Malta’s prime minister Robert Abela has defended the country’s controversial gaming law, the so-called Bill 55, in a meeting with Austrian chancellor Karl Nehammer.

During the meeting with Nehammer (pictured), Abela said that MGA-licensed operators will continue to be protected from “baseless legal challenges”.

He said the aim of the bill was not to protect gambling operators in cases where the law was violated, but rather to “protect against procedures that do not respect the European principle of a free market”.

He added that the government’s priority was to ensure “the integrity and strength” of the Maltese jurisdiction in the gambling sector.

As such, he defended the country’s “robust legal framework” for remote gambling in the EU.

“This is consistent with the MGA’s approach of ensuring that its licensees are allowed to operate where they have a justifiable legal reason to do so, and always in a compliant manner,” said the MGA on LinkedIn.

Ongoing disputes over European law

Whether online gaming is covered under EU free movement of services rules is one of the most important legal questions in the European gaming industry.

Historically, much of the Malta-based iGaming sector has used this legal basis of offer online gambling throughout the continent.

Malta’s government, as well as operators including 888 and Kindred Group, have maintained this position.

However, many European jurisdictions with their own local licensing regimes have argued that MGA-licensed operators in their country effectively serve as illegal gambling.

In some countries, including Austria, Germany and the Netherlands, lawyers have had success in suing gambling companies for historic losses on behalf of players.

While some operators have opted to pay-up after losing cases or negotiate settlement fees, others have not – notably 888.

This has led to lawyers attempting to sue some gambling businesses in Malta, where many of the companies are registered.

Bill 55 protects gambling operators from liability

Approved in June, Article 56A to Malta’s Gaming Act, more commonly known as Bill 55, protects MGA-licensed gambling operators from liability resulting from their iGaming activities.

The law has proved controversial throughout Europe, facing specific criticism from German regulator GGL, which said the legislation “should not be compatible” with European law.

In July, the European Commission said it would scrutinise the law to ensure its compatibility with EU law and said it had requested more information from the Maltese authorities.

Historically, the Court of Justice of the European Union has been the final authority on disputes over national and supranational law. AG has revealed an 11.6% year-on-year reduction in revenue for the first three quarters of 2023, to €34.5m.

Revenue was impacted by several factors including regulatory developments in Bet-at-home’s core market of Germany, it said, particularly the imposition of cross-product and cross-operator monthly betting limits for customers.

The group’s earnings were also negatively impacted by adverse sports results, as previously reported on by several operators in Q3.

Customer-friendly results in English football, which saw an unusually high number of favourites win their matches in Q3, were likely responsible for a reduction in revenue.

Bet-at-home had already issued a warning to investors and adjusted its guidance for the full-year 2023 downward as a result.

In addition, the operator said it also suffered from a weaker performance in the online gaming segment, which was negatively impacted by harsher restrictions on operators than in the prior year.

Costs, results and outlook

While revenue fell year-on-year, Bet-at-home was also able to reduce some of its costs, as personnel expenses fell by 38.8% year-on-year to €6.6m following two restructuring programmes implemented during the 2022 financial year.

However, the operator increased its marketing costs at the same time, which grew by 33.8% to €11.7m as it continued to intensify its brand presence through “a large-scale advertising campaign and numerous bonus promotions.”

“The management board intends to further expand the company’s strong market position in the sports betting sector in the core markets of Germany and Austria, in particular through targeted marketing measures,” the company added.

Other operating expenses during the first three quarters of 2023 fell 15.9% year-on-year to €8.6m.

Those costs brought the operator’s EBITDA for the nine months to €1.7m, down 24.4% year-on-year. The business declared a net loss for the period of €231,000.

Bet-at-home now expects to generate total revenue between €44m and €48m in the full-year 2023, with EBITDA “in the upper range” of previously issued guidance between -€3m and €1m.

By the end of the year, the operator intends to have its key corporate functions performed by outsourcing partners.

Its Malta-licensed operation had already been outsourced to EveryMatrix in February, while the outsourcing of its German-licensed operation was successfully completed in October, it said.

“The group will henceforth concentrate internal development and operation solely on those customer- and revenue-relevant components that cannot be sourced externally,” it concluded.

Lottery giant Allwyn recorded GGR of €1.96bn in Q2 2023, up 115.3% year-on-year, following its acquisition of Camelot UK and Camelot LS.

The company, formerly known as Sazka, completed its Camelot acquisitions – consisting of the UK’s National Lottery operator and the operator of the Illinois State Lottery – in February 2023, making Q2 the first full quarter to include their results.

Excluding the impact of the acquired businesses, Allwyn’s like-for-like GGR grew by 7.6% year-on-year to €979.8m.

Of the total €1.96bn in GGR, Camelot’s operations in the UK were responsible for around half at €980.3m, up 1.2% year-on-year.

As for Allwyn’s operating regions excluding the Camelot acquisitions, Greece and Cyprus generated €498.1m in GGR, up 12.6% year-on-year.

Austria generated a further €360.3m, up 1%, while the Czech Republic brought in €121.4m amid a year-on-year increase of 9%.

Outside the metric of GGR, Allwyn LS Group (formerly known as Camelot LS) which operates the Illinois State Lottery, generated a further €47.1m in total revenue, amid a 3.9% year-on-year reduction.

That revenue is generated from private management services and therefore is not included as GGR in Allwyn’s reporting.

Similarly, the company’s operations in Italy generated additional net revenue of €116.5m, up 3.4%. In that market, Allwyn holds a 32.5% stake in local lottery operator LottoItalia.

Overall, Allwyn declared adjusted EBITDA for the quarter of €381m, up 34.6% year-on-year.

“I am happy to report that the good performance in our existing geographies was driven primarily by strong growth in digital, where we have sustained our momentum in product development and innovation,” said Allwyn CEO Robert Chvatal.

“Alongside this, we continue to evolve and digitise the customer proposition in physical retail, while during the quarter we once again saw resilience of demand for our products, even in an environment where consumer spending remains under pressure.

“We continued to deliver strong margins and solid free cashflow generation, with only a limited impact of inflation on our cost base, reflecting our favourable cost structure, with our largest cost categories being directly linked to revenue, and our focus on cost and capital efficiency,” Chvatal concluded.

Malta’s parliament has passed a controversial law aimed at safeguarding MGA-licensed gambling operators from overseas claims for damages.

Known as Bill 55, this legislation stipulates that Maltese courts will no longer enforce foreign court judgments if the companies possess a Maltese gambling licence and comply with local regulations.

The law was introduced by Malta’s economy minister Silvio Schembri following discussions with local operators and in response to a surge of lawsuits from abroad.

Particularly, civil courts in Germany and Austria have ordered MGA-licensed operators to compensate players for historical losses incurred through alleged illegal online gambling.

The prevailing argument in these cases is that the absence of a valid licence nullifies the contractual agreement between the operator and the player.

Furthermore, the players frequently contend that they were unaware of the illegality of the gambling offers in their respective countries at the time.

Last month, iGaming NEXT reported that the combined value of these claims is projected to reach hundreds of millions of euros.

Public policy

Bill 55 states that “as a principle of public policy,” no action can be taken against a licence holder, current or former officers, or key persons of a licence holder, in relation to the provision or receipt of gaming services if such action contradicts or undermines the legality of gaming services provided in or from Malta under a valid licence issued by the MGA.

Additionally, the court is obligated to reject the recognition and enforcement of any foreign judgment associated with an action described in this specific provision.

EU complaint

However, a significant question remains whether Malta’s new law is compatible with EU law.

The EU Commission has confirmed that it is currently examining a complaint filed by German lawyer Dr. Benedikt Quarch and Austrian lawyer Karim Weber.

They accuse Malta of violating European law and advocate for infringement proceedings to be initiated.

The extent of the impact of the Maltese ‘protective shield’ on operators facing lawsuits in Germany is yet to be determined.

However, many of the affected companies are now also on the German gambling regulator’s whitelist of approved operators.

The GGL stated to German news outlet Tagesschau that it will closely monitor the situation.

It emphasised that if providers employ the law at the expense of German players, a case-by-case evaluation will be necessary to determine whether it affects the provider’s reliability or necessitates adjustments to the supplementary provisions of the permits.

The MGA, meanwhile, pointed to the “very aggressive advertising” tactics of German and Austrian law firms to encourage players, who may have suffered financial losses, to seek legal assistance.

Last year, iGaming NEXT described how lawyers were seeking assistance from technical platforms to aggregate and handle player claims, enabling the filing of mass historical claims against operators.

The MGA suggests a significant amount of Austrians and Germans are now fully aware of their ability to potentially reclaim losses.

This kind of messaging, the MGA argues, is particularly harmful to problem gamblers, as it could falsely assure them there is no risk involved.

Malta’s iGaming industry is braced for a high-stakes battle as it gears up to defend its operators against player reimbursement claims from other countries.

The collective worth of these claims, seeking to recover losses from alleged illegal online gambling, is projected to reach hundreds of millions of euros.

Despite foreign court orders instructing them to do so, some MGA-licensed operators, including 888 and Flutter, have reportedly refused to refund players.

The companies contend that these judgments are devoid of a legal foundation, asserting that their actions are within the purview of EU law.

Malta’s government has stood firmly behind these operators and is actively preparing to introduce legislative amendments aimed at blocking the enforcement of foreign court rulings against MGA-licensed companies with a presence in Malta.

Several foreign law firms representing gamblers are particularly incensed about Malta’s proposals, which they argue could contravene EU law.

Some background

In recent years, operators have been confronted with a multitude of lawsuits from players seeking reimbursement for historical losses incurred through alleged illegal online gambling.

The majority of these claims stem from Germany and Austria.

While the specific legal circumstances may differ (more details below), the primary argument put forward in these cases is that the absence of a valid licence renders the contract between the operator and the player null and void.

Consequently, players assert that the funds they lost while gambling should be returned.

There has been a notable upsurge in these cases over the last year, largely attributable to the involvement of legal tech and litigation financing firms.

These entities provide the technology to process player claims, thus enabling them to file collective claims against operators in return for a portion of the awarded compensation.

Dr Benedikt M. Quarch, a lawyer and co-founder of legal tech company RightNow, suggest the total value of these claims reaches a substantial amount in the three-digit millions.

German litigation limbo

In June, iGaming NEXT first reported about the rising number of player lawsuits in the German courts to recoup losses that pre-date Germany’s regulated gambling market.

The vast majority of these cases concern funds deposited in online casinos before 1 July  2021, at which point these games were only regulated in the state of Schleswig-Holstein.

Although not all German courts follow that argument, several courts have ordered operators to reimburse funds to players, with thousands of settlements pending.

“Given that these companies are licensed by the MGA, the judgments need to be enforced in Malta. This is also where the operator is based and where the funds should be located.”
Dr Marlon Borg, partner at DF Advocates

Several higher regional courts have also rendered similar judgments.

In an effort to circumvent additional court rulings and maintain confidentiality, some operators have proactively reimbursed losses and opted for out-of-court settlements.

These settlements are often accompanied by non-disclosure agreements, to keep these disputes out of the headlines and away from public scrutiny.

Nevertheless, these cases are likely to continue in German courts for a considerable period in the absence of a definitive federal ruling, at least according to Quarch.

Austria’s supreme court ruling

In Austria, the situation presents some notable distinctions. Casinos Austria, the state-supported gambling company, has maintained a monopoly on casino gambling since 2016.

Austria’s supreme court has ruled that other companies operate unlawfully because they contravene a federal gambling monopoly and therefore must reimburse losses.

According to the Financial Times, more than 2,500 gamblers have been repaid losses totalling €75.8m following court judgments and out-of-court settlements, while €34m in payouts has been withheld.

Operators argue that the state-sanctioned gambling monopoly in Austria contradicts the principles of EU market freedoms and should not be enforced, in accordance with the principle of the supremacy of EU law.

Another point of contention arises from the fact that, in numerous instances, Austrian courts have mandated operators to reimburse players for their entire losses, even in the case of poker, where operators solely collect a rake and do not retain the losses themselves.

No funds in Malta

Lawyers involved in the cases have identified both 888 and Flutter (primarily via PokerStars) as the main operators refusing to reimburse the funds.

“Given that these companies are licensed by the MGA, the judgments need to be enforced in Malta,” said Dr Marlon Borg, partner at DF Advocates, a Maltese law firm representing the local interests in some cases. “This is also where the operator is based and where the funds should be located,” he told iGaming NEXT.

“In the case of 888, we have received information that 888 holds assets in Gibraltar but has no funds in Malta. A garnishee order has been issued against 888 and communicated to all banks and payment service providers in Malta.

“However, they have all confirmed that they don’t hold any funds on behalf of the company in Malta. Based on this, we have initiated bankruptcy proceedings with a creditor’s liquidation lawsuit, arguing that if they lack the funds, they are essentially bankrupt.”

A garnishee order is a common form of enforcing a judgement debt against a creditor to recover money.

888, meanwhile, stressed the “lawsuits are procedurally incorrect” and in violation of EU law, Borg said.

Malta’s draft law

In response to the rising number of foreign lawsuits, Malta’s Economy Ministry proposed to amend its gaming regulations by adding a provision that would prevent Maltese courts from awarding damages to plaintiffs who sued gaming businesses for offering their services abroad.

The draft law, known as Bill 55, has completed its initial reading in the Maltese Parliament at the end of April and is currently undergoing the parliamentary process.

One of the proposed amendments states that “as a principle of public policy”, no action can be taken against a licence holder, current or former officers, key persons of a licence holder, in relation to the provision or receipt of gaming services if such action contradicts or undermines the legality of gaming services provided in or from Malta under a valid licence issued by the MGA.

Furthermore, the court is required to reject the recognition and enforcement of any foreign judgment related to an action described in this particular provision.

A matter of public policy

Malta has fought many battles with the EU over the regulation of iGaming in Europe.

The island’s Economy Ministry stated that the government remains strongly committed to protecting the status of the Maltese gaming sector and its licence certificate.

In a statement sent to iGaming NEXT, the Ministry emphasised that Malta’s regulatory standards in this field are “exceptional” and uphold the fundamental freedoms granted to individuals and establishments within the EU, including the freedom of establishment and the freedom to provide services.

“In the absence of harmonisation of regulation of this service, the government has given regulated operators the necessary assurance against unfounded challenges, as a matter of public order for the country. The bill is solely intended to enshrine this approach in law,” said the Ministry.

Strong criticism

The draft law has faced sharp criticism from both German and Austrian lawyers.

In a strongly worded letter written to European Commissioner for Justice Didier Reynders and to Economy Commissioner Paolo Gentiloni, Quarch and fellow layer Karim Weber from Austria described the bill as an “attempt by the government of the Republic of Malta to blatantly undermine European Rule of Law by blocking the fundamental rights of EU citizens and residents.”

In conversation with iGaming NEXT, Quarch further stated that Malta’s draft bill clearly goes against the principle of separation of powers.

Malta, he said, referred to the Recast Brussels Regulation, which states that cases can be appealed should the judgment be contrary to public policy.

“If the law is passed, Malta would most likely have the EU as an opponent. If the law is withdrawn, it would be an admission that it is not correct.”
Dr Benedikt M. Quarch, lawyer and co-founder of RightNow

However, he emphasised, it is up to the courts to decide whether decisions from EU countries can be recognised and enforced.

Moreover, the government of Malta has no authority to intervene in the independent arm of the judiciary to determine what constitutes public policy.

Should Malta go ahead with the law, the lawyers also wrote in their letter: “This will set a very dangerous precedent not only for any action to be taken or not against Maltese gaming companies, but for any EU member state judgment to be enforced in the Maltese state.”

DF Advocates partner Marlon Borg said he was “shocked” by the bill that had been presented.

“We have seen a number of judgments from the ECJ, which hold that the legislative can never instruct the judiciary whether to accept or not certain claims being put forward,” he added.

Is there an alternative?

While there is a consensus within Maltese iGaming circles that Malta should safeguard the industry, others have suggested to iGaming NEXT that Malta has taken the wrong stance on this issue.

Some believe Malta’s defence should have been based on the fact that since the bets were facilitated in Malta, any player lawsuits should also have been heard in Malta.

888 stands firm on EU principles

888, meanwhile, told iGaming NEXT that it has taken “extensive independent advice from lawyers and experts both inside and outside of Austria” who agree that the position adopted by the Austrian Courts is contrary to the fundamental EU principle of freedom to provide services. 

“Like many other international leading gambling operators, the group services Austrian customers via a licence issued by the Malta Gaming Authority. 

“This position is based on the fundamental EU principle of freedom to provide services. While the Austrian Courts have challenged this, the group continues to contest the compatibility of the Austrian licensing regime with EU law,” 888 said.

“The Malta Gaming Authority concurs with this view and therefore takes the position that gaming service providers licensed by it are able to offer their services in Austria entirely legally on the basis of their freedom to provide services within the internal market, insofar as they remain compliant with the Maltese regulatory and legal framework,” the company stressed.

Lastly, 888 expressed absolute confidence in its “legal and regulatory position”.

What’s next?

German lawyer Quarch said that the European Parliament will also bring the issue to the attention of the European Commission later this week.

Germany’s gambling regulator (GGL) is also looking into the matter.

Quarch pointed out that the GGL did not issue permits to Curaçao-licensed operators on purpose because judgments cannot be enforced there. This could hint at potential wider implications for Malta as an iGaming-focused business hub.

In any case, he says, Malta is in a tricky situation: “If the law is passed, Malta would most likely have the EU as an opponent. If the law is withdrawn, it would be an admission that it is not correct.”

While it is not yet known when the bill will be tabled again in Malta’s parliament, Quarch hinted that delays could work in their favour.

“The Maltese government should be well aware that it is not compatible with European law. However, what they gain from it is time,” he told iGaming NEXT.

“It can easily take 18 months, if it goes quickly, or three years, if it proceeds normally, for the ECJ to make a decision. That is certainly a long time during which assets can be moved.”

A streamlined bet-at-home has provided full-year revenue guidance for 2023 after EBITDA plummeted by 85% last year to €2.1m.

Topline numbers

Gross betting and gaming revenue from continuing operations hit €53.5m, a decrease of 9.8% on last year. The decline was primarily due to exiting the UK market and the implementation of cross-product deposit limits in its domestic market of Germany.

Sports betting revenue came in at €49m, down 13.4% year-on-year, while gaming revenue rose by 60.7% on the prior-corresponding period to €4.5m.

After the reduction of betting taxes and gambling levies, net gaming revenue (NGR) for full financial year 2022 reached €42m, down 11.8% annually.

Full-year EBITDA plummeted by 85% to €2.1m as so-called “other” operating expenses more than doubled to €16.2m.

These expenses included an increase in legal and consulting fees, as well as transaction costs, while other high costs relate to the reconciliation of legal disputes in connection with the brand, which is in liquidation.

Advertising expenses increased by 14.3% to €13.6m due to more acquisition and retention offers and a 2022 World Cup marketing campaign.

Personnel expenses decreased, however, by 27.4% to €13.5m due to a restructuring programme, which saw 65 Austria-based staff laid off amid further cut backs.

News nugget

The impact of extreme measures taken throughout 2022 to reorganise and streamline the firm’s operations stood out.

The company changed its historical approach of in-house development to increased outsourcing, with that strategy to be deployed throughout financial year 2023.

In the second half of 2022, operational focus was on the implementation and testing of a new platform, while extensive adaptations to meet German regulatory requirements were also introduced.

These measures, combined with withdrawal from the UK and further preparations for outsourcing, led to a significant reduction in the group’s workforce.

The company did not provide a figure for the number of employees.

Current trading and outlook

Management expects to generate gross betting and gaming revenue of between €50m and €60m for full-year 2023. It has also guided to EBITDA in the range of -€3m to €1m.

The company said Germany and Austria would become areas to target for revenue in 2023 due to the strong awareness in those markets of the bet-at-home brand.

Financial resources, resulting from staff cuts and other fixed cost cutting measures, will be primarily used for customer acquisition and marketing this year, according to management.

DraftKings will no longer offer daily fantasy sports (DFS) contests in Austria, Germany, Ireland or Malta from 22 January 2023.

According to an email sent to DFS customers in those countries and seen by iGaming NEXT, players will be prohibited from depositing funds and entering contests in the jurisdictions, and will also need to withdraw all funds from their accounts before the 22 January deadline.

The operator added that as of today (18 January), in-game currencies such as Crowns and DK Dollars, along with any existing contest tickets, will be converted back into US dollars for withdrawal.

Woke up to the bombshell that Draftkings are withdrawing from the Irish market immediately and you’ll no longer be able to play DFS here. 😕 They’re advising to withdraw money ASAP.

You’d have thought they would have waited until the NFL season finishes at least!?

— Mícheál Nagle (@Micheal_Nagle) January 18, 2023

“Following this conversion on 18 January, we strongly recommend you initiate a withdrawal request from DraftKings as soon as possible,” the email read.

“Should any funds remain in your account after 22 January, DraftKings will not be able to process withdrawals and is required to remit any remaining funds in your account to the Malta Gaming Authority (MGA) for customers that were located in Austria, Germany, Ireland and Malta when they registered their account.”

Bad news for German @DraftKings users and on a very short notice. I hope withdrawal works, already contacted support. Very sad I cannot play from Germany anymore.

— uglywolf (@uglywolf6) January 18, 2023

DraftKings also requested that any customers who have not made a deposit in the past six months now make an additional €5 deposit into their accounts, “to update [their] linked payment method,” and subsequently process a withdrawal of their full remaining balance.

Customers whose funds are remitted to the MGA should be able to recover them from the regulator.

Several people have taken to social media to comment on DraftKings’ withdrawal from these markets, including new White Label Casinos CEO Phil Pearson on LinkedIn:

Other users of the operator have taken to Twitter to express their dismay at the sudden news.

“Bad news for German DraftKings users and on a very short notice,” one said. “I hope withdrawal works, already contacted support. Very sad I cannot play from Germany anymore.”

On DraftKings’ Q3 2022 earnings call back in November, CFO Jason Park alluded to the operator pulling back from its DFS operations in certain markets this year.

He said: “In 2023, we expect gross margin to improve slightly relative to 2022 as we reduce promotional intensity in more mature states, partially offset by new state launches and continued mix shift out of DFS.”

Online operator AG has confirmed that it will wind up its Malta-based operation, after announcing in October that its online casino offering in Austria had been discontinued as a precautionary measure following rulings by Austrian courts.

Although the operator said it believes national Austrian gambling regulations are contrary to European law, it said it is not foreseeable that it will offer online casino in the jurisdiction in the near future.

In view of its withdrawal from the market, bet-at-home’s management and supervisory boards have analysed the situation, and concluded that it is not possible for the Malta-based Entertainment Ltd to continue operating.

It said that in the absence of a positive going concern forecast, the business is expected to be wound up as it is no longer in a position to service its liabilities from existing or independently generated funds.

As a consequence, the operator said it expects the Maltese business will be deconsolidated from the AG Group financials.

Player balances of customers are in no way affected by the winding up of the business, it said, and it does not expect the decision to have any material impact on the Group’s ongoing business activities.

The operator concluded that the winding up will have no consequences in its key markets of Germany, Austria, the UK and Ireland, while further work is underway to gain access to new markets and ensure future growth for the business.