UK-based Betfair, the world's leading internet betting exchange, has been awarded a licence to operate in Malta in a move that could eventually lead to the company shifting its successful business offshore.
The licence will allow Betfair to operate a person-to-person betting or gaming product from Malta but the implications of the move could be far more significant.
Observers in the industry believe Betfair is contemplating shifting its entire operations to Malta if the UK punitive tax laws are enforced, a move that would translate into millions of liri in revenue.
"Malta's excellent technological infrastructure, its progressive and responsible gambling legislation and its EU membership were the three key reasons that made us apply for a licence there," Betfair chief executive officer Stephen Hill said.
Since Malta is a member of the EU, there would be no need to restrict Betfair's advertising and sponsorship in the UK. It might also be possible to move its computer servers - where the exchange is "hosted" - to Malta while maintaining its main office in the UK.
The company hopes to launch an innovative poker-based product from Malta in the near future.
Betfair's application for a licence comes just a year after Malta introduced its new remote gaming regulations. The Maltese licence enables Betfair to offer new person-to-person games to its customers. Until the new UK gambling legislation comes into force, bookmakers are not permitted to offer P2P games in the UK.
Malta Gaming Authority chief executive officer Mario Galea said the fact that a tier one operator had opted to obtain a licence showed that Malta's regulations were highly regarded and that it was seen by operators as a serious jurisdiction for remote gaming. Betfair's decision could generate substantial revenue and will help Malta strengthen its infrastructure even further, Mr Galea said.
He expressed optimism that Betfair's decision would pave the way for other well-known betting companies to make use of Malta.
Betfair's move is considered to be a warning to the UK Treasury that it will not tolerate any attempt to introduce punitive new taxes on its revenue, contrary to Malta which charges reasonable corporate taxes and gaining taxes of net winnings.
The Guardian newspaper reported on Monday that at present Betfair pays 15 per cent of its gross commission revenue to the Exchequer.
The explosive growth of exchange betting over the past four years has been followed by complaints from traditional bookmaking firms that the system by which Betfair's duty obligations are assessed is unfair.
Betfair matches prices between punters, in the same way as the stock exchange does for shares - punters bet on prices set by punters themselves rather than by a bookmaker.
At peak times, the exchange matches up to 12,000 bets a minute, over 2,000,000 bets a day, and employs 120 engineers.
The company's co-founders - Andrew Black and Edward Wray - were jointly voted Ernst & Young Emerging Entrepreneur of the Year 2002.
In April 2003, Betfair won a Queen's Award for Enterprise in the Innovation category and in 2004 was voted the CBI Growing Business Awards winner for Company Of The Year.
Betfair now holds licences in the UK, Austria and Malta and is actively seeking licences in other jurisdictions, including Australia.