of the wager is refunded to the player by placing it in the player’s account.

COMPLAINTS

The MGA takes complaints from players very seriously, and every licensee must give players the possibility of filing complaints. Every licensee is obliged to enquire into any complaint made, and in the event that the complaint is escalated to the MGA, the licensee must provide the initial feedback within 21 days from the date on which the complaint has been lodged.

ADVERTISING

SELF-BARRING

The framework also lays out detailed guidelines on advertising, and licensees are not permitted to carry out advertising that, among others: implies that remote gaming is required for social acceptance, personal or financial success or the resolution of any economic or social problems; that contains endorsements by well-known personalities that suggest remote gaming contributed to their success; that encourages individuals under 18 years of age to engage in remote gaming; or that sends unsolicited electronic mail, whether it is through its own operation or by the intervention of third parties.

RESPONSIBLE GAMING

KEEPING RECORDS, ACCOUNTS, GAMING TAX

Self-barring gives players the option of managing their gaming activity effectively. All registered players must: be given the facility to set a limit on the amounts wagered within a specific period of time, set a limit on the losses that the player may sustain within a specific period of time, set a limit to the amount of time the player may play in one session and exclude the player from playing for a definite or indefinite period of time. If the game is displayed on a screen, an automatic counter must indicate the player’s account balance.

Malta’s commitment to player protection includes an obligation to provide safeguards to ensure responsible gaming. The dangers of compulsive gambling and other gamblingrelated problems are well recognised by the legislation and regulation governing Malta’s remote gaming industry. The MGA has put in place a variety of checks and balances to prevent the abuse of gambling and the proliferation

Licensees are required to keep accounts and records that show a true and fair view of the financial position and state of affairs of the licensee. Within 180 days from the end of its financial year, the licensee needs to file with the MGA an audited set of financial statements. Within 30 days from the end of the half yearly period, the licensee has to submit interim financial statements. The gaming tax based on

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the licence class has to be paid monthly by the 20th of the following month.

GAMING TAX

Diligence is the mother of good luck. Benjamin Franklin

Besides paying tax on their profits, gaming companies licensed in Malta must also pay gaming tax. However, when compared to other European Union member states, the gaming tax is relatively low and capped at a maximum of €466,000 per year. The gaming tax depends on the class of the licence: • Class 1 - Fixed rate at €4,660 per month for the first six months and €7,000 per month thereafter • Class 1 on Class 4 - €1,200 per month • Class 2 and Class 2 on Class 4 - 0.5% of the gross amount of bets accepted in remote betting operations • Class 3 and Class 3 on Class 4 - 5% of real income • Class 4 - No tax for the first six months of operation, €2,330 for the subsequent six months, and €4,660 per month thereafter for the entire duration of the licence • Class 4 licensee hosting and managing an operator that is not in possession of the relevant Class 1, 2 or 3 licence in terms of regulations, however hosting an EEA licensed Business to Consumer operator - €1,165 per month per operator, paid by the Class 4 licensee With the new regulatory overhaul anticipated to be implemented in 2017, taxes will change according to the new licence classes and will be based on variables rather than fixed elements. In general, both licence fees and gaming tax will be based on gross gaming revenue (GGR).

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ANTI-MONEY LAUNDERING

The Fourth AML Directive came into force in June 2015 and must be transposed into national law by June 2017. The new directive presents a legal obligation for iGaming companies which requires more robust due diligence and more onerous obligations to prevent money laundering, while bringing about an obligation for all gambling operators to conduct customer due diligence (CDD) for transactions of €2,000. Thus far, iGaming operators are not subject persons under the EU’s Third Anti-Money Laundering Directive, but this is about to change when the Fourth Directive will be transposed into national law. The Fourth Directive will also crystallise the obligation of remote gaming operators, as subject persons, to appoint a Money Laundering Reporting Officer and to notify the Financial Intelligence Analysis Unit – a unit of the Malta Financial Services Authority (MFSA) – and the MGA of the appointment. The importance of this aspect of the regulations is underlined in the provisions laid down, which require operators to have systems and training in place to prevent money laundering and the financing of terrorism. These systems include customer due diligence procedures, record keeping and internal reporting procedures. Gaming operators should take particular notice of the following sections of the PMLR regarding the obligation to be aware of compliance requirements on: identification of criminals, appropriate record keeping, dealing with internal reporting procedures and establishing the duty to report money laundering activities. n

MGA licensees are obliged to display the following information on the homepage of their websites: u the registered name of the licensee’s company

u the address of the company’s registered office

u the official number and date of issue of the licence

u a statement that the licensee’s operations are regulated by the MGA

u hyperlinks to the websites of MGA approved organisations specialising in helping problem gamblers

u hyperlinks to the rules of the games or betting offered and the procedures adopted by the licensee for the registration of players

u the kitemark of MGA, which shall double up as a link to the MGA website

u any other information that the Authority may deem necessary

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Pioneering the fantasy sports sector Malta’s long-awaited skill game regulations for fantasy sports are out. They are expected to attract global industry leaders to the island and to ensure that the troubled fantasy sports sector can find a future.

alta’s rapid expansion over recent years as a global hub for gaming companies is the island’s most flamboyant success story, and the country is now setting out to gain the attention of the global fantasy sports community. January 2017 has seen the publication of the new skill games licence for fantasy sports operators, a sector that thus far had been largely unregulated, except where it was categorised as gambling. The hopes are high that the new licence will become the foundation for a thriving European skill gaming sector. Malta’s intention to regulate digital skill games with a prize was first announced in 2014. From then onwards, the Malta Gaming Authority (MGA) has been seeking the input of various industry stakeholders in order to develop a framework that will facilitate the growth of the sector, while ensuring players that games are fair. Regulation is widely supported by the global skill gaming industry itself, which, following allegations of fraud and unethical behaviour, wants to assure players that safeguards are in place and that there is no room for fraud. The regulations do not require every skill games operator to acquire a licence; however, games that may pose an increased risk to consumers may be subject to a ruling by the MGA, which classifies them as controlled skill games. Only operators of controlled skill games are eligible for a licence. Notwithstanding this, all skill games still fall under the governance of the MGA, and the MGA may still publish standards which must be followed by said operators. Fantasy sports have been very early singled out as one segment that could benefit from

a dedicated regulatory framework. In the summer of 2016, Malta exempted fantasy sports from the requirement of a gambling licence; however, this was just a temporary measure and paved the way for the introduction of a bespoke fantasy sports controlled skill game licence. Fantasy sports operators operating in or from Malta are now required to obtain a skill games licence in terms of the Skill Games Regulations (S.L. 438.11). The licence has a duration of five years, and can either be: • A licence to offer a skill games service (business-to-consumer); and/or • A licence to offer a skill games supply (business-to-business).

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When an application is submitted, the MGA conducts a three-fold exercise of probity checks on shareholders, directors and managers, as well as a business plan review and a review of statutory and operational documentation. If the applicant is accepted in the first phase, a system review is carried out by an independent third party. The applicant may also opt for certification against the MGA’s standards. If the review is successful, the applicant is given the green light and a licence is issued. Holders of a business-to-consumer skill games licence are required to pay a gaming tax of 5% of real income, which shall be construed as total wagers less total monies paid out to players, up to a maximum of €466,000. The tax has to be paid monthly, and by not later than the 20th day of the following month. There is no gaming tax for holders of a business-to-business skill games licence. However, all licence holders have to comply with the following statutory, reporting and operational requirements:

MGA receives application form

Probity checks on Shareholders, Directors and Management

Review of Statutory and Operational Documentation

Business Plan Review

• A body corporate established in Malta or in the EU/EEA • A minimum paid-up shared capital of €40,000 • A Key Official, MLRO & Information Security Officer readily available to the Authority • Segregated operational and players’ funds • Regulatory data made accessible to the Authority • Reporting Requirements • Monthly tax reports • Monthly player liability reports • Annual audited accounts • Interim financial statements for each half-yearly period • Any material changes in the documentation submitted to the Authority • Any changes to the licensee’s corporate or operational structure, including: • Changes to the qualifying shareholding (10%) or the management of the company; • Changes to the type of body corporate, registered address, constitutive documents and share capital; • Sale of business; • Changes to directorship or senior management of the licensee; • Technical set-up; • Major incidents; • Ongoing litigation.

• • • • • • • •

Accepted?

System review contracted by a 3rd party unless prior certification is acquired

The application Process

Statutory Requirements

Operational Requirements

MGA obtains clarifications or requests changes

Anti-Money Laundering Protection of Player Funds Self-Exclusion Information Security Collusion & Fraud Prevention Data Redundancy Fair and transparent game rules Player classification

Fees Application Process Terminated

Further changes or clarifications may be requested

Accepted? Licence is issued Refer to: System Documentation Checklist Controlled Skill Game – Fantasy Sports – License Specifications

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The fees due to the MGA include a one-time application fee of €2,300, and a renewal fee, due on renewal of a licence after five years or €2,300. A licence fee of €8,500 must be paid annually and in advance. The MGA may impose additional administrative fees incurred, including fees for System and Compliance Reviews, approval of a new shareholder, new games or agreements with new material suppliers. n

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The Road to Change Malta’s iGaming regulatory framework is going to look a lot different at the end of 2017. An ambitious agenda for regulatory reform was set up two years ago, and has been the road map for this journey. The pace of this transformation has been slower than many had hoped, but the MGA stresses it is going for long-term solutions, rather than quick fixes in designing a complete new regulatory framework. The build-up has so far been dominated by change behind the scenes, and while the draft regulations are still awaiting approval, here are some defining features and developments that will most likely come into play in 2017.

Strengthening Regulatory Oversight Implementation Timeframe

Political procedures for the introduction of the new bill have been initiated, and the draft framework will be published for public consultation in the first half of 2017. Once feedback is concluded, the proposed bill will be passed on to Parliament. Depending on the length and nature of discussions there, the final regulatory framework should be launched towards the end of this year up to the first quarter of 2018 for full roll out.

Strengthening the MGA ahead of the regulatory overhaul was seen as crucial in ensuring that the authority could perform its supervisory role as efficiently as possible. In the past two years, a number of directorates have been restructured, while the authority has been ‘right-sized’ in terms of its human resources. The regulatory department has been split into two units: authorisations and compliance, while the player support unit has been scaled up significantly. The regulatory oversight function was also strengthened through the setting up of a Supervisory Council. It serves as a forum for the members of the regulatory directorates of the MGA to discuss, decide and provide recommendations on complex and sensitive regulatory issues; the development of the regulatory functions, strategic and risk-based regulation, as well as the implementation of best practices. The Council is composed of the Chief Officers and senior management responsible for the Authorisations, Compliance and Enforcement functions and is chaired by the Chief Officer - Legal and EU/International Affairs. Our people are our major resource, and we are committed to providing our people with more than just a job. Talent is seen as critical for the transformation of the MGA into an organisation geared towards the delivery of its strategic objectives and goals. The MGA continuously invests in its people to enrich their knowledge and competencies and to provide them with the necessary skills to contribute to the success story of the Authority. A key activity is addressing any gaps in the level of talent required by each department. Christopher Formosa Head – Human Resources & Corporate Affairs

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Simplified Licensing System

The MGA is seeking convergence in the licensing framework, both conceptually and also tangibly by proposing a two-tier licencing structure: a business-to-business (B2B) licence and a business-to-consumer (B2C) licence. This model, the MGA hopes, will streamline the licensing process, while eliminating duplications and unnecessary complexities. The MGA already announced that it will also recognise gaming software providers as well as other B2B segments that currently do not fall under the specific Class 4 category. Administrative fees and tax are also under review with a number of changes being proposed on that front, placing a greater focus on the Gross Gaming Revenue of operators.

Player Protection Blueprint The MGA would like to adopt a similar risk-based framework for the protection of players underpinned by an evidence-based approach. A working group will be set up later on this year with the involvement of academics, the industry and other relevant persons with the MGA in the lead.

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Technical Standards

The MGA shall also be issuing a consultation document relating to sector-specific technical standards in the coming months. The idea is to promote a set of standards that shy away from being prescriptive, towards more objective-based requirements, so as not to stifle innovation and technological developments being proposed.

Risk-Based Approach

We are proposing to widen the concept of a business to business licence. Under the current regulations we only license a platform that hosts and manages gaming operations. The new regulations, if the drafts are approved, will also allow other service providers such as software and backend providers to apply for a B2B licence should their services be considered as being a critical function in the gaming operation. We are trying to aim for technology neutral legal provisions that are wide enough to future proof our regulatory framework for the years to come and so as not to stifle innovation. Needless to say, the latter concepts are underpinned by our commitment to ensuring continued protection for players and to remain an attractive jurisdiction for the whole gaming ecosystem. Edwina Licari Chief Officer – Legal and EU / International Affairs

The new legislation will provide for the adoption of different regulatory approaches. A major change will be the shift from prescriptive to risk-based instruments and controls. This will be underpinned by a set of principles and policy objectives that will provide the MGA with the necessary latitude and power to regulate gaming activities according to the risk presented by the same activities, business models and persons conducting them. Special attention is being paid to avoiding the duplication of regulatory and administrative requirements that have already been met and validated, which in turn will lead to faster time to market of new products for existent, compliant operators.

Key Functions

The MGA has proposed a revised approach to the key function position. In addition to more holistic changes which are still undergoing discussion, the new regime is proposing that key functions within licensed companies should prove their competence through certification, relevant experience and continuing professional development. Persons holding these positions shall be required to have a sound understanding and knowledge of their obligations, as well as gaming operations compliance methodologies, attested by a certificate that can be obtained by following an accredited training programme. In terms of proving professional experience, the MGA is considering two years’ experience in the five years preceding the application as a legal, finance or compliance officer in a gaming or financial services company, as sufficient. The MGA is proposing that key functions must continuously keep themselves updated on developments in the regulatory and compliance areas, directly or indirectly affecting the gaming sector.

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Policy on Outsourcing

A draft policy on outsourcing has been developed in 2016 by a Joint Working Group that was set up by the MGA together with operators and service providers. The draft policy, which was also subject to public consultation, is not intended to restrict outsourcing. It states that the Board of Directors and senior management of any iGaming operator will remain solely responsible if the management of regulatory risk and compliance is outsourced to a third party. The draft policy further proposes that when operators outsource critical activities, they should still be subject to regulatory oversight which may be captured under the widened concept of a B2B licence. The conclusions drawn in the policy paper are being translated into concrete principles and obligations in the new law.

Customer Relationship Management System

A new web portal is set to reshape the way the MGA communicates with its licensees. In March 2016, the MGA teamed up with Microsoft Malta to create a dedicated Customer Relationship Management (CRM) system, which will be rolled out in phases during 2017. The intention is to transform the way the MGA does business. Going paperless is high on the agenda. The CRM system will digitise the communication between prospective and existing licensees, which thus far relied heavily on manual processing of information. The platform will automate and simplify licensing procedures, while a dedicated dashboard will give applicants the possibility of following the status of their application in real time, ensuring efficiency and transparency.

Commercial Communications

The MGA is developing a new set of regulations that shall be proposed and packaged with the new framework to better reflect the sector’s technological evolution. While the current rules have served the industry well, they do not address many of today’s marketing and technology realities, such as the growth of social media. A draft set of standards has already passed a round of stakeholder consultations in March 2016 and the feedback received has been evaluated and considered accordingly.

• •

• In 2016 the MGA embarked on a number of internal projects covering new technology, enhanced processes and our workforce skillset. The new Customer Relationship Management (CRM) system is one such initiative, which is expected to go live by Q2 of 2017, and throughout the year we will roll out more functions. Our target for 2017 is to bring this and other activities to a successful conclusion and to align it with the new gaming and AML/ FT legislations envisaged to be executed in 2017. The Programme Management and Development directorate thus aims to consolidate all our ongoing projects under a programme of activities that will enable the MGA to achieve its strategic goals. Andrew Naudi Chief Officer Programme Management & Development

•

The new regulations aim to better protect vulnerable persons and underage players from being incited to gamble. For instance, some of the proposals deal with the following: • Online casinos are not allowed to publish false information on chances of winning, or suggest that iGaming can be an investment. Gambling cannot be promoted as a way of gaining prestige. iGaming companies also need to refrain from making players think they receive free money once they sign up with a casino. It is also not allowed to use celebrities in advertising and making the player believe that gambling was behind their success, or that skill can influence the outcome in a game of luck. When it comes to social media, iGaming companies need to make sure that under-age persons are excluded from the target audience, while social media accounts also need to contain an educational message on responsible gaming, and an age-limit warning.

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Match-Fixing Reporting Guidelines

While the MGA has consistently maintained a zero-tolerance policy against match-fixing, the procedures for reporting suspicious betting behaviour have not been formalised appropriately. As part of the national review of the framework pertaining to suspicions of match-fixing, the MGA will also be proposing a set of reporting guidelines to be followed by operators. It is also expected that further obligations will be introduced in the new regulatory regime with a view to increasing the controls on this threatening phenomenon.

European Gaming Institute of Malta (EGIM)

The MGA also started working on its own gaming academy, the European Gaming Institute of Malta (EGIM) to address the skills shortage within the sector. EGIM will work on a three-fold plan to ease the situation on the iGaming labour market. The short-term plan aimed at entry-level skills is for EGIM to partner up with local training providers in a franchise scheme. The medium-term plan is for EGIM to work with schools and universities to develop course offers. EGIM has initiated the first fully fledged business intelligence course with Middlesex University of London. EGIM will also set up a task-force to engage with the industry’s HR and talent management to better understand the needs of iGaming companies in order for training services to be prepared one year in advance. The long-term plan of EGIM is to create university degrees in iGaming. In the short term, the European Gaming Institute of Malta (EGIM) plans to offer entry level training in cooperation with specific training providers based in Malta to local and European students. Part of our medium-term strategy is to work with other foreign schools and universities. We already started designing a course with foreign university brands based in Malta, and we are also looking at partnering up with universities based overseas. The long-term vision is to set up our own school, which would provide very specialised training that we cannot source externally. Thomas Mahoney Project Director, European Gaming Institute of Malta (EGIM)

Skill Games Regulations

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Malta’s new set of skill games’ regulations for fantasy sports came into force last month, ahead of the new regulatory package. Skill games have long been identified as a future growth area for Malta, and the MGA has worked intensively on developing a dedicated framework for this segment. The new regulations define games of skill as being a contest played for money or money’s worth and where the winning outcome is determined through the skill, knowledge and/or dexterity of the player, and where the results are determined by the accumulation of statistics. Games of skill will be differentiated between skill-based games with elements of chance and pure games of skill. So-called ‘pure skill games’ such as the eSports video-games Starcraft, Dota, World of Warcraft and Counter-Strike would not require a licence. However, the MGA is now empowered to assess games of skill and determine to what extent regulatory intervention is required to limit risks to consumers, based on a number of considerations listed in the law. It falls upon the shoulders of the operator of a game of skill to provide proof thereof when applying for a licence at the MGA. It is relevant to state that in its ‘Position Paper on Digital Games of Skill with Prize’ published in December 2015, the MGA had stated that in view of the element of skill and knowledge involved in fantasy sports games, such an activity should be differentiated from games of chance in terms of licensing and regulation. These games will now be regulated under this new skill regime.

Skill game criteria: • • • • • • • • •

The presence of random draws. Length of each game. If intention is amusement or competition. If a skilled player can win more often than an unskilled player. If chance of winning is increased by experience. If skill can be attained through reading or education. Whether a set of rules or format further nullifies elements of chance. If the game is played against other players or against the house. Common sense and opinion of the player community.

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Anti-Money Laundering

The national implementation of the 4th Anti Money Laundering (AML) Directive will have to be in place by July 2017. All providers of gambling services will become subject to AML obligations. The MGA is working together with the Financial Intelligence Analysis Unit (FIAU) on the planned implementation procedures. The MGA has expressed the ambition to impose the new obligations ahead of July 2017. However, following the sector-specific risk assessment carried out in 2016 and due consultation and feedback from the industry, it now seems likely that implementation can be expected closer to the deadline. In 2016, the MGA focused on the implementation of the 4thAML Directive by holding several meetings to obtain the necessary feedback from remote and land-based gaming operators. Furthermore, discussions were held with the competent authorities in particular with the FIAU about the implementation of this Directive. The MGA was also active in the fight against matchfixing and exchanged information with the competent authorities and analysed information received from Class 2 gaming operators about suspicious bets. One of the priorities in 2017 is to issue the 4thAML implementing procedures for consultation and the implementation of the Directive. Moreover, in 2017, the MGA will enhance its supervisory role on gaming operators to verify that gaming operators are adhering with the implemented procedures. Â Dominic Micallef Chief Officer Enforcement

Enhanced Automated Reporting Platforms (EARP)

To improve the reporting infrastructure between the regulator and the industry, a consultation feedback on the proposed Enhanced Automated Reporting Platforms (EARP) was published in March 2016. Currently, operators submit information to the MGA on an ad-hoc basis. With the new EARP system, all operators will be wired directly with the MGA enabling real-time monitoring. As many operators already have monitoring systems in place, the time for adopting the EARP is ripe and unlikely to cause any major business disruption in the views of many stakeholders. The EARP is being seen as offering better player and operator protection, streamlining compliance and reporting methods, improving efficiency, as well as providing insight and analytics that enable better decision making. The results of the consultation published in 2016 concluded that operatorsâ&#x20AC;&#x2122; views are generally favourable on the proposed EARP system. The main issues and concerns raised by operators involved the need for secure connections with the MGA to ensure privacy and data protection. An integrated system could mean that an individual companyâ&#x20AC;&#x2122;s poor security standards could become a drag on all others as the chain would be no stronger than its weakest link. Many operators believe that costs could outweigh benefits in the short run. However, in the long term, it could provide for resource optimisation.

Cryptocurrencies & Blockchain

While substantive research has already been conducted, the MGA has decided not to recognise cryptocurrencies without the backing of a national stance. The MGA is currently analysing the realities of cryptocurrencies and blockchain technologies and the potential risks posed. It is anticipated that the study will be concluded during 2017 when an official position will be taken.

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The 2017 CEO Guide to Gaming in Malta Malta can be rightly proud of its thriving iGaming sector. No other country is so richly peppered with as many world-leading iGaming companies as Malta is. A key pillar of the island’s success has been the support provided by the country’s skilled technical and professional services sector, coupled with the operatorfriendly business environment. With a new regulatory framework to be published shortly, Malta continues to represent the gold standard of gaming jurisdictions and the business case for Malta remains strong. We explain what companies must do to operate efficiently and effectively in gaming’s most attractive centre.

Malta’s main assets are the continuous ICT investments in infrastructure and training which are supported by the government’s strategic economic policies, an English-speaking and skilled workforce as well as the country’s proximity to Central and Western Europe. Additionally, a variety of rapidly developing service industries allow vertical specialisation in areas such as finance, iGaming and other IT-enabled services industries. Savas Manyasli Founder and Solution Architect of DAIS Software Limited

MARKET ACCESS

Malta was the first country in the European Union to create dedicated legislation for remote gaming that is based on the EU’s freedom of movement of goods and services. Throughout the past years an increasing number of member states have implemented national regulatory regimes. Malta, however, stands firm that a licensed operator from Malta should be able to use that licence in any EU member state without the need for an additional licence from other member states. Operators in Malta highlight that despite the fact that the European market is becoming more restricted, the Maltese licence still holds value, providing access to countries that have not introduced national licensing regimes. In addition, Malta license holders may find it easier to acquire a licence in other jurisdictions, such as the UK, as there are certain similarities between the Maltese and UK regimes. The UK Gambling Commission also has a very high regard for the Maltese licence. The Maltese licence also provides value for B2C operators in those European countries that do not have a B2B licensing model, and can therefore turn to Malta to regulate the B2B element of their business by obtaining a Maltese B2B or Class 4 licence. The MGA believes it is also important to look beyond the EU and explore the emerging markets of Asia and Latin America. Malta believes there are opportunities for the sector in the sense that if Asian and

Latin American countries open up to remote gaming for Maltese companies, licensees who are operating in Malta would have access to those markets. In 2016, Malta has also been on the radar of Asian companies who are keen to establish themselves on the European market and are seeking a Maltese licence.

ADVERTISING & MARKETING

Malta offers a well-established infrastructure that supports the creative needs of iGaming companies. The island has become renowned for its creative industries such as film, website design, graphic design, animation, digital media and advertising. Over recent years, the island has succeeded in attracting key players and supporting companies to establish operations in Malta, ensuring that iGaming companies can tap into areas such as SEO, affiliate management companies and consultants. Due to Malta’s lower cost base, iGaming companies can source services at a lower rate here than in Continental Europe. Due to the fact that advertising guidelines vary in European jurisdictions, the Malta Gaming Authority recommends that operators seek advice in relation to if, how and what can be advertised in other jurisdictions. Going forward, operators will have to abide by the Code of Conduct on Commercial Communication, which has been under revision in 2016 when advertising in Malta. The new code aims to better protect vulnerable persons and to make sure minors are not gambling and is expected to enter into force together with the new regulatory package.

CORPORATE TAX REGIME

Malta is determined to keep up its reputation as a transparent jurisdiction and places great emphasis on the fact that it is not a tax haven. The country ensures its regulatory framework is in sync with the changing demands of the industry and is fully in line with the requirements laid out at EU level. With the island’s accession to the EU in 2004, Malta’s tax regime – which had been in place since 1948 – was approved by the European Commission. The country operates a full imputation tax system under which companies are taxed at a

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Talent wins games, but teamwork and intelligence wins championships Michael Jordan

Planning for the future of your employees is set to be the next battleground in attracting and, more importantly, retaining talent. We have spoken to all major gaming companies in Malta, and most are planning on implementing pension schemes to show they are committed to investing long-term in their people and not just offering a salary and some fringe benefits. Richard Cok CEO of Worldwide Pensions

rate of 35%. However, shareholders are entitled to refunds for the tax paid by the company. The refund may be equivalent to either 2/3rds (when double taxation relief is claimed), 5/7ths (in the case of passive interest and royalties) or 6/7ths on trading income. Income and gains from a participating holding, where a company holds directly at least 10% of the equity shares of a non-resident company, or meets certain other criteria set out in the law, are exempt from tax. Malta’s network of some 70 Double Taxation Treaties further strengthens the country’s position as a key corporate location. Malta also meets international tax standards and is included in the Organisation for Economic Cooperation and Development (OECD) white list. Adhering to the highest anti-money laundering standards, Malta’s regulatory framework has been assessed numerous times.

PERSONAL TAXATION & EXPAT TAXATION Individuals are charged on their income at progressive tax rates up to a maximum of 35% (for income over €60,000). The top rate of income tax for those who earn less than €60,001 is 25%. To attract highly qualified personnel from abroad, Malta has introduced an incentive scheme targeting foreign executives. iGaming professionals can benefit from a flat personal income-tax rate of 15% on income up to €5 million. Any income over that figure is tax-free. To qualify for this tax incentive, the employee must earn a minimum of € 82,353 per year (basis year 2016), among other criteria. EU nationals can benefit from the reduced tax rate for an unlimited period, EEA and Swiss nationals for a period of ten years and third country nationals for four consecutive years. Malta is also an attractive place for retirees as well as high-net-worth individuals and their families, with separate programmes allowing them to benefit from a reduced tax rate if they relocate to the island.

INCORPORATING A COMPANY

Forming a company in Malta is relatively easy and only takes a couple of days. The Maltese legal structure is a hybrid system of Civil and Anglo law. While it is based on the civil law pattern

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of Continental Europe, most administrative and fiscal legislation is constructed on the British model. While Maltese law does not have a specific requirement on the nationality and residence of directors of a company incorporated under the laws of Malta, iGaming companies are required to appoint a Key Official, who must be resident in Malta. Maltese law does not lay down any specific requirements on the shareholding of a gaming company, and the iGaming company may be owned indirectly through a Malta holding company or directly by non-resident shareholders.

VAT

New VAT rules for the iGaming industry were introduced in 2015. The EU ‘VAT Package’ has shifted the place of taxation for Value Added Tax (VAT) of ‘games of chance and gambling games’, when supplied to non-business customers within the EU, from the country where the provider of the services is established, to the member state where the customer of the services is located. Thus, the supply of online gambling services by Maltese operators to players located in other EU Member States is now treated as being supplied in the Member State of the player, and hence, in most cases, outside Malta. This means Maltese operators are required to apply the VAT rules as applicable in each of the member states in which their customers are located. In member states where iGaming is taxable, operators must charge their players with the local VAT rate of the country in which the players are located. Since VAT rates vary from one EU country to another, this may affect operators’ profit margins, and they may need to revise their pricing strategies. Operators also need to understand the taxable value on which VAT should be charged, and also review their data maintenance and record keeping.

MERGERS & ACQUISITIONS

With operators facing higher regulatory, compliance and operational costs, M&A in the iGaming industry has increased over the past few years. Malta is perceived as a flexible and efficient jurisdiction for M&As due to its attractive corporate law and regulatory

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environment as well as the advantageous fiscal treatment of locally registered companies used as vehicles for cross-border acquisitions. Equally important, the minimal tax leakages mean bidders using a Maltese company to launch an offer for a foreign firm are able to put in a more attractive bid in an auction process.

TELECOMS & DATA MANAGEMENT

Malta has developed a growing cluster of service providers offering hosting and co-location services. Data centres are operated by the telecoms operators with their own international fibre-optic cables, but also by telecoms companies and several specialist data centres. Data centres are provided with international bandwidth through the three main telecoms service providers; GO, Vodafone and Melita. Malta’s data centres offer co-location services and IT connectivity as well as the provision of technical services. Malta is internationally connected through two satellite stations (one to the Atlantic Ocean region and the other to the Indian Ocean region) and five submarine fibre optic links to mainland Europe via Italy. GO has two fibre-optic submarine cables linking the island to Sicily, while Vodafone and Melita have one each. In addition, Melita has teamed up with US-based provider Level 3, one of only six tier-one operators in the world, and a new fibre link connects Malta to Milan. Electricity company Enemalta has installed an additional fibre-optic cable to Sicily as part of an electricity interconnector. However, the fact that all links end in Sicily means that traffic has to pass through a number of hops, resulting in latency, until it arrives to ‘more connected’ internet points. While this latency has no implications to most internet users, it jeopardises the sustainability and further development of telecoms-reliant sectors such as iGaming. To reduce Malta’s reliance on the existing links, Malta’s government plans to invest in a new fibre optic cable to Marseille, France. Bandwidth in Malta is slightly more expensive than elsewhere due to the fact that Malta is an island, but increased competition from multiple market players is expected to drive telecommunications prices further down in the near future.

BANKING & FINANCIAL SERVICES

Malta is renowned for its robust financial services sector that continues to grow year on year. The sector offers a full range of services

to the iGaming industry and has developed industry-specific products and services. More than 25 foreign or privately owned credit institutions are present in Malta, offering the full set of banking services ranging from retail and investment banking to wealth management, trade finance and custody services. Malta’s banks are ranked amongst the safest and best run financial institutions in the EU. While many European banks suffer hangovers from the financial crisis and continued shockwaves inside the Eurozone, Malta’s banking sector suffered no systemic shocks or banking failures. The World Economic Forum’s Competitiveness Index 2015-2016 rates Malta’s banking sector the 15th soundest banking system in the world. Bank of Valletta (BOV) and HSBC are the largest players in the local retail sector. BOV is the main player in the iGaming sector, while Satabank, Sparkasse and Mediterranean Bank are also servicing this industry. Most iGaming operators in Malta maintain merchant accounts and player fund accounts with top tier overseas acquiring banks such a RBS and Lloyds, while the local Maltese banks are used for operational funds, personal bank accounts and wealth management solutions. During 2016, Catella Bank has also launched its services on the island, keen to service the growing iGaming industry.

PAYMENT SERVICES

Malta is also home to credit card companies, payment service providers, payment gateways, card issuers and eWallets, regulated and overseen by the Malta Financial Services Authority (MFSA). The island’s financial services legislation is modern and sophisticated, leading many of its competitors in the areas of e-commerce regulation and facilitation. Specialist PCI-certified payment service providers offer a full range of payment services. Payment service providers in Malta maintain their own in-house data centres with redundant connectivity and power, and extremely high security, and are connected to a large number of international and local banks, eWallets and financial institutions. Malta’s professionals believe that there is strong potential to attract more payment business given the overall growth of the industry. The island offers the necessary legislation and infrastructure to support their operations while the presence of a large number of iGaming operators and software providers situated on the island means a cluster of potential clients are already in situ. This is seen

I can’t believe that God plays dice with the universe. ALBERT EINSTEIN

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as an excellent opportunity for eWallets and eMoney providers to set up operations and take advantage of the many benefits Malta offers.

INSURANCE

The island’s insurance sector includes traditional insurance companies and agencies, as well as captive insurance companies. Investors can find a number of insurance management companies handling cover for large corporations and providing reinsurance solutions. This means iGaming companies based in Malta are able to tap into some of the most sophisticated insurance products on the market, including industry-specific products ranging from technology cover to business interruption cover and key official cover, as well as revenue and player fund insurance. In addition, insurance companies can also provide any personnel cover, such as home, health and motor insurance, that expatriate employees and directors of iGaming companies may need.

STOCK EXCHANGE LISTING

The Malta Stock Exchange (MSE) has become a gateway for businesses targeting the EU capital market. With a market capitalisation of some €10 billion, the MSE may be small by international standards, yet it provides companies with a solid alternative venue to access the EU market and to raise funds through its recognised and reputable regulatory framework, a cost-effective fee structure and a speedy processing time. The Exchange uses Deutsche Börse’s Xetra trading platform, while on the settlement and custodial side the MSE has a link with Clearstream Banking, the global liquidity provider of Deutsche Börse Group, which facilitates international investor access. Although equipped with and connected to the latest technology, what sets the MSE apart is its very high standard of personal service. While iGaming companies have yet to discover the advantages of the MSE, the Exchange highlights that generally companies can go through the preparation for an initial public offering (IPO) with more support than on a larger exchange. In addition to this, costs and fees remain competitive. Companies can also benefit from ancillary services that range from admission and trading, to depository and custodial services.

HR & RECRUITMENT

A highly skilled workforce is the backbone of the iGaming sector, and Malta offers a well

educated labour pool comprising both Maltese nationals as well as expats. iGaming companies require a diverse range of professionals ranging from IT specialists, accountants, financial controllers, and customer care personnel to product managers, traders and more. While most of these positions can be filled by the Maltese labour market, the island’s comfortable lifestyle and magnificent climate make it easy to attract expats to relocate in Malta. The gaming industry currently employs more than 6,000 people, with an additional 3,0004,000 employed in ancillary fields – lawyers, accountants and recruiters – enhancing iGaming’s impact on the local workforce. Some 70% of the sector’s workforce is foreign. Maltese staff tend to fill positions in IT, finance and general management, while the more specialist gaming, customer relationship management (CRM) and marketing posts are filled by expats. As the industry in Malta grows, the availability of staff expands along with it. However, there is a shortage of business intelligence professionals and software developers, and there is a high demand for marketing professionals, affiliate managers, online marketing managers, business intelligence developers – and on the IT and technical front, there is increasing need for Java and front end developers, .NET developers, systems engineers (Linux/UNIX) and digital designers.

EMPLOYMENT REGULATION

The Employment & Industrial Relations Act governs the conditions of employment, termination of contracts and the organisation of workers and employers. Employment may be for a fixed or indefinite term, and on a full-time or part-time basis. The length of the probation period is normally six months. The standard working week is 40 hours. Employees in fulltime employment are entitled to 24 days of vacation per year. Maternity leave for female employees in full-time employment is 18 weeks. The law also provides for up to three months’ unpaid parental leave in the case of birth, adoption or legal custody of a minor. Jobsplus is responsible for providing a public employment service and managing state-financed vocational training schemes, as well as for processing work permits for non-EU nationals.

RECRUITMENT AGENCIES & TRAINING

To cater to the high demand for experienced gaming professionals, there are a number of specialist remote gaming recruitment

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companies located in Malta, including iGaming Elite, Pentasia, Betting Connections, Reed iGaming, People & Co, Quad Consultancy, VacancyCentre.com, and CSB Group. These companies can assist operators in deciding how and where to recruit the human resources necessary, using their international networks to reach potential candidates from around the world. Most of the larger companies on the island now also have their own gaming specialised HR departments. Training companies and some educational institutes provide industry-specific training, while the launch of a new Gaming Academy in a few years time is set to expand the current offering by providing training modules that are to be tailormade to industry needs, targeting Maltese nationals and foreigners alike. A new official initiative is also the European Gaming Institute of Malta (EGIM) set to work out education and training solutions in tandem with private and public institutions.

SALARIES & STAFF COST

Malta remains significantly cheaper than other European capitals in terms of staff salaries and other costs. Although the iGaming industry tends to offer remuneration that is some 30% higher than other industries in Malta, the figures are still lower than the European average. As the industry sources many employees from the international job market, operators are quick to point out that the lower cost of living in Malta means that staff actually enjoy a much higher quality of life on the lower salary, than on a higher salary in locations like London or Stockholm.

WORK PERMITS & APPROVALS

Visa obligations for foreign nationals reflect EU regulations and obligations. Non-EU nationals must apply for and obtain an employment permit, and the granting of the permit is subject to a labour market test. Due to the nature of the industry and the specific knowledge that is required, the granting of employment permits even to non-EU nationals is generally an uncomplicated and smooth process, according to operators and recruiters. However, to attract specialist talent from non-EU countries, Malta recently relaxed its rules for work permits, and iGaming companies can now hire experts for certain roles, including IT consultants and system analysts, without having to prove that they were unable to find a suitable EU employee. To protect the reputation of the

jurisdiction, operators that are licensed in Malta need to submit certain due diligence, such as a police conduct certificate and a passport copy, of their prospective personnel to the Malta Gaming Authority for their approval before the employee can start work.

PROFESSIONAL SERVICES

Malta has a solid cluster of firms that specialise in providing professional services to iGaming operators, guiding them through the prelicensing process, the licence application and post-licensing requirements, as well as in the setting up of a Malta company, establishing operations, offices and recruiting HR. In addition, the iGaming community in Malta is strongly supported by a large range of accounting and auditing practitioners ranging from small boutique practices to the global Big 4 accountancy firms, as well as most international network brands. The jurisdiction also has various companies providing excellent back office services such as bookkeeping and payroll services. Most also offer a wide selection of Key Official and business advisory services, providing operators with a director and Malta Gaming Authority liaison who is both experienced and has the relevant industry knowledge to ensure smooth operations. Some companies have also started to provide multijurisdictional advice, responding to recent changes in the legislative landscape and the opening of new markets. Most of the country’s legal firms are part of international networks, such as Lex Mundi and Lexis Nexis, and are regularly ranked on Chambers, MartindaleHubbell and Legal 500. Malta is able to offer operators professional services such as accountancy, business consultancy and legal services at costs that are generally lower than in other Western European locations.

TECHNICAL SUPPORT

Technical services are well catered for in Malta with a number of firms being set up to exclusively support the iGaming industry. These include iGaming specialist firms offering comprehensive security audit services, custom-tailored assessment and examination programmes to test every aspect of iGaming system security and also the testing of all types of games on a wide range of gaming platforms. Malta has also proved an attractive location for software developers and platform providers supplying the iGaming industry. Companies present in Malta include NetEnt, Microgaming

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Logo sizes There are two size variants of the logo: Standard size: for all applications requiring a logo 30mm and above in length. Small size: for all applications requiring a logo smaller than 30mm. This logo has been optimized to reproduce well at small sizes: the ‘counter space’ within the letter ‘e’ has been opened up to stop the ink filling in, as well as opening up the space between the letters to achieve the right appearance at small sizes. NB The shortest length the logo can be is 15mm in printed applications, or 80 pixels wide for onscreen applications.

100mm Standard size logo is for applications requiring a logo over 30mm in length

30mm Small use logo is for applications requiring a logo less than 30mm in length

15mm or 80px Minimum size for logo usage in print is 15mm wide, or 80 pixels

Clearspace Always make sure there is sufficient clearspace around the logo to maintain its impact and integrity. The minimum clearspace rule is equal to the height of one ‘D’. No other graphic element may appear within this area. Always allow for more clearspace wherever possible.

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We were involved in iGaming a couple of years ago, and we still have in-house expertise in the field, and have recently reinvigorated our interest in the industry. Obviously, the sector has changed in recent years. We are now positioning ourselves to become one of the big players in the industry. Warren Young Head of Acquiring and Corporate Banking at Catella Bank

A gambler is someone who plays slot machines. I prefer to own slot machines. DONALD TRUMP

and Omega Gaming Malta, amongst others. Another area registering significant success in Malta is the setting up of call centres offering multilingual services. While most of the larger iGaming operators in Malta have in-house customer relations teams, many smaller outfits are turning to outsourcing opportunities.

COMMERCIAL & RESIDENTIAL REAL ESTATE

Malta offers enviable real estate with sea views and marinas as well as prestigious landmark office complexes within easy commuting distance of residential areas. Although sales and letting prices have gone up recently, they are around two-thirds of those charged for comparable spaces in Continental Europe. Most iGaming offices are located in the vibrant areas of St. Julian’s and Sliema, but many have also chosen to move into the more central areas of Malta such as Mosta, Naxxar or Birkirkara. Office space comes in many flavours, ranging from purpose-built office blocks, converted houses, apartments and palazzos as well as new, large mixed-use areas currently under development. The latter are generally located in key urban areas with sea views. Modern office space is also available in SmartCity Malta, a dedicated IT business park based on the model of Dubai Internet and Media City. iGaming executives can also find a wide range of residential property, including apartments, penthouses, townhouses and villas, with or without a pool. Malta’s small geographical size is a benefit in terms of short commutes. Traveling time between Malta International Airport and an office or a home is rarely longer than 20 minutes. A large number of local and international real-estate agents provide sales and letting services and can assist in locating suitable property.

START-UP INCUBATORS

iGaming start-ups can find Malta an attractive place due to the concentration of suppliers on the island. Face-to-face meetings with these companies can easily be arranged. The island is also stepping up its efforts in helping to create new businesses and has expanded the scope of support for innovators. Based at the University of Malta, TAKEOFF is Malta’s first technology business incubator. The programme is specifically designed to help innovators and aspiring entrepreneurs create successful science, technology, engineering, creative media and knowledge-based start-up

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businesses. The TAKEOFF programme delivers a tailored package of benefits and guidance to entrepreneurs from inside and outside of the University of Malta. The Malta Information Technology Agency (MITA), Malta’s national IT agency, also runs an Innovation Hub at SmartCity Malta. The hub provides a location backed by software tools and all the necessary resources in which students, web designers, software developers and start-ups can share ideas and develop prototypes under the mentorship of world industry players. To back their projects, future web entrepreneurs and innovators will have access to a number of software and cloud technologies, and support programmes.

START-UP SUPPORT

Malta Enterprise, the national development agency responsible for promoting and facilitating international investment, also provides incentive packages to support research and development from the initial stages to postimplementation of certain projects. Incentives include part-financing of the costs and business advisory services. A government website, BusinessFirst.com.mt, provides information and tools that are designed especially for startups, established businesses and those who support them and advise them. An ‘Innovative Start-Up Programme’, which is also available to businesses that have the potential to develop innovative products or services, provides startup advisory services, business incubation, grants to cover costs related to investments in tangible and intangible assets, and access to finance. Start-ups can also benefit from a number of other initiatives and institutions such as the Microsoft Innovation Centre at SkyParks Business Centre, PwC’s 1Million Euro Startup Fund initiative and the Malta College of Arts Science and Technology (MCAST), which has recently been assigned a number of units at the Kordin Business Incubation Centre managed by Malta Enterprise. In addition to the support available from the public sphere, venture capital firms have started to move into Malta, offering iGaming start-ups a new avenue to access finance. n

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Making the Right Move

As iGaming companies grow and mature, so too do their offices, say Jeff Buttigieg, Chief Operating Officer, and Edward Agius, Regional Letting Manager at RE/MAX.

he merger boom in the iGaming industry is also a major theme for Malta’s real estate sector. Consolidation means exponential growth, and combined companies often require double the space to house all employees under one roof. When it comes to office relocations, Malta is currently experiencing a surge in activity, and we often advise our clients to plan ahead. It’s particularly difficult for smaller companies experiencing high growth to find the right size of space to serve their current and future needs. The industry is still booming, and it is not unusual for companies to outgrow their offices within a very short period. Our advice: hire a larger space that, quite literally, offers room to grow, but sublet it until it is needed. Office space can be a drain on resources, however subletting solves the problem of having too much space that is underutilised until a company’s operations expand.

2017 Office Trends

In Malta, the availability of commercial space has increased significantly in recent years, and today the island has some of the most sophisticated office spaces in Europe. However, there is still a demand for more, and we at RE/ MAX are asking developers to convert buildings into offices which are central, spacious and have sufficient parking facilities. It is important for us to offer excellent quality developments with the latest technology. We are aware that bright offices with terraces and outside areas

are the foundation for iGaming companies to create work spaces that boost creativity, spark innovation and motivate employees. While the ‘white office look’, often with a splash of colour, has long been popular, we are currently seeing a move towards industrial features, including concrete floorings and walls. Today, iGaming companies are often bringing their own designers to create workspaces with the best office interior architecture. Sliema and St. Julian’s are still the preferred office locations, however nowadays, companies are spreading out throughout the island. Just a few kilometres away from the traditional hotspots, in areas such as Gzira, Msida and Swieqi, prices may be slightly lower.

Pushing for Quality

As demand for properties for the iGaming industry has continued to increase at a rapid pace, Maltese investors have discovered the opportunity of buying properties for the sole reason of letting them out. Many new properties over the last five to six years have been purchased with the main requisite of accommodating the growing industry. As Malta’s iGaming industry continues to boom, its employees are dominating the residential rental market. At RE/MAX, up to 29% of properties are being rented by people working in the sector. Co-living is also a growing trend, and we are seeing an increase in professionals in the gaming industry choosing to share rental properties.

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It is true that prices have increased in recent years, however, there has also been a drive towards quality. Over the last 17 years of servicing the iGaming industry in Malta, we have seen a sharp increase in the quality of not only the furnishings, design and finish of properties, but also in the quality of the service that is being delivered to the staff, management and the executives of iGaming companies. There is growing awareness that the cosmopolitan Northern Europeans expect nothing less than the same modern, minimalist style which they are accustomed to in their own countries.

Experts for iHoming

The influx of iGaming companies that were literally packing their bags lock, stock and barrel and moving to Malta, also caused a need for new blood within the real estate sector. We were the first company to identify this trend and hired five or six associates to specialise in and cater for this demand. The letting industry is very close to our hearts. As a matter of fact, before we founded RE/MAX in Malta, we were J&K Properties or better known as ‘The Letting Specialists’. In 1999, we opened the first fully fledged letting agency in Malta, which catered for every need of a relocating individual or company. In life one should never forget their roots, and while we have become the largest real estate company in Malta and Gozo with over 350 sales and letting agents and 24 offices, letting has always been central to the success of the company. Our letting team has grown tremendously over the years, however we still have most of the original team intact. In just a year, RE/MAX has grown from 20 to 35 letting associates, catering for several different sectors. However, iGaming has consistently topped the charts accounting for 30 to 40% of our business. As the industry grows, so does RE/MAX Lettings. In 2017, we are planning to increase our staff by another 50% to meet the rising demand, and this growth trend extends to the entire firm: RE/MAX Malta is to grow to 450 agents, and we plan to open another 10 offices. Jeff Buttigieg is the Chief Operating Officer of RE/MAX Malta, which is the largest relocation rental agency in Malta. He is also a Founding Partner of the Malta iGaming Seminar (MiGS). His key areas of expertise are marketing, business planning and strategy.

Edward Agius has been part of the JK Properties team since its inception in 1999, when he altered his career from real estate sales to property letting. As a Senior Letting Associate, Edward was then asked to lead the team as the Regional Letting Manager when the RE/MAX franchise was brought to Malta. Today, he proudly guides and mentors a team of 35 letting associates, offering their assistance for both residential and commercial letting.

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A Trusted Partner

Our commitment to the iGaming industry cannot be questioned. Over the years we have exhibited at ICE, organised iGaming Socials, coordinated five-a-side football tournaments, and for the past eight years we have been organisers, as well as founding partners, of the Malta iGaming Seminar (MiGS). MiGS was originally organised by five companies with a main objective to attract new business to Malta. The event has evolved into a global conference attracting over 400 delegates, international experts, major sponsors and has recently been rated as one of the top ten iGaming conferences to attend. We have become a one-stop-shop for the iGaming industry and have built long-term relationships with many clients that often go beyond the rental of property. We even help with issues such as finding nannies and schooling for children. While most business in this segment is rental, we are seeing increasing numbers of iGaming executives purchasing property. Malta has become their home and they are ready to invest, confirming that the iGaming is here to stay.

Growth Ahead

Malta as an iGaming jurisdiction is an excellent choice. The infrastructure is ever improving, and there are an abundance of incentives. Favourable tax and affordable cost of living result in the lifestyle being second-to-none. Malta is a place that will ensure that any employer will retain its workforce: 10 months of sunshine annually, excellent seaside accommodation, an array of different entertainment venues, restaurants galore and an airport that reaches any destination in Europe within three to four hours. A small island that sees some 2 million tourists per year, Malta is also home to several major international corporations. Malta is doing exceptionally well in all areas of the economy. We are a jurisdiction that is miles ahead in terms of regulation, licensing, training and having the most credible people to work with. We do, however, see room for more big retail brands here, such as Louis Vuitton or Gucci for example. For the future of Malta, we expect to continue to see the iGaming industry grow, as well as other sectors such as financial services. We believe that we at RE/MAX, need to continue to be the knowledge base of the industry. By continuing to do things right, we will remain leaders, and we look forward to a 2017 that will be even better than 2016. n

DON’T MISS GAMING’S LEADING EVENTS SERIES IN 2017!

ICE TOTALLY GAMING ExCeL, London, 7- 9 February 2017 icetotallygaming.com

#icegaming

@TotallygamingHQ

GiGse San Diego, CA, 26 - 28 April 2017 gigse.com

#GiGse17

@GiGselive

JUEGOS MIAMI Miami, 31 May - 2 June 2017 juegosmiami.com @juegosmiami Brazilian gaming congress 26 - 28 June 2017, sao paulo braziliangamingcongress.com

#BGCongress

@BGCongress

EiG 30 October - 1 November 2017, Berlin eigexpo.com

Excellence in iGaming

#EiG17

@EiG_gaming

GAMINGmalta

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EVENTS2O16

Summit of iGaming Malta (SiGMA)

he Summit of iGaming Malta (SiGMA) in November 2016 attracted close to 4,000 delegates to a lively expo floor and two days of conference sessions addressing sports betting, affiliate marketing, regulation, innovation and start-ups. Bringing together 160 exhibitors and sponsors, eight conferences, and a top-notch list of attendees, SiGMA put Malta on the global iGaming calendar. “What started off as a little expo dominated by Malta-based companies has now gone global. SiGMA became a multi-national show this year with the likes of Golden Race, Marathon Bet, Trustly, NMI, Pragmatic Play, Ganapati, Betradar, GLI, Aliquantum, Paysafe, W2 Global Data, Pegasus Gaming and others gracing our floor plan. These brands have little or no operational presence in Malta, yet they believed in having a solid presence at the show,” organisers Eman Pulis and Dennis DyhrHansen said about the event. A third of the attendees were professionals from the iGaming operators, while another 27% were affiliates and 23% were suppliers. The remainder constituted of legal professionals, regulators, speakers, media, start-ups and investors. Exhibition floors for SiGMA16 were sold out already by April. The topics at play during the conferences were payments, regulation, affiliates, and sports. Much appreciated features included the career convention and the StartUp Pitch, which consisted of a panel of venture capitalists taking the front seat in a Dragon’s Den-like environment while a number of startups pitched their ideas on stage. Another wellattended conference was the KPMG eSummit, which attracted high-calibre speakers and panellists from across the world. SiGMA delivered value to all attendees and made sure everyone walked out a winner. Nothing less can be expected of SiGMA 2017.

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JOIN US IN LONDON FOR THE BIGGEST EVENT IN THE IGAMING AFFILIATE MARKET

LONDON AFFILIATE

CONFERENCE 9-12 FEBRUARY 2017, EXCEL LONDON You can expect: • Three conference streams focused on acquisition and retention, SEO and marketing and finance - all aimed at giving you the ultimate learning experience. • Expert speakers from within the industry and beyond. Our speakers will provide you with information on hot industry topics, trends and technologies. • Unrivalled networking opportunities in London’s hottest venues. You will be able to connect with industry experts, operators, suppliers and other affiliates.

www.LondonAffiliateConference.com

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EVENTS2O16

Malta iGaming Seminar (MiGS)

iGS 2016 promised to be one of the most informative and interactive conferences of its kind to be held in Malta. Its eight-edition theme was “Navigating Unchartered Waters” and brought together C-level professionals from the iGaming industry in a number of networking activities, exhibitions and seminars at the Hilton in St. Julian’s between the 7th-9th of November. Welcoming drinks kicked-off the two-day iGaming bonanza at the Portomaso Casino during the final table of the Battle of Malta poker tournament. This glamorous evening gave attendees the opportunity to get to know each other in a more relaxed environment before the busy schedule went live the next day. Hon. Dr. Christian Cardona, Minister for the Economy, Investment and Small Business was invited to start the day with a speech. The first keynote speaker was Warwick Bartlett from Global Betting & Gaming Consultancy, who presented the good and the bad news of the global gaming industry. The following seminars covered topics such as the digital economy, cryptocurrencies and blockchain, player retention, as well as three well attended fishbowls on eSports, Brexit, and a regulator Q&A with officials from the Malta Gaming Authority including the Executive Chairman Joseph Cuschieri. The fishbowls engaged attendees to the maximum by allowing anyone to raise their voice on the topics covered. Networking breaks provided the perfect platform for iGaming professionals from all branches of the industry to mingle on the expo floor. A highlight was also the MGA-sponsored Gala Night, where the winners of the 2016 iGaming Idol were announced.

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Company Advertorial

MiGS 2016: Polished & Professional Conference Hailed as a Major Success The challenge to running a successful conference isn’t in the marketing but rather it is in actually turning out a high level audience participating in sessions that generate discussion and getting everyone to attend networking events that facilitate deals. The eighth annual Malta iGaming Seminar (MiGS) achieved all of those objectives once again in extraordinary fashion while introducing genuinely new concepts. For the professional crowd in iGaming, MiGS delivered an unmatched experience well worth the effort, as expressed by speakers and attendees alike.

The industry’s leading iGaming executives gathered at the Hilton for a busy two days of learning, deal-making and networking, mingling with other top representatives from global companies in the sector. A jam-packed day one included experts from a range of backgrounds discussing everything from the digital economy and crypto-currencies to the exchange of regulatory best practices and antimoney laundering directives. During frequent networking breaks, attendees browsed a range of products and services shown by top-tier companies participating in the exhibition. Topping it off, the launch of the first awards going to the people actually doing the hard work of running the industry were presented in high style at the iGaming Idol ceremony and after party at 22. An expert in world politics, John Andrews, Consulting Editor at The Economist provided a timely perspective in his Keynote Address, as day two was influenced by the stunning revelation that the United States election resulted in victory for Donald Trump. Andrews’ talk helped the audience put it in perspective, saying “If there is a problem, we’ll find a solution. One of the things I’ve always admired about Americans is a tendency to always find a solution to a problem.”With regards to the event itself and coming from outside the industry, Andrews was struck by the enormity of the outsized part Malta plays in iGaming. “MiGS put on a terrific show. It’s really impressive to see how Malta, the smallest nation in the European Union, is able to play such an important role in Internet Gaming. For me, it was a delight to meet so many interesting people.”

Day two also featured the popular “fishbowl” interactive session format on eSports, Brexit and one hosted by the Malta Gaming Authority (MGA), as well as an IMGL Master Class on New and Changing Markets. In a sign the iGaming markets are maturing, Wes Himes, Managing Partner of Instinctif observed that the markets are moving closer to an open multi-licensing regime, certainly a welcome development for operators. Conference Chair and industry veteran, Sue Schneider summed up many delegates’ views of MiGS, saying “Given the keynote from The Economist and the timing of the day after the US elections, this year’s conference took on a distinctly global view on how these issues will affect the industry. MiGS also had a local spotlight with one of the most well attended talks being the interactive fishbowl session with the regulators from the MGA. The audience appreciated the candid discussion on the issues that they deal with as EU members.” Post-event surveys provided the perception of the event and organisers learned what attendees most appreciate are thoughtful topics that promote forward thinking and lively discussion with a healthy mix of networking options. Said one attendee, “MiGS is the place to be if you’re interested in getting a holistic understanding of what is happening within the gaming industry. It provides a great deal of information on different interesting topics.” Exhibitors, sponsors and even other attendees were duly impressed with the high caliber of attendees and

opportunities for deal making. Dr. Alex Spiteri-Gingell of Transcripta Translations Services said “Our experience at MIGS 2016 was extremely positive. As a translation services provider to the iGaming industry, it gave us an excellent opportunity to meet the main stakeholders and decision makers and thus understand better the key issues in the industry. This level of understanding helps us to tailor our translation services to the industry’s specific requirements. We will certainly be returning.” MiGS harnessed the power of proximity and prestige with its impressive speaker line up and interactive approach that successfully utilised the larger and more decadent Hilton venue as well as those of the offsite networking events. The addition of the uniquely focused iGaming Idol awards event that recognized individuals over companies was a terrific tribute to the people that power the industry so heavily compacted into the small space of Malta. MiGS continues to use its evolution to push the industry to adapt to the changing environment and challenges attendees to see beyond marketing hype to value the true benefits of these events: giving companies and executives the tools to unlock the industry’s future. For more information on 2017 edition go to www.maltaigamingseminar.com or email us on info@maltaigamingseminar.com

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EVENTSCALENDAR

February

April

June

October

7th Annual European Online Gaming Forum 6th February London, UK

i-Gaming Forum 2017 5-6 April Vasa Theatre, Stockholm, Sweden

Prague Gaming Summit 2017 20-21 June Prague, Czech Republic

NIGA Indian Gaming Tradeshow 2017 10-13 April San Diego Convention Center, California, USA

July

G2E Vegas 2017 3-5 October Sands Expo Center, Las Vegas, Nevada, USA

ICE Totally Gaming 7-9 February ExCel, London, UK London Affiliate Conference (LAC) 2017 9-12 February ExCel, London, UK

March Vienna International Gaming Expo 2017 20-22 March Austria Center Vienna, Austria ASEAN Gaming Summit 2017 21-23 March Solaire Resort and Casino in Manila, Philippines iGaming Asia Congress 27-29 March Estrada do Istmo City of Dreams, Macau

East Africa Gaming Convention (EAGC) 14-16 April Nairobi, Kenya GiGse 27-29 April San Diego, California, USA

May Japan Gaming Congress 10-12 May JgC in Tokyo, Japan

World Gaming Executive Summit WGES 2017 4-6 July W Hotel, Barcelona, Spain iGaming Super Show 2017 11-14 July Hall 8, Amsterdam RAI, Amsterdam

September Central and Eastern European Gaming Conference & Awards 19-20 September Hilton City Budapest, Hungary

EiG 2017 30-1 October-November Arena Berlin, Germany

November Berlin Affiliate Conference 1-4 November Messe Berlin, Germany Malta iGaming Seminars (MiGS) November, date TBC St. Julianâ&#x20AC;&#x2122;s, Malta Summit of iGaming Malta (SiGMA) November, date TBC St. Julianâ&#x20AC;&#x2122;s, Malta East European Gaming Summit 21-22 November Bulgaria

G2E Asia 16-18 May The Venetian Macao, China