You deposit your money with a casino and start a game, for example, on a slot machine. How do you know that the slot machine you’re playing on is fair and that the results are truly random, and not influenced? This is an important question on every player’s mind. The degree to which you can be certain of the fairness of the games strongly depends on the type of market the casino you’re playing with operates in.
Types of Online Gambling Markets
There are three main types of markets for online gambling: regulated, unregulated, and illegal.
The latter market is essentially a black market, where online gambling is clearly seen as illegal, and no licenses are issued in this market. Unregulated markets are “gray areas,” where the authorities have not taken a stance on unregulated markets. Online gambling is not legal in the unregulated market, but it’s not illegal either. Here, too, no licenses are issued, and although online casinos can operate here, their legality is questionable. Finally, there are regulated markets.
These are jurisdictions where online gambling is recognized and accepted, where online casinos have a license and can offer their services and products to residents in the area.
A regulated market has several advantages. The country stimulates its economy and revenue by having casinos establish local operations, creating jobs, and the country benefits from incoming taxes. Customers of a casino also benefit from playing in the regulated market. The prevention of addictions and interventions are taken more seriously, and the local authority – the institution that issues licenses – provides protection in case of problems with (pay)outs from casinos.
Most importantly, the regulatory authority also conducts thorough security and background checks, as well as ensuring strict financial and fiscal controls to ensure that casinos operate legally and that their casino software is fair and random. To achieve the latter, it will usually also be necessary for licensed casinos to be tested by a well-known, reliable, and recognized independent software auditor. Unlike in gray or black areas, casinos that do not behave properly in regulated markets are punished. Their licenses are revoked and blocked, preventing players from accessing the casinos and opening accounts.
With this information in mind, it’s not difficult to understand why players prefer to gamble at a casino that operates in the regulated market. They know they are playing fair, random, and tested games. This article will focus on how the fairness of the games is controlled and guaranteed in one of the most popular gambling jurisdictions – the Malta Gaming Authority.
The Malta Gaming Authority (MGA)
“Malta is at the forefront of a new industry, namely remote gaming, and the home of some of the world’s largest and most profitable online gaming companies,” KPMG states in its 2013 report on the subject of remote gaming. At the end of 2014/beginning of 2015, the Malta Lottery and Gaming Authority (LGA) was transformed into the Malta Gaming Authority (MGA).
Based on the island of Malta, a member of the European Union and located off the coast of Sicily in the Mediterranean Sea, the MGA has been issuing online casino licenses from the point when online gambling started gaining popularity in 2000, and at the time of writing, the MGA has over 300 licensees. MGA licenses are valid for a period of five years and must be renewed once they expire.
As the regulatory authority responsible for all online (and land-based) gaming in Malta and Malta’s “one-stop-shop” for licensing, the MGA’s tasks include ensuring a safe environment for gaming, overseeing the fairness of games and equipment, issuing licenses to operators, and creating a regulated environment from which gaming, potentially remote, can be conducted.
The Gaming Act (2018)
Malta’s gaming rules are reportedly strict and robust, and the MGA prides itself on a high level of openness, fairness, and integrity. On May 8, 2018, as the MGA’s latest annual report explains, the Maltese Parliament approved the third and final component of a new regulatory framework that replaces all existing legislation with a new act, called the Gaming Act.
Through this overhaul of the regulations, the licensing, monitoring, and compliance processes have become even more efficient and effective.
The Gaming Act elevates Malta’s jurisdictional profile from a regulatory perspective by strengthening the MGA’s supervisory role, particularly the compliance and enforcement functions, to achieve the objectives of the existing regulations more expeditiously. One of the objectives is to ensure the fair, responsible, safe, and transparent delivery of gaming and the fairness of these games. The new framework broadens the scope of the regulations to increase the MGA’s oversight and enable better intervention.
How Does the MGA Ensure Games are Fair?
Even before the MGA looks at the games being offered, the MGA vets the persons and companies applying for a gaming license. As part of their corporate governance, the MGA’s Fit and Proper Committee looks at the companies and individuals applying for a license. They evaluate these companies or individuals at the inception stage of their licensee-ship and throughout the period they hold an MGA license. The shareholders, Ultimate Beneficial Owners, and key persons directly involved in the running of the company are thoroughly assessed, as well as the financial feasibility of license applicants and their business plan.
The vetting also includes a so-called System Review, where applicants are asked to implement their operations in a technical environment so that an approved and independent third party, contracted by the MGA – an independent software auditor can provide an assessment.
Let’s now look at the games themselves. As we saw, as part of applying for a license, the MGA requires that the casino has its games tested and certified by an independent software auditor. The software auditor will provide a certificate stating that the games are indeed fair and operating randomly.
The software auditor does this after checking the RNGs and compliance with the stated specifications, such as the RTP (Return To Player), of the casino game. The MGA can then verify that the games the casino is offering online are indeed the same games that the independent software auditor has verified by checking the hash codes. This may sound quite complex, so we’ll go into more detail in the upcoming sections of this article and delve into what Independent Software Auditors, RNG, RTP, and hash codes are.
All this oversight is supported by an Enforcement Unit that investigates all remote gaming licensees and takes appropriate action against those found to be in breach of gaming laws. The Anti Money Laundering (AML) and Compliance Unit continuously monitors, checks, and investigates all MGA-licensed entities to ensure the casinos are always adhering to the rules.
Independent Software Auditors and RTP
Licensed online casinos want to demonstrate that the games on their website are truly fair and random. They do this by offering extensive documentation about their games to players, including technical details such as the theoretical Return to Player (RTP) percentage on all games. Players cannot simply take the casinos’ word for it, hence the need for independent software auditors in this industry. These independent software auditors must test the various games of casinos for fairness through various tests.
Once a casino has successfully passed the tests (and, as we have seen, in regulated markets such as the MGA jurisdiction, such testing is required to obtain and maintain the license), it will receive certification proving that the games are indeed operating randomly, which can then be displayed on the casino website’s homepage.
One of the tests that an independent software auditor performs on licensed casino games is an RTP check. If a casino claims that a specific game has an RTP of 96%, then the test will simulate billions of rounds on that game and evaluate whether the overall RTP across all round outcomes falls within the statistically acceptable deviation from the stated 96%. This way, players are assured that the game offers the chances it promises in the long run.
When choosing a casino, players should always check all references the casino makes to the independent testing houses that conducted the game checks. Some of the most reputable independent software auditors are eCOGRA, iTech Labs, Gaming Laboratories International (GLI), and Gaming Associates (GA). Players registering with casinos that have been tested by one of these testing houses know that they are staking their money on games that meet the strictest requirements.
Another element that independent software auditors assess is the fairness and randomness of the game outcome, also known as the RNG.
What are RNGs and How Do They Work?
The outcome of spins on online slot machines or other games is determined by an extensive piece of software that continuously generates random, long sequences of numbers that have no logical pattern and are unpredictable. After an initial seed number, a fairly complex mathematical algorithm will calculate another random number based on the first number. The new number is then used in the same way as the first number. A complex algorithm then calculates the next number, and this process continues.
So there is an infinite stream of random numbers (these numbers are even generated when no gambling games are being played), with each number representing one of the many possible outcomes a particular game can have. The number that happens to be generated at the moment a player places a bet and pulls the digital lever of the slot machine will determine the result.
With such a system, players can’t predict the outcome of a game unless they discover what the seed number is and use a powerful computer with the right software to calculate the next step in the algorithm. Although this is technically possible, it is highly unlikely because the seed number is only known to the game developers. Moreover, it is never in the interest of the developers or casino operators to manipulate the RNG, as failing a test would cause them to lose their license.
The independent software auditors therefore also check whether the RNGs are not developed to select certain cards, roulette numbers, or symbols on the reels of the slot machines. The tests by the independent software auditors must prove that there is no bias towards certain numbers or symbols. If this is proven, the company can be certified by the MGA. Players can also rest assured that the results of the games they play are as random and fair as possible.
Hash Codes – How Does the MGA Ensure Casinos Actually Offer the Tested Games in the Casino?
Hash codes are the result of a cryptographic hash function. The codes are a checksum generated by an algorithm from the contents of the files, in this case relating to each game that the casino has had certified by an independent software auditor. The SHA family (Secure Hash Algorithm) is an example of a hashing system that is widely used in the online gambling industry. Once the independent software auditor has verified a game, the certificate it issues will also contain the hash codes of the audited files.
The MGA can now check at any time whether the games being offered by the casino are indeed the same as the certified games. The MGA does this by comparing the hash codes. If the hash code is the same as that of the certified file, this means it is indeed the certified game. This is essentially a digital signature ensuring the games’ authenticity.
Who Monitors the MGA?
The question remains: who monitors the MGA and ensures they are doing their job properly? The MGA has a robust corporate structure, one component of which is the Testing Committee. There is also a Supervisory Council that, among other things, must ensure the fairness of the MGA, oversee the granting of licenses, and enforce the laws.
Conclusion
We have seen how Malta is a regulated online gambling market, with the new Gaming Act of 2018 further strengthening the MGA’s strong role. The MGA vets the people and companies running casinos, investigates their finances, and requires them to have the RTPs and RNGs of their games certified by independent software auditors. The MGA then ensures through hash code checks that the games on the websites are indeed the certified games. A corporate structure focused on internal controls ensures the MGA continues to operate properly.
This process guarantees that games at casinos with an MGA license are fair and random.