Malta Tightens Financial Requirements for Gambling Operators

The Malta Gaming Authority (MGA) has issued a new Capital Requirements Policy that formalizes financial obligations for operators, aimed at enhancing their stability and protecting the interests of players. Unlike previous one-time checks, this policy requires a continuous evaluation of financial health, demanding an immediate strategic review from all licensees and applicants.

Commentary by Illia Ivanko, Lawyer at SBSB Fintech Lawyers:

The new requirements from MGA make gambling regulation in Malta more mature and transparent. The most significant aspect is the obligation for operators to maintain a positive financial state on a continuous basis, which will significantly increase the demands on financial planning and strategy. For those who are just planning to enter the market, these changes could become a serious barrier that requires careful development of business plans and capitalization.

Key Requirements and Changes:

1. Minimum Share Capital. While the capital thresholds remain the same (€40,000 for B2B/Types 3 and 4, €100,000 for Types 1 and 2, up to a cumulative cap of €240,000 for multiple types), the mechanism of this requirement is changing. Licensees are now required not only to meet the threshold at the application stage but also to maintain this minimum level of capital on a continuous basis.
2. Positive Capital Requirement. The licensee’s assets must exceed or equal its liabilities at all times during the license’s duration. This requirement makes financial health a continuous compliance obligation.
3. Restoration Rule. If capital becomes negative, it must be restored to a positive state within six months from the end of the company’s financial year.

Key Flexibility: Exceptions and Transition Period

The MGA has provided flexibility for operators:

• Exceptions to the Restoration Requirement. Operators can request an exception to the immediate restoration of negative capital if they can demonstrate financial stability in a broader group or provide safeguards, such as bank guarantees or asset pledges.
• Transition Period for Existing Operators. Operators in a negative capital position as of December 31, 2024, can apply for an “Extended Restoration Period” of up to five years. The length of this period will be determined by the MGA on a case-by-case basis, based on factors such as business model, size of the negative equity deficit, company’s overall financial performance, etc.

Market Impact and Consequences of Non-Compliance

The policy is mandatory, and non-compliance will lead to serious consequences. The MGA reserves the right to impose sanctions, ranging from warnings to license suspension or revocation.

The effects on the market will be substantial:

• For Existing Operators: Startups and small operators will find it more difficult to remain in the market due to the requirement for continuous positive capital. This will require significant financial effort, and undercapitalized companies may struggle to comply with these requirements.
• For Applicants: The market entry barrier has increased, and applicants will now need to provide more detailed and stress-tested business plans.
• For Players: The increase in financial stability of operators in Malta is a step towards better protection of players’ funds and a reduction in the risks of insolvency.

Recommendations

The MGA’s new capital requirements strengthen the financial stability of operators and the protection of player interests. All licensed operators must review their financial strategies and prepare to comply with the new requirements. This is not only a matter of legal compliance but also a key to successful operation in Malta’s stable gaming ecosystem.

At SBSB Fintech Lawyers, we provide expert assistance to help you navigate these regulatory changes and ensure your business remains financially stable. Contact us to learn more and prepare for these legislative changes.