With Bill 55 on increasingly shaky ground amid a transitional era for online gambling, what does the future hold for Malta’s point-of-supply industry?

This week has seen the EU heap yet more pressure on Bill 55, a defensive measure introduced by the Maltese government to hold back a tidal wave of player refund lawsuits that could cost the industry hundreds of millions of euros.

Players in Austria and Germany have been able to successfully argue in court that they should be repaid all money lost to operators that offered gambling in their countries without a local licence. The cases stand to erase years of grey market earnings at many operators.

Bill 55, which in June 2023 became an official amendment to the Malta Gaming Act under the title Article 56A, allows judges to reject court rulings from other EU nations if they threaten the economic security of the island’s gambling industry.

It has served Maltese operators well since it was enacted, effectively blocking lawyers from passporting claims from Austria, Germany and elsewhere to the location where operators are legally headquartered, in order to force them to pay out.

This has triggered an international legal wrestling match, now being fought via a series of cases at the Court of Justice of the European Union (CJEU), the EU’s highest judicial authority.

So far, the judgements and opinions issued have not made comfortable reading for the Maltese industry or its regulatory officials.

Earlier this month, the court appeared to settle a longtime debate on which the entire premise of Malta as an offshore hub is founded. Judges said that the freedom to provide services within the EU does not allow for operators to ignore local prohibitions on certain types of gambling.

That was followed this week by an Advocate General (AG) advising judges that if they were to consider the legality of Bill 55, it should be struck down.

It also reaffirmed the court’s dim view of gambling as a cross-border service.

As the opinion put it: “Under the current state of EU law, Member States are under no obligation to recognise gambling licences issued by other Member States. Accordingly, a Maltese gaming licence is, in principle, valid only in Malta.”

This opinion is only advisory, and is unlikely to amount to anything in this particular case (C-683/24) because the AG also recommended that the case as a whole should be ruled inadmissible.

But this is just one in a handful of similar issues being considered by the CJEU and the more time that passes, the greater the pressure appears to be on Malta and Bill 55.

The EU is also taking a tandem approach: The European Commission, the EU’s executive arm, has itself opened an investigation into Malta and the legality of Article 56A and has indicated through its own statements and submissions to the CJEU that it considers the provision to be against EU law.

New tactics needed?

All of which leads to several difficult questions for Malta and the many gambling companies based there.

The first is a defensive issue: With Bill 55 on the ropes, how will the nation prevent the many operators who call its islands home from being stuck with a huge refund charge?

Work is already underway to mount a new defense. The tactic uses the same inspiration as Article 56A, which argues that allowing the foreign court judgments that demand large payments from operators would seriously damage the Maltese economy and thereby upset its “public policy”.

The EU principle, also known as “ordre public”, allows for member states to make legal exceptions in order to protect their society.

In a pair of new cases addressing transferred player refund claims from Austria, Maltese lawyers have argued, without reference to Bill 55, that granting the payment orders would upset the nation’s public order.

These two cases are a clear attempt to establish that, even without any specific Gaming Act amendments, the principle of ordre public protects Maltese gambling firms from having to pay up.

The problem is, the CJEU may have seen this coming.

“The fact that the enforcement of certain judgments may entail serious economic consequences for a national operator, an industry or even the Member State addressed does not justify recourse to the ‘public policy’ clause,” reads the recent AG opinion.

Although lawyers in Malta insist that the AG’s comments should be taken only to refer to Bill 55.

Meanwhile, lawyers fighting to recover refunds believe that cases like these, which have already been appealed, will themselves wind up in the CJEU and at least buy more time for Malta before payouts need to be made.

A new kind of industry hub?

Perhaps the more fundamental question is what Malta offers as a gambling hub over the next decade.

It’s been apparent for some time that the value of a Maltese licence is degrading, through no fault of local authorities.

As European nations gradually switched on their own licensing models, operators have needed to collect local approvals.

Even where nations have clung firmly to monopolies, like in Norway, authorities have also become more effective in enforcing against offshore operators who offer into their territories.

The clear trend of the CJEU also indicates that arguments based on the freedom to provide services are practically finished.

In face of this reality, regulators and business leaders in Malta are looking further afield. Maltese law firms have appeared in locations as far afield as the UAE and Taiwan in recent years, as they look to advertise the nation’s status as a centre of iGaming excellence to emerging online gambling markets.

Leaning into the density of online gambling expertise is also an increasingly important strategy for those looking to attract investment to Malta.

The reason that the industry flocked to Malta in the first place may no longer be relevant, but it’s still the case that two decades later the nation boasts a greater concentration of industry talent than in any other European nation.

There’s also been an increased focus on suppliers, which typically have lower local compliance overheads and more ability to run their businesses remotely from the territories where their content is used.

Although this sector is increasingly subject to local licensing, as well as new compliance burdens designed by regulators looking to drive a wedge between on- and offshore online gambling markets.

Change is inevitable

Malta has demonstrated its ability to adapt and survive, but there’s little denying that the nation’s gambling industry has never been more under siege than it is now.

After decades of growth and success, new ideas are needed to steer the sector into a new phase.

The success with which it emerges from the Bill 55 era will have a dramatic impact on Europe’s online gambling sector and beyond.

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Prediction markets have established a stable, if highly controversial, regulatory niche in the USA and are reaping the rewards from sidestepping traditional gambling markets. So what about Europe? Early signs suggest that any path to success will be significantly more complex.

Over the past 18 months, prediction markets have completely upended the gambling ecosystem in the United States. The likes of Kalshi and Polymarket have gone over the heads of the state regulators to offer a nationwide betting-like service without the need to acquire numerous state-managed licences.

Billing themselves as an alternative financial product, rather than a betting platform, prediction markets are regulated in the US by the Commodities Future Trading Commission (CFTC).

Using these platforms to make a forecast on the Superbowl, operators argue, is no different than risking money on the fluctuating price of corn or whether Disney stock will fall in a week’s time.

That viewpoint has the backing of none other than US President Donald Trump, whose administration has given clear approval to the sector, much to the outrage of the many online sports betting operators still toiling under the various regulations imposed by individual states.

Not such a warm welcome

Europe, however, looks to be a less friendly playing field.

This week, the Netherlands Gambling Authority (KSA) issued Polymarket with a cease and desist order, and a threat of weekly fines of €420,000 if it did not withdraw from the Dutch market.

The authority said that the predictions giant had been offering markets on last year’s Dutch election and ensuing coalition negotiations, which have now ended the appointment of Rob Jetten as Prime Minister.

“Although Polymarket itself states that prediction markets do not fall under the category of gambling, the KSA has taken a different stance,” the regulator said.

“After contacting the company about its illegal activities on the Dutch market, there has been no visible change, and the offering remains available.”

As of the time of publication Polymarket now lists the Netherlands among the group of territories where it says trading is prohibited.

The other European markets where Polymarket declares it will not accept wagers are Belgium, France, Germany, Italy, Poland, Russia and the UK.

Kalshi provides a similar list, which includes Ukraine, Switzerland and Hungary.

That leaves large swathes of Europe available for these companies to operate in, but the status of those operations is unclear at best.

Unlike the US, there is no backing from the EU-level financial regulators for prediction markets. To date, Brussels has not seen fit to comment on the sector at all.

While some legal experts have argued that predictions operators will be able to work in the same sort of legal grey area they enjoy in the US, others are less confident.

“Any other gambling jurisdiction [apart from the US] would regard prediction markets as gambling,” said David Zeffman, head of gambling at London law firm CMS.

Polymarket did not responded to a request for comment on its KSA enforcement by time of publication.

UK sends a message

Although the UK now marches to the beat of its own regulatory drum post-Brexit, there may still be some clues for the rest of Europe in the way that the Gambling Commission (UKGC) has chosen to approach the sector.

In a statement released earlier this month on whether predictions markets are allowed in the UK, the conclusion is very clear: These are just betting exchanges.

“If a prediction market operator was to launch here in Great Britain, we do not believe they would be able to classify themselves as non-gambling products,” said Brad Enright, the commission’s director of strategy.

If Polymarket, Kalshi or another similar company wanted to operate in the UK, it would need to acquire what the regulator calls a “betting intermediary licence”.

“Their core aspects are akin to what in the UK would be described as a ‘Betting Exchange’,” concluded Enright.

Even if prediction markets could successfully argue that they are more akin to financial products, David Zeffman of CMS told EEGaming that this would not create any room to manoeuvre.

“As far as the UK is concerned, it’s either gambling (and then falls under the GC’s jurisdiction) or it’s a financial instrument (and then falls under the FCA’s jurisdiction) – I don’t think there’s any gap between these,” he said.

Didn’t we already do this?

This characterisation of prediction markets as betting exchanges matches what several industry veterans have been saying for some time. Particularly those with long memories, who recall the arrival of Betfair over 20 years ago and the revolutionary effect it had on the market.

The ability to lay bets against another gambler proved to be extremely compelling and Betfair eventually became part of what is now industry giant Flutter.

However despite its originality and impact, time has shown that traditional bookmaking is significantly more popular.

Figures from the Gambling Commission for the 24/25 financial year show that exchanges accounted for just 3.9 percent of the online betting market, compared to 95.3 percent for standard bets.

In the current early days of prediction markets in the US, they do seem to be taking a bigger slice of the pie.

Analysis by the Financial Times suggests that Kalshi is generating annual sports wagering revenues of around $1.3bn, compared to the total US sports betting market of $14bn.

In a strange circular twist of fate Flutter and its chief rival DraftKings have abandoned their allies from the US casino industry and signalled plans to open stateside prediction markets of their own.

But despite their growing status in the USA, precisely how much grey market grace prediction markets can enjoy in Europe is uncertain, but so far the European regulatory response seems significantly colder than the warm embrace of Trump’s America.

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