Robert Zammit, Senior Associate, has recently written an article on fantasy sports games in the spring issue of the European Gaming Lawyer.  Robert gives a topical overview and discusses regulatory framework around fantasy sports.

Fantasy sports games are not a new concept. Countless variants of this hobby have been with us for decades and most sports fans have experienced and played either in community format or in simulation format. The popularity of these games is already significant and the amount of users in community fantasy sports games worldwide is increasing constantly.

Regulators around Europe  should decide on whether to consider fantasy sports games with prizes as a gambling product and issue licenses or exclude them completely from their licensing regimes. This dilemma derives from the singularity of fantasy sports games whereby the element of skill is predominant but the element of chance is still present, with different types of fantasy sports games requiring different levels of skill. Certain jurisdictions consider fantasy sports games as skill games and therefore not a licensable product, but this approach is not acknowledged by all jurisdictions. Some consider fantasy sports games as products similar to lotteries, others as a product similar to betting.

But why should remote gambling regulators seek to license fantasy sports games when the games are predominately games of skill and the risk related to these kind of games is low? And why should fantasy sports games operators seek to be licensed when an unregulated market could be more attractive? Regulators are seeing the opportunity to capitalise on this potential lucrative niche by licensing and taxing a new product, while at the same time promising operators a reliable, maybe more flexible, licensing regime for the operators to be able to attract more users by showing that they are licensed and regulated. On the other hand, operators’ main reason to be regulated is to be able give a sense of security to its users. As always achieving a balance between the targets of the regulator and the operator is a challenge.

One of the main US daily fantasy sports operators, Draftkings Inc, a Boston based company, has seen the potential  of the European market and has already obtained, from the United Kingdom Gambling Commission, a gambling software and pool betting license to offer daily fantasy sports games in the United Kingdom.

On the other hand, in Germany, a fantasy sports game offered by Axel Springer, has been declared by the courts as “game of entertainment” and therefore does not require a license, which makes the German market an interesting and easily accessible market for fantasy sports games operators.  Similarly in Italy the gaming regulations do not cover these products.

The Danish regulator on the other hand opted to change its gambling laws to allow for a specific permit for fantasy sports. Gambling operators holding a betting license in Denmark are allowed to offer fantasy sports games without the need of obtaining an additional license but any smaller operator wishing to offer just fantasy sports games, may opt to obtain the specific permit, which is a less restrictive license but with a cap on the annual gaming turnover and the return to players.

The Malta Gaming Authority, in the Digital Games of Skill with Prize Position Paper issued in December 2015, analysed the various skill games in the market and offers a clear indication of what the Malta Gaming Authority considers as licensable product. Games where the predominant element is skill, are considered to be out of the Malta Gaming Authority’s scope. However, if a skill game with prize meets particular objective criteria listed in the position paper, such skill games, might still be licensable. The Malta Gaming Authority has taken the approach to look at each product on a case-by-case basis and placed the onus of proof that a game is a skill game which would not require a license onto the operator.

With regard to fantasy sports games, the Malta Gaming Authority recognises that the skill element is predominant, yet should still provide a licensing framework to provide users the peace of mind that the product is genuinely based on their skill rather than chance.  Although the intention of the Malta Gaming Authority is to provide a differentiated approach from the standard gambling products, the current licensing regime does not provide for many options, and currently should an operator wish to obtain a license from the Malta Gaming Authority to offer fantasy sports games, the operator would have to rely on the current licensing regime.

Therefore for a differentiated approach for fantasy sports games in Malta, we will have to wait for the new legislation expected to be published during this year, to see how the checks and monitoring imposed will differ from those which will be imposed on typical gambling-type games.

Source: 2016 – Fantasy Sports Games – Robert Zammit – WH Partners – Leading Law Firm Malta