By Dr. Alistair Facciol
The Skill Games Regulations (the ‘Regulations’), Subsidiary Legislation 438.11 of the Laws of Malta, regulating the provision of a number of skill games, including Fantasy Sports, in and from Malta, have come into force on the 24 January 2017, after a process initiated back in 2012 by the Malta Gaming Authority (the ‘MGA’) (then Lotteries and Gaming Authority), when the possible regulation of skill games with prizes was being looked into. Following this initiative, the MGA conducted a consultation process in 2015 whereby it highlighted its concerns regarding the possibility that certain elements of the way in which skill games were being provided could potentially not be sufficiently regulated by the laws in force back then. The industry widely participated in this consultation process, which eventually led to a position paper issued by the MGA in December 2015.1 The end result was the publication of the Regulations earlier in January this year.
Seeking to ensure a risk-based regulatory intervention which is proportionate, consistent and non-discriminatory, the Regulations have the established aim of ensuring that skill games which are being offered to consumers are conducted in a fair and transparent manner, whilst keeping the sector free from crime and adequately safeguarding the interests of consumers by having proper controls in place for the protection of minors and vulnerable persons.2 It is therefore immediately apparent that the Regulations place the consumer at the centre of their objectives in addition to the retaining of such an essential sector free from crime.
Before delving into the technicalities, it is imperative to discuss the scope of the Regulations. Specifically, the Regulations are intended to govern the provision of skill games, which are defined as being those games “for money or money’s worth and through means of distance communication, the result of which is determined by the use of skill alone or predominantly by the use of skill and is operated as an economic activity, but does not include a sport event”.3 The key element in this definition is the term ‘skill’ which therefore distinguishes these Regulations from other regulations regulating separate gambling operations where chance might be more predominant. The term ‘skill’ is defined as meaning “knowledge, dexterity, strength, speed, accuracy, reaction time, coordination, and, or competence in other physical or mental feats acquired, developed or learnt through practice, experience or study”.4 This definition is in line with the outcome of the consultation process and was published in the Position Paper where the intention to include games “the result of which is determined by the knowledge, reaction time and/or the dexterity of the player” within the term ‘skill game’ was publicly announced. This definition of skill games does not mean that elements of chance must be completely absent from the game, but rather, the definition includes those games which contain elements of chance that are minimal to an extent that the outcome is not affected by such minimal element of chance.5
The Regulations stipulate that the burden of proving that a particular game falls within the remit of skill games as defined therein rests with the operator promoting such an activity. Nonetheless, the Regulations bestow upon the MGA the “discretion to classify the activity as a skill game or otherwise”,6 after taking into consideration a number of criteria, including whether the game is played for money and/or prizes with a monetary value, the presence of random draws and their effect on the outcome, the possibility of negative social impact of the game, whether the game is closely associated with gambling, the duration of the events and whether on the face of it, a skilled player is able to win more than an unskilled player.7
Furthermore, the MGA may also issue rulings establishing whether a game is a ‘controlled skill game’,8 which is defined as a skill game which is subject to a licensing requirement in accordance with the Regulations.9 From this definition of controlled skill games, it seems clear that the Regulations aim to distinguish between those games in relation to which the MGA’s intervention is required from those other games in relation to which such intervention is not essential. By virtue of the Regulations, Malta has arguably followed in the footsteps of the United States by providing for this new sector through ad-hoc legislation, thereby providing the sector with the distinct recognition that it merits.
Following the coming into force of the Regulations, the MGA has issued the first ruling related to Fantasy Sports. The ruling defines Fantasy Sports as “a contest offered by means of distance communications, wherein players commit a consideration of monetary value, whether in the form of a stake, a periodic subscription or the purchase of in-game items which provide an advantage to the player, to compete against other players for the possibility to win a prize of money or money’s worth.”10 Furthermore, the MGA also provides that a Fantasy Sports contest “shall be one where the outcome is determined by the accumulation of statistical results of the performance of a number of individuals competing in actual sporting events”.11
The forecasting of the score, point spread or the result of any other future occurrence of one or multiple events have been excluded from the definition of Fantasy Sports. Furthermore, the ruling has also established that “the winning outcome must be determined predominantly through the skill or knowledge of the player”,12 maintaining that the onus of proving all the factors mentioned hereabove rests with the operator seeking to offer such games.
Individuals who wish to offer Fantasy Sports in, or from Malta will need to apply for a controlled skill game licence whilst those Fantasy Sports operators that are already based in Malta will need to obtain a controlled skill game licence by the 27th April 2017 in order for them to keep on providing Fantasy Sports services in, and from Malta.
A controlled skill game may only be organised in, or provided from Malta, and made available to individuals in Malta if the operator has obtained a licence or authorisation issued by the government or a competent authority of another Member State of the European Union or a Member State of the European Economic Area. It is immediately clear that Malta continues to advocate in favour of the free movement of services across different Member States of the European Union and the European Economic Area by recognising authorisations issued by governments or competent authorities of such Member States. Licenses under the Regulations are issued by the MGA for a period of five years which may be renewed for a further five-year term.
The Regulations distinguish between ‘controlled skill games service’ and ‘controlled skill games supply’, with the former defined as making a controlled skill game available for participation by end customers, whilst the latter defined as the organisation of a controlled skill game for, or with a controlled skill game operator, thus empowering the MGA with the faculty to issue two types of licences: one for a controlled skill games service to consumers and another for a controlled skill games supply between two business operators.13 It is also noteworthy that it is only those controlled skill games in respect of which a ruling has been issued in terms of the Regulations by the MGA that are licensable.
A controlled skill game licensee is obliged by virtue of the Regulations to provide its consumers with the option to set a limit on the amount that the consumer may deposit or play, and the option to exclude oneself from playing for a definite or indefinite period of time.14 A player may, thereafter, amend the limit or exclusion referred to above by notifying the operator. A notice which aims at increasing or revoking the limit or decreasing the exclusion may only take effect after the lapse of twenty-four hours from the operator receiving such notice. A notice reducing a limit or increasing the exclusion will take immediate effect.15 These measures are essential for consumers to be able to protect themselves and take effective action against problem gambling.
In addition, player funds are to be kept segregated from the operator’s own funds and must be insulated against the claims of creditors of the operator, or of any other person holding such funds other than the players themselves, including in the event of insolvency.16
By virtue of the enactment of the Regulations, Malta has set its sights forward in terms of regulating skill games including Fantasy Sports. Taking advantage of its experience as a jurisdiction which has been ever present and innovative within the remote gambling sector, Malta is one of the first jurisdictions in Europe to enact separate and specific legislation in relation to this sector, having arguably taken a lighter approach than that taken in respect of other remote gambling sectors through the separate licensing regime, without however compromising the protection afforded to consumers. Arguably, Europe has lagged behind in debating the emergence and regulation of Fantasy Sports when compared to the US which has, to date, dominated the discussions with respect to certain skill games including Fantasy Sports. Malta has made the first step in pushing the fragmented European market forward in a sector which will certainly continue to experience rapid growth in the near future. One may indeed argue that once again, similar to when Malta enacted the Remote Gaming Regulations back in 2004, Malta has re-positioned itself at the forefront of regulatory innovation within the remote gambling sector in Europe, giving Europe a much needed push within the global economy.
1 Malta Gaming Authority, ‘Digital Games of Skill with Prize Position Paper’, December 2015, available at <http://www.mga.org.mt/mga-issues- position-paper-on-digital-games-of-skill-with-prize/>, accessed 2 February 2017.
2 Skill Games Regulations, Article 3.
3 Skill Games Regulations, Article 2.
5 Malta Gaming Authority, ‘Digital Games of Skill with Prize Position Paper’, December 2015, available at <http://www.mga.org.mt/mga-issues- position-paper-on-digital-games-of-skill-with-prize/>, accessed 2 February 2017.
6 Skill Games Regulations, Article 5.
7 Skill Games Regulations, First Schedule.
8 Skill Games Regulations, Article 6.
9 Skill Games Regulations, Article 2.
10 MGA, ‘Ruling in terms of Regulations 6 of the Skill Games Regulations’, SGR/001.
12 MGA, ‘Ruling in terms of Regulations 6 of the Skill Games Regulations’, SGR/001.
13 Skill Games Regulations, Article 10(2).
14 Skill Games Regulations, Article 35.
15 Skill Games Regulations, Article 35(2).
16 Skill Games Regulations, Article 34(7).
Dr Alistair Facciol is an associate in the Technology, Media and Telecommunications Practice Group at Fenech & Fenech Advocates, a Malta law firm. Dr Facciol can be contacted at email@example.com.