Doubts over Malta’s gaming licence regime raised in Europe

On the local front, the Malta Chamber of Commerce sounded the alarm over the perceived laxity of regulation, after a report by Maltese rapporteur Stefano Mallia, drawn up for the EP’s European Economic and Social Committee, highlighted massive illegality in the European online gaming market.

Addressed this matter in a talk to the Chamber last week, Mallia pointed towards the lack of any serious mechanisms to protect users of electronic services such as online gaming.

According to the rapporteur, there is a “real danger that the online gaming industry will be driven into the hands of black market operators, leaving consumers exposed to fraud and abuse.”

Elsewhere, concerns with individual Malta-licensed operators have been raised separately in the Eureopean Parliament: one company, Stryyke Ltd, was singled out for having allegedly refused to pay out winnings for legally questionable reasons.

Online gaming is a growing industry in Malta. In 2008, online gambling amounted to 7.82% of Malta’s GDP.

Consumers not protected from fraud

Mallia quoted from a Green Paper, published by the European Commission, suggesting that some 85% of all online gambling websites operating in Europe are illegal, and are therefore not subject to any kind of controls or monitoring.

“This is extremely serious, especially when you consider that there are millions of consumers entering these sites every week,” Mallia said, adding that, as things stand today, consumers will find it very hard to identify which sites are legal and which are not.

Furthermore, consumers entering illegal sites are exposed to risk of serious crimes such as fraud and ID theft.

To this end, the opinion authored by Mallia for the EESC strongly recommends that “an EU framework of Consumer legislation [be] put into place to protect all EU consumers of online gambling services”.

Mallia explained that such legislation should set a minimum standard of consumer protection while at the same time allowing individual member States the margin to additionally develop higher levels of protection should they wish to do so.

“If a member State feels that it should afford its citizens a higher level of protection than that established by EU legislation, then it should be allowed to do so. At least in this manner, consumers across the EU will be guaranteed a level of protection which is common across the EU. Presently, such a guarantee does not exist.”

Even as Mallia outlined the EESC’s recommendations to the Chamber, the activities of at least one Malta-registered online gaming company – Germany-based Stryyke Ltd – were raised for discussion in the European Parliament.

Are licensing States responsible for default by licence-holders?

In a PQ tabled on 9 November, Syed Kamall, an MEP within the European Conservatives and Reformist Party (ECR), drew the EP’s attention to complaints about the dubious legality of Stryyke Ltd’s actions.

He also indirectly asked what liability, if any, the licensing member state – in this case, Malta – should hold when individual licence-holders default on their financial obligations.

“My constituent tells me that he won over €300 on the site, after initially depositing over €100. However he says that Stryyke refused to pay him the winnings or his deposit back because they claim that he did not meet their terms and conditions. He says that this is after they had previously told him that he had met their terms and conditions,” Kamall observed.

Kamall also hints that the local regulator, the Lotteries and Gaming Authority, offered little response when contacted with complaints.

“My constituent tells me that he has repeatedly tried to get an answer from the Maltese authorities but he also gets very little response from them. He says that the authorities did contact him on 30 September 2010 to say that Stryyke Entertainment Limited had now been suspended and was being investigated by the Lotteries and Gaming Authority, but he has not heard of any developments since then.”

Kamall asked the Commission to confirm whether Stryyke has broken any EU laws by breaching their contract and refusing to pay legitimate winnings. Signifcantly, he also asked the Commission it was willing to press the Maltese authorities to take up my constituent’s case and respond to his requests.

Claimed but unpaid winnings involving Stryyke Ltd amount to just over EUR100,000.

Regulator’s response

However, a spokesperson for the local regulator, the LGA, told this newspaper that the requirements for obtaining a license in Malta are “strict and comprehensive”. 

“Amongst other things, an applicant needs to be fit and proper, and just to mention a few, needs to implement various processes such as anti-fraud processes, risk management, anti-money laundering processes, data protection, etc. The licensing requirements can be viewed on the Authority's website.  In granting a license, the LGA has a whole array of sophisticated pre-licensing and post licensing checks and controls. The LGA’s structure includes focused areas on inspections, investigations, and enforcement, including a dedicated anti-money laundering function.”

The LGA confirmed that, including Stryyke’s, nine licences have to date been withdrawn or suspended; though not necessarily for non-payment of winnings.

Regarding the company raised in the EP this month, the LGA points out that the matter is now court, following regulator action taken by the authority.

“Stryyke Entertainment Ltd held a remote gaming licence with the LGA up to 1 September 2010, which licence was suspended on the same day following to investigations carried out by the Authority on non-compliance matters by the said company.  On the day when the licence was suspended, the LGA issued a public notice about the matter on its website, which was also reported in various gaming review websites in Europe. The LGA had also requested all players that may have had any alleged claims to provide all the necessary details to the LGA.  It should be noted that the LGA had also filed a report to the Police for further investigations, which eventually resulted in the Director and Legal Representative of the said company being arraigned in court.  As the case is sub-judice the LGA believes it should not make any further statements in order not to compromise the court proceedings.”