Could Estonia become a regulatory rival to Malta?

Estonia is emerging as one of European gaming’s most important hubs. The capital of Tallinn is buzzing with innovative young companies which are disrupting the space. Meanwhile, several of our industry’s biggest names have also opened offices in the country. But as well as a centre for tech innovation, Estonia is also increasingly being considered as a viable regulatory option, particularly for those with an eye on dotcom European markets. For many years, Malta has offered the de facto licence for any operator looking to enter European markets without dedicated regulatory frameworks.

While some have argued that the Malta licence has been devalued as more European jurisdictions introduce their own dedicated regulation, it is still a popular choice. You’d be hard pressed to find a major operator not in possession of an MGA licence. Until now, there hasn’t been serious competition to Malta, but Estonia’s Tax and Custom Board may now be offering precisely that. There is a growing list of operators who have been granted a remote gaming licence in the country, ostensibly to offer products to Estonian residents via a .ee domain.

However, there is a case to be made that these licences may serve a similar purpose to those offered by the MGA when looking to operate elsewhere in Europe. Of course, as a member of the European Union, an Estonian licence is likely to offer certain protections in member states. The European Commission has tended to side with operators in markets which have not yet established their own, workable frameworks.

However, it is fair to say the European Commission has also been somewhat ambiguous on the topic.

While it notes that: “the freedom to provide services or to open a business in another EU country is particularly relevant”, it also acknowledges that: “EU countries are autonomous in the way they organise their gambling services”.

Progressive licensing

The Estonia licence is appealing for a number of reasons. Firstly, its 5% tax rate on remote revenue is manageable, and the upfront fee relatively inexpensive. But more than that, Estonia has shown a willingness to pioneer and innovate within the regulatory space. The country was one of the first to offer cryptocurrency licences, quickly becoming a hub for companies utilising blockchain tech; since the introduction of the licences in 2017, more than 1,400 have been issued.

There are, however, reasons to be cautious. In June, the country revoked around 500 of these licences amid concerns around money-laundering risks. Occasional stumbles are to be expected when a regulator takes such a progressive approach, and there are plenty of reasons to see why Estonia is appealing to operators. As with Malta, it has now built up a pool of talent which makes it a viable centre not just for licensing but also operations.

A tech-savvy and highly educated population, combined with what is now considerable experience across the gaming industry, makes it a popular choice, particularly for those with tech-led businesses. And while the internal consumer market does not match up to larger European countries, its economy has grown faster than most other European countries in recent years.

An EU gaming licence?

This is not to say that it is the end of the road for the MGA licence. While many have long dreamed of an EU-wide licence, the reality is that we are further away than ever. More countries across the continent are making moves to introduce their own frameworks for online gaming, and as they do, generalist licences will become less valuable.

Despite ongoing delays, both Germany and the Netherlands – two countries long considered fair game for Malta licence holders – appear determined to introduce new regimes. Even for holders of Malta or Estonian licences, a market-by-market approach to regulatory compliance will be more critical than ever.

Antonio Zanghi is an online gambling compliance expert with years of experience in the field. He has previously worked at IGT where he was involved with both regulatory and technical compliance, successfully managing compliance in the Canadian and European regions. He now runs Maxima Compliance, a full-service compliance consulting firm supporting online gambling businesses.