The Malta Gaming Authority has proposed to significantly increase the amount of paid-up share capital required to be granted a licence in Malta.

Under the proposals, some prospective service providers would see their required capital quintuple to €500,000 while others would see their contribution increase more than sevenfold to €300,000.

The increases vary, based on the type of services the company plans to offer, with those applying to offer multiple services required to hold the combined capital required for each service up to a cap of €1 million.

According to the MGA, the aim of the proposals is to ensure the financial stability of operators and to safeguard the integrity of the industry.

“One of our foremost regulatory objectives is to foster an environment that encourages sustainable growth. This, however, cannot be achieved if gaming companies find themselves unable to maintain financial stability,” a spokesperson for the MGA said.  

The proposed changes have been met with words of caution from industry stakeholders, however, who fear the revised capital requirements could discourage start-ups – new companies run by small teams with typically less access to capital – from basing their operations in Malta.

At a recent panel discussion organised by the Malta Business Network, gaming law expert Joseph Borg voiced concerns the proposals could stifle innovation by pushing away start-ups.

Industry concerns

Speaking to Times of Malta, Borg, who is a partner with advisory firm WH Partners and lectures at the University of Malta, said that while he understood the MGA’s decision, the sector could lose out.

“My fear is the changes may push start-ups to go to other jurisdictions and that if too many do, we might lose out on some good ones. But I also understand the MGA is trying to raise its standards,” he said.

“My invitation to the MGA is to be careful and to not keep raising requirements to a level where we start losing start-ups to other places... I would personally like to see more start-up success stories, without compromising the level of compliance required.”

One of our foremost regulatory objectives is to foster an environment that encourages sustainable growth- MGA spokesperson

Responding to the concerns, a spokesperson for the authority said the proposed changes were a “proactive step to secure the reputation of the gaming industry and to enhance its attractiveness for the long term”.

Stressing the MGA was aiming to ensure sustainable growth, the spokesperson said that meant “being open to start-ups that have the necessary resources to operate effectively and in a compliant manner.

“Cushioning the financial barriers for companies to start up in Malta can take other forms and should not be at the expense of their viability,” the authority said.

Proposed share capital rules for Malta gaming licence

For gaming companies offering games of chance played against the house – such as roulette, blackjack, poker and sports betting – the amount of share capital they will be expected to hold will rise from €100,000 to €500,000.

How share capital rules requirements could change.

Businesses requiring a licence for games between players, where the company is less exposed to risk but instead takes a commission from players’ activities, will see their share capital requirements revised upwards from €40,000 to €300,000, as will companies offering betting on fantasy sports games.

Meanwhile, those offering business-to-business services such as software or compliance management will be required to prove they have €300,000 in share capital.

Paid-up share capital is the amount of money a company has received from shareholders in exchange for stock. It is seen as a measure of company health and confidence, representing money that has been invested rather than borrowed.

While the capital can be accessed and spent by the company, the MGA spokesperson told Times of Malta that companies would be regularly monitored to make sure the value of their liabilities does not exceed their assets – a state known as negative equity.

Those that do slip into negative equity will be required to restore their capital to the proposed amounts by the beginning of the next year, according to the proposed policy document.