Despite the small size of its online gambling market, the Mediterranean island is a global hub for iGaming businesses.
Malta was once a waystation at the crossroads of civilizations. The Mediterranean island’s long history as the intersection of Europe, North Africa, and the Middle East has seen its politics and population in constant flux. But now, decades after becoming an independent republic, Malta is more than just a stopover on international trade routes.
It’s the center of the iGaming world.
An iGaming gold mine
Malta’s small size belies its strong economy.
The country’s population of just under 500,000 enjoys a high-income economy, with a GDP per capita of $39,000 (2020 est., 2017 dollars). Due to the archipelago’s limited space and resources, plenty of essential goods are imported. Oil, food, and even water are brought in by foreign trading partners. The economy is largely service-based, with the financial sector playing a large role.
Despite its classification as a high-income country, Malta’s tiny population makes its domestic market unappealing for iGaming operators, whose business models are often based on high volumes of bettors.
But despite the minuscule market, Malta is the home base (or home-away-from-home base) for most of the biggest names in iGaming.
The iGaming industry is a pillar of the Maltese economy. Revenue from the online gambling and sports betting sector generates a stunning percentage of the overall GDP.
In 2019, the country’s iGaming industry generated nearly €1.5 billion in revenues, making a massive contribution to the country’s economy while providing thousands of jobs (the sheer number of game developers, casino brands, and software providers headquartered on the island has created a massive pool of talent; most estimations put the number of gaming staff on the island just under 10,000).
The 2019 revenues represented an increase of nearly 10% on the previous year’s performance, accounting for nearly 13% of the island’s overall GDP, and making gaming the third-biggest private sector industry in the country.
However, despite the flexibility demonstrated by the industry throughout the pandemic, revenues took a body blow in 2020. The gaming sector’s contribution to the economy was estimated at €924 million, roughly 40% less than the year before.
Still, the Maltese economy is predicted to expand by 5.4% in 2022, the fastest rate in Europe.
The government has no illusions about the importance of the iGaming industry to the island’s economy. A restructuring of the main piece of legislation regulating the gambling sector in 2018 was clear evidence of the government’s gambling-friendly stance. Already Europe’s premier licensing destination, the Gaming Act of 2018 made the island an even more appealing jurisdiction for operators.
The licensing regime was simplified: whereas the previous system had separate legislation for land-based casinos, remote gaming, and lotteries, the 2018 law covers all forms of gambling under 4 types of license. The gaming tax was eliminated to avoid double taxation.
As the epicenter of European iGaming, Malta hosts some of the biggest events in online gambling. SiGMA has spread around the world, with iterations in Asia, Africa, Eastern Europe, and the Americas, but SiGMA Europe is still the industry’s biggest must-attend. The EGR Nordics Awards in January and the CasinoBeats summit in April offer a few opportunities to visit the island and soak up the sunshine for those who can’t wait for SiGMA Europe in November.
The goldmine hits the graylist
In the summer of 2021, the Financial Action Task Force — a global anti-money laundering and counter-terrorism financing watchdog — announced that it had placed Malta on its graylist.
The 2019 assessment, carried out by FATF associate MONEYVAL, found issues with the country’s financial sector. Unlike in previous years, the assessment focused not only on the legislature, but also on implementation. Having laws on the books is no longer enough; Maltese authorities now have to make an active effort to prevent illicit funding from winding its way into the island’s banks through a loophole or via shell corporations.
Unlike the blacklist, the graylist carries no legal penalties. Business can continue as usual, and the country’s international credit rating hasn’t been affected. However, the ripple effect of the reputational damage could be disruptive. International banks might get uneasy about conducting transactions with Maltese institutions, and wary investors might pull out and re-situate their businesses elsewhere.
The greylisting was not, as it turns out, related to the gambling industry. A spokesperson for the Malta Gaming Authority announced that the gambling industry would face no additional enforcement, as the background and security checks carried out during the licensing process already present applicants with a high enough bar to clear.
The government’s plan of action will focus on other areas of its financial sector, such as cash flow from shell organizations. However, industry players are still keen to see what the government will do next to rehabilitate its image.
Licensing and regulation
There’s a reason MGA licenses are considered the gold standard in the iGaming industry.
The regulator’s background checks are famously stringent, and the extensive vetting process includes a full technical inspection. There’s also a clear process for players to contact the regulator in case of any malfeasance on the part of an operator.
The Malta Gaming Authority issues four classes of license for gambling and betting.
- Type 1 allows the holder to organize games of chance powered by a random number generator (RNG).
- Type 2 allows the holder to organize games of chance where the result is determined by a sporting event.
- Type 3 allows the holder to organize games of chance that generate revenue through commission based on stakes or prizes (such as poker).
- Type 4 allows the holder to organize controlled skill games with a result determined by aggregated statistical performance (such as fantasy sports).
Each of the first three types requires an annual licensing fee of €25,000; the fourth type, fantasy sports, requires only €10,000. However, operators wishing to run a combined online casino and sportsbook would pay a separate fee for each license for a total of €50,000.
How can Slotegrator help?
Breaking into the online gambling industry can be daunting. Malta is one of many licensing jurisdictions for potential operators to choose from. Weighing the pros and cons of each is too much to handle for most. Instead of going it alone, get in touch with our jurisdictional advisory services to figure out which jurisdiction suits your goals and resources, as well as which markets are the best to target in 2022.