Is the gaming sector saving our bacon?

Published on The Independent Malta¸ issue 26th June 2011

Caravaggio has a famous oil painting depicting gamblers playing cards in a dark room with one of them displaying false cards¸ i.e. cheating. This painting was commissioned more than four centuries ago and one wonders if gambling regulations have managed to weed out miscreants and cheaters. It is obvious that gambling is an old pastime that has evolved over the centuries in many ways. It was immensely influenced by the Internet revolution¸ which helped to expand its use exponentially. One can define Internet gambling as a game/s that is played over the Internet cloud linking players across many geographical frontiers.

The official definition in the E-commerce Directive¸ and as established under the Information Society Directive 98/34/EC¸ states: “Online gambling services are any service which involves wagering a stake with monetary value in games of chance¸ including lotteries and betting transactions that are provided at a distance¸ by electronic means and at the individual request of a recipient of services.” Malta is considered one of the leading member states (if not the largest) when it comes to online gaming. As a general rule¸ it has excellent regulation of the industry¸ preferring that this is done according to normal EU competition and internal market rules. At the same time it aims to protect consumers claiming to have one of the most modern regimes in this sector.

What is the secret recipe of our success? How did we manage to become a European number one jurisdiction in just five years? It is not because we have a flexible regulation or turn a blind eye to certain requirements. The Commission’s view is that “Malta has managed to attract a big number of online companies due to its favourable tax incentives and a good functioning regulatory system.” The proof of the pudding is in the eating because¸ according to the Green Paper¸ by 2008 the island had 500 registered online gaming companies¸ its share of revenue from gambling¸ technically known as Gross Gaming Revenue (GGR)¸ amounting to 7.82 per cent of its GDP for that year. This was 11 times more than the EU average¸ which stood at just 0.68 per cent of GDP in the same year. By sheer comparison¸ the overall gross gaming revenue of the European Union accounted for approximately €82 billion in 2008; of this¸ the GGR from online gambling exceeded €6 billion and this is expected to double by 2013. On its own¸ such statistics show beyond reasonable doubt how important is gaming sector for our economy and its strategic position¸ which contributed in no small way to reach the impressive 3.7 per cent increase in GDP registered last year.

It is now opportune to explain the aim of the Green Paper launched last year by Commissioner Michel Barnier. Quite simply¸ the objective of the Green Paper is linked with supporting and fostering the emergence of a legal framework providing greater legal certainty for all stakeholders. The Green Paper on on-line gambling¸ adopted by the European Commission on 24 March¸ launches an extensive consultation on public policy challenges resulting from the rapid development of on-line gambling on offer to EU citizens. It introduced a consultation scheme (ending next month) to collect comments and suggestions on the most critical issues connected to this practice and take actions a