Author: Joseph Cuschieri, Executive Chairman, Malta Gaming Authority
1 Feb 2018
We are in the midst of an unprecedented technological revolution, one that is transforming the way gaming services are supplied and consumed. This technological revolution brings with it both challenges and opportunities.
As a forward-thinking regulator, the Malta Gaming Authority (MGA) is embracing technological disruption, creating the right environment for innovation to flourish. Regulators should not see disruptive technologies, such as distributed ledger technology, as a threat, but as an opportunity for improvement in regulatory efficiency. They must embrace change and create policies to allow new technologies to join the mainstream.
Prior to joining the MGA as Executive Chairman four years ago, I spent a number of years in the financial services and communications sector. While each regulated sector brings its own unique challenges, you don’t have to look too closely to see the key governance issues that influence economic regulation in general, including in the gaming industry.
Regulators should adopt an evidence-based approach in decision-making and avoid making judgements that aren’t founded in fact
Delivering effective regulation builds consumer confidence, thereby improving long-term stability and growth in gaming markets. I strive to ensure that the MGA lives up to the values it promotes in terms of ensuring fairness and openness for consumers and maintaining market integrity.
We are operating in a fast-changing and dynamic global regulatory landscape. As such, it is necessary to develop a new strategic direction for both the company and the gaming industry as a whole. Not only must the MGA move with the times, but it’s also essential to foster a work ethic based on continuous improvement, risk awareness and a player-focused culture committed to doing justice to the millions of players who gamble on websites licensed by the MGA.
The gaming industry is keen to embrace technological advances, but in order to do so successfully, regulatory frameworks need to be flexible enough for the industry to innovate and develop without neglecting consumer protection standards. Because of the changeable nature of the gaming industry and the need to uphold regulatory efficiency, legislation and policies need to be under continuous review.
Promisingly, there is growing focus on raising standards within the industry, with more time and money being directed towards data analytics, technology and intelligence, which ultimately enriches the quality of decision-making and policy formulation. In addition to this, regulators should adopt an evidence-based approach in decision-making and avoid making judgements that aren’t founded in fact.
Playing the long game
Finding the balance between public interest and economic interest presents a challenge for any regulator. My experience has shaped my conviction that the gaming industry must be aware that the sustainability of its business depends on upholding high consumer protection standards and implementing responsible gambling measures. Although in the short term this approach may have an adverse impact on the bottom line, it will pay off in the long run.
In Europe, regulatory changes, such as the introduction of a point of consumption regime, are raising costs for operators. Furthermore, monopolistic structures and unregulated online gaming sites are still common. Cyberspace is limitless and so we shouldn’t be creating barriers for the digital market, which should be one single market within the EU.
Unfortunately, the European market is fragmented as a result of diverging gaming regulation across the EU, ranging from the very prohibitive to the open market system. This is not only highly inefficient for the internal market, but is also risky for players who don’t have a clear legal framework or one single best-practice approach to refer to.
The European market is fragmented as a result of diverging gaming regulation across the EU, ranging from the very prohibitive to the open market system
The MGA is ready to implement a totally revamped regime that will work in harmony with regulatory changes. We are proposing a two-tiered licensing structure: a business-to-business licence and a business-to-consumer licence. This regime will oversee both physical and online gaming activities.
The proposed framework will allow for the adoption of different regulatory approaches. A major change will be the shift from prescriptive to risk-based instruments and controls, underpinned by a set of principles and policy objectives that will provide the MGA with the necessary powers to regulate gaming activities. Special effort is being made to avoid the duplication of regulatory and administrative requirements that have already been met; this will speed up the time it takes to market new products to operators.
A collaborative approach
The MGA will continue to improve the support it offers players by creating an evidence-based regulatory system in order to future-proof conventional standards and strive for alignment with other member states. Through such changes, the MGA will be able to service operators irrespective of the point of consumption; this will also involve fostering bilateral relations with other foreign regulators.
I have placed collaboration with other markets high on my agenda for the next few years and shall continue to work closely with my international counterparts to unlock regulatory potential and facilitate market entry, particularly for B2B operators, in the interest of the Maltese gaming sector.
My message to other regulators is that it is counterproductive to criminalise an industry and seek to cooperate solely on enforcement. Effective enforcement needs intelligence and logical and proportionate measures, not criminal sanctions.
The point of consumption, regulation and taxation has forced the industry to restructure and consolidate due to the costs and challenges associated with these factors. If the industry does not react and acquire the critical mass necessary to succeed in the evolving regulatory and fiscal environment, then most gaming markets and governments will fail to attain their objectives within the gaming services sector. While the industry has to respond to the evolving regulatory environment in Europe and beyond, the MGA will respond to the industry’s needs within the same evolving environment.
The MGA is working to ensure that it delivers in the areas where it can have the greatest impact while remaining at the forefront of gaming regulation. Its belief in sound regulatory policy, consumer protection, transparent legislation and efficient crime prevention controls are the key to its success.