For all those who know something about Malta’s economy they must have been told a hundred times over that Malta’s economy relies heavily on two sectors which, according to official figures, jointly contribute to around 33% of the gross domestic product (GDP). I am referring to the financial services industry and the gaming industry. The latter accounts for 10% of Malta’s GDP and employs around 10,000 persons.
Having over 400 licensees in possession of a licence granted by the Lotteries and Gaming Authority, Malta is regarded as one of the most popular gaming jurisdictions worldwide. Being a key player in this industry, Malta is endowed with the responsibility of ensuring sustainable growth of the industry and protection to all players who trust their deposits in online betting accounts. Malta should set a standard for all other European jurisdictions to follow and provide a model of regulated gaming based on best practices. Malta should ensure that its regulations are updated and tailored in a way that is not only appealing to operators but also ensure that players’ funds are protected using the most player protective legal vehicles available. This is one of the most vital and sensitive aspects of iGaming however the rationale is simple: if the player is not comfortable with the regulatory body’s regulations regarding segregation of player funds which ensure and guarantee the secure holding of player funds, whether they relate to deposits or winnings, and the availability of such funds immediately upon a withdrawal request, the player would choose an operator which is licensed in a more player protective jurisdiction. Therefore, not only would the operator lose out but would likely produce a chain reaction whereby the reputation of the Maltese jurisdiction as an iGaming centre would be tarnished and the taxes collected by the Maltese government diminished upon the departure of operators to competing jurisdictions preferred by players.
Malta’s current regulations already provide a degree of player protection and in fact oblige operators to keep players’ monies separately from the operator’s own funds and placed in an account designated as a clients account and held with an approved credit institution. 
In spite of the proactive regulation in place, problems can still arise: Firstly, when operators run short of cash, the temptation of “borrowing” players’ deposits to cover operating costs becomes hard to resist notwithstanding any regulatory imposition. In order to curb this possibility the Lotteries and Gaming Authority, acting in accordance with the Remote Gaming Regulations, requires each operator to submit to it by the 20th day of each following month the amount of player liabilities and proof by bank statements that a corresponding amount of money is held in the client’s account to meet player liability.
The second and perhaps biggest worry of gambling regulators is when a company licensed by them becomes bankrupt and shuts down its websites effectively disabling players from making withdrawals. This was the experience with Full Tilt Poker which failed to pay its players after the operator allegedly failed to segregate players’ funds and mixed players’ funds with the company’s own funds. The typical risk in this context is a possible garnishee of the funds and the subsequent onerous obligation on the part of the company to prove that the monies are players’ monies and not funds of the gaming company. In this case players take their place in a long line of creditors who rank differently and can only cling to the hope of getting paid the amount which was available in their wallets.
However, the situation is dire when the money in the clients’ account disappears and is already used up by the company to pay off its creditors by the time the players make a claim for payment, usually ending up with a situation where the players lose their funds.
This kind of fund segregation coupled with the reporting requirement currently in place in Malta ensures that such a situation is caught early to minimize hardship on players. However present regulation does not guarantee that such situations are averted. In fact, one can take note of the Everleaf case where this licensee had its licence suspended by the Lotteries and Gaming Authority earlier this year, which measure has been declared as too little too late by unpaid players. In this case the clients’ funds went missing and as a result monies owing to the players were never recovered.
An alternative to the current fund segregation approach is available to ensure adequate management and control of players’ funds. A player protection trust affords greater peace of mind than fund segregation. The effect of a person holding assets for another under a trust is that the trust property constitutes a separate fund within the patrimony of the trustee which is distinct and separate from the property of both the trustee and the company. Although already somewhat implicitly recognised by the Lotteries and Gaming Authority and has in fact already been used by some licensed operators, player protection trusts are still not widely used in the iGaming industry. Like any other ordinary trust a player protection trust is created when a settlor (being the gaming operator) settles property into the trust which becomes owned and managed by a trustee for the benefit of the beneficiaries (being the players and the operator collectively). Ideally, the trustee delegates the management of the account to an approved or licenced fund manager to ensure efficient management of the trust account. Once the trust is created, players would be informed that any funds deposited or held in their wallets would be received immediately, transferred by the company to the trust, and any such funds would be managed by an independent trustee. Consequently, funds will not be owned by the operator who has no title to the property or control over the funds of the trust, except for the entitlement of the operator to receive any excess funds which represents the gaming revenue of the company which would be transferred by the account manager upon the instruction of the trustee. Operators who attempt to use player funds to cover operating costs would be turned down by the trustee. On the other hand, the trust instrument would oblige the operator to settle more funds into the trusts whenever there is a shortfall.
In order not to experience any delays in the transfers between the client’s account managed by the trustee and the operating account managed by the operator it is suggested that the two use accounts with the same banking institution.
By creating such a structure operators give comfort both to the regulator and more importantly to players. By making such a structure compulsory on all gaming operators, or alternatively creating incentives for the adoption of a player protection trust, the Maltese regulatory environment would demonstrate once again the robustness of its legislation and would re-impose its position as leader amongst igaming jurisdictions, keeping player protection top of its agenda.
It must be borne in mind that in the iGaming industry, unlike the land based market, competition is rife and player loyalty is rarely acquired. If a player feels that he is inadequately treated by an operator or the supporting regulatory body then it would take him a few clicks to move to another operator. Put simply, in the iGaming business, like any other commercial sector, the player is king and when he is no longer comfortable with existing regulation he moves away. The player protection trust provides an integral instrument towards better regulation, the security required for fund availability and an effective tool which ensures the continued growth and development of the Maltese iGaming industry.
 Times of Malta, ‘Gaming accounts for 10% of GDP’ <http://www.timesofmalta.com/articles/view/20140218/local/gaming-accounts-for-10-of-gdp.507341> accessed 5 February 2014
 James Scicluna, WH Partners ‘2013 – Licence to Gamble – eGR Jurisdictions Report’ <http://www.whpartners.eu/viewarticle/november-2013-licence-to-gamble-egr-jurisdictions-report> accessed 4 February 2014
 Remote Gaming Regulations, Subsidiary Legislation 438.04, article 35
 Nick Jones, ‘The Lotteries and Gaming Authority of Malta: A Rubber Stamp in EU Clothing’ (May 2012) <http://pokerfuse.com/features/editorial-opinion/malta-lga-rubber-stamp-in-eu-clothing/> accessed 9 February 2014
 Charles Rettmuller, ‘Full Tilt Granted Isle of Man Online Gaming License’ (October 2012) <http://www.pokerupdate.com/news/the-full-tilt-saga/full-tilt-granted-isle-of-man-online-gaming-license/> accessed 6 February 2014