How Market Liberalization Impacted Sweden’s Gambling Industry

How Market Liberalization Impacted Sweden’s Gambling IndustryThe gambling industry of Sweden has not ceased to evolve during the past 25 years, and it went from a state-run business into a market more and more operators are looking to penetrate. Yet, this did not happen overnight, and the country has gone a long way until its gambling industry started to flourish.

The gambling market is developing quickly, and the interest in online gambling is even more heightened, which made the available legislation irrelevant and the re-regulation much-needed.

Yet, prior to the introduction of the new Gambling Act back in 2019, the industry was somewhat messy. Up until its passage, the market was entirely in the hands of the state-owned monopoly.

In this article, we will focus on the way Sweden has gone until it turns into a country with a well-developed and well-regulated gambling industry, so just continue reading.

The State of Affairs Prior to 2019

The State of Affairs Prior to 2019Sweden has long been on the radar of foreign gaming operators, and even more so after the legislative changes that took into effect at the beginning of 2019, which goes to show why they created such a buzz.

The monopoly over the gambling industry has lasted for quite some time, and it all started back in 1934 when the first private bookmaker was established. Needless to say, its operations were subject to tough regulations and what is more important to point out is that it was nationalized shortly after it saw the light of the day. After several years, this nationalized bookmaker and a small-scale national lottery merged, which resulted in the creation of Svenska Spel, a state-owned betting company, which backed all forms of gambling for many years.

Something essential to note is that the responsibilities of Svenska Spel included the organization of lotteries, sports events, dog races, and the operation of gaming machines. The scope of the operations of the Horse Racing Totalizator (ATG), on the other hand, included betting on horse races, while the organization of lotteries and bingo was in the hands of public benefit organizations.

The two main pieces of legislation that guaranteed that the industry will remain under the control of the country are The Lotteries Act 1994 and The Casinos Act 1999.

Thanks to some legislative changes that were enacted back in 2002, Svenska Spel was allowed to start using digital platforms, which gave Swedes access to online scratchcards. A few years later, the range of the available options was further broadened, as the enactment of some law reforms made it possible for residents of the country to play poker online.

The engagement of Swedes in such activities over the Internet was heavily on the rise, and according to the available data, back in 2003, gaming on the channel of Svenska Spel hit 60%, thus generating well over SEK490 million.

In the next few years, the government figured out that there is no way to prevent overseas operators from accommodating Swedes, while the tension from the EU continued to grow.

In spite of the legislative developments that allowed foreign operators to provide their services in the country, it should be pointed out that Sweden has retained its monopoly on a number of gambling activities. Along with slot machines and brick-and-mortar casinos, the state still keeps its sway over bingo, and lotteries, no matter whether it comes to their virtual or land-based form.

How the Swedish Gambling Market Fared under the State Monopoly

How the Swedish Gambling Market Fared under the State MonopolyAfter the passage of these significant changes in its gambling laws, Sweden has largely scrapped the state monopoly. The question one might ask, however, is how the gambling industry performed prior to these game-changing legislative amendments.

What is interesting to point out is that during the past two decades, the private gambling industry in the country has seen continued growth, and under the available data, the number of such companies that operate there has exceeded twenty almost a decade ago. Besides, the share of the fifteen companies that are added to the stock exchange alone was valued at almost SEK70 billion.

GGR of Sweden’s Regulated Market under the Monopoly
Regulated vs. Unregulated Market Performance prior Liberalization
Popularity of Online Gambling in Sweden Compared to Other EU Countries

Reasons for Market Liberalization

Reasons for Market LiberalizationThere are several factors that led to the opening of the Swedish gaming market, and the biggest game-changers were the growing pressure from the European Union, the intensifying efforts of operators to penetrate the market, and the changing preferences of players.

While exploring the way the legislative framework of Sweden has changed, the first thing to take into account is the role the EU has played, and back in 2004, the country received a letter of formal notice that the limited betting opportunities the Svenska Spel offers should be introduced in a consistent and systematic fashion.

During the next year, Ladbrokes pushed for permission to start working in the country, but the efforts of the operator were averted as the Swedish Supreme Administrative Court rejected its application.

The Swedish government continued to maintain its tough stance on the liberalization of the market. Back in 2006, the European Commission requested information from Sweden and several other countries including the Netherlands, Hungary, Germany, Italy, Finland, and Denmark regarding the limited offering of betting on sports. In spite of the fact that the Commission did not address the state monopoly in the country, it raised its concerns that the national measures in the country breach the EU laws, and more specifically, Article 49 of the Treaty.

In the next year, the Commission requested France and Sweden to adjust their legislation in order to make it compatible with the laws and regulations in the EU. Contrary to what many people expected, the Swedish government refused to pass the needed legislative changes and lift its monopoly on the gambling market and open it for overseas operators.

With this in mind, in the next few years, an ever-growing number of lawmakers started to express their approval of the idea to make the gaming industry more competitive. The first steps towards an open-door licensing system that foreign operators will be able to penetrate were made in 2008 when a set of measures were announced.

The pressure from the European Commission continued in the next years, and in 2012, Sweden was asked to adapt its legislation when it comes to poker and online betting. The Commission was not satisfied with the legal amendments, which resulted in the referral of Sweden to the Court of Justice of the EU. Back in 2015, the Swedish government went on with the steps needed to scrap the monopoly and came up with ideas about its own licensing system.

According to the proposal, land-based horse racing, sports betting, bingo, poker, and online casinos that are offered by foreign operators will be made available to Swedes. Although the courts within the country went to uphold the state monopoly on the gambling industry, the all-important legislative amendments ultimately took into effect at the beginning of 2019.

The increase in customer protection has also played a role in terms of the liberalization of the market. Prior to the opening of the industry, Swedes were used to playing at foreign betting sites where they cannot have the full peace of mind that the safety levels and player protection are up to scratch. With some overseas operators, the conditions are not that clear-cut, for which reason gambling enthusiasts are exposed to greater risk.

As it was already mentioned, the legislative changes that were put into effect a few years ago did not lift the exclusive state control of all forms of gambling, which in practice limits the money flow to overseas operators. The gambling taxes are another to consider while discussing the reasons for the liberalization of the gambling market of Sweden.

Regulations Under the Swedish Gambling Act of 2019

Regulations Under the Swedish Gambling Act of 2019Obviously, the rise of online gambling and its heightened popularity, together with the pressure from the EU is what eroded the state monopoly over the industry.

It turns out that Swedes are heavily into gambling, and data shows that around 60% of the residents of the country have engaged in such activities during the last year. The gambling industry of the country is expanding rapidly, and this is to be ascribed not only to the behavior of customers and technologies but above all, to the legal initiatives.

As likely as not, this would not have been the case without the Gambling Act, which entered into force on the 1 of January 2019. The market was re-regulated after Riksdag, which is the national legislature of Sweden, gave the nod to legislative changes that scrap the state monopoly system and make it possible for foreign operators to apply for a license and accommodate Swedes. Under these legislative changes that were hammered out in 2018, greater stress was put on customer protection and effective dealing with risky gambling.

What is interesting to point out is that this law reform was almost uniformly accepted by lawmakers, and thanks to it, the market became much more exposed to competition as foreign operators, thus giving Swedes a much wider choice of regulated options to select from. The aim of the set of rules that were introduced at the beginning of 2019 was to exclude gaming operators that are not properly regulated and to guarantee that the market will get enough oversight.

The role of the Gambling Authority of the country should also be given due attention as it should maintain the gambling market healthy and safe. It is important to note that under the legislative changes, the government of the country is no longer responsible for the issuance of licenses, and this responsibility is delegated to the Gambling Authority.

Gambling operators that have got a stamp of approval are required to take all measures to prevent excessive gaming and to this end, need to keep track of the behavior of their users.

These legislative changes have brought about the transformation of the gambling market of Sweden as now, it is divided into several parts, including online gambling and betting, gambling with public benefit, which is the case with bingo and lotteries, token machines, and brick-and-mortar casinos.

In this relation, it should be mentioned that the legal framework of the country is based on multiple statutes, more specifically, the Gambling Act, Money Laundering Act, and Marketing Act, among others.

There are several agencies and organizations that are involved in the gambling industry, and these include the Gambling Authority, The Ministry of Finance, The Swedish Consumer Agency, and the Swedish Public Health Agency.

Taxes and Fees
Restriction on Gambling Advertisements
Measures Against Unauthorized Gambling Businesses

Liberalization Impact on Sweden’s Online Gambling Industry

Liberalization Impact on Sweden’s Online Gambling IndustryMuch like in other countries around the globe, gambling is becoming more and more available to residents of Sweden, all the more so thanks to the efforts of gaming operators to make their services available in all possible environments. In spite of the fact that the liberalization of the gambling market of Sweden came about more than two years ago, it can safely be said that the pieces are yet to fall into their places. In fact, the Covid outbreak intensified the issues the gambling industry was already facing in terms of unlicensed gambling and player protection.

The situation forced lawmakers to approve a set of temporary rules that aim at tightening the control over virtual casinos in order to enhance the protection of players. In order to reduce the harm of excessive engagement in gambling activities, the government has introduced new rules under which players will not be allowed to take other special deals than the one given on the first deposit occasion, and most importantly, the offered amount cannot exceed SEK100.

Needless to say, foreign operators were not comfortable with the crackdown on virtual casinos, and they voiced concerns that these measures are tailored to strengthen the position of ATG and Svenska Spel. Yet, contrary to what most foreign operators expected, their revenues are still on the rise even after the implementation of the above-mentioned limits.

The government is indeed looking to counteract the negative impact excessive gambling has as under the new measures, there is a mandatory weekly deposit and loss cap of SEK5.000. Besides, gambling enthusiasts will be prompted to choose time limits for their betting session. Naturally, operators have expressed their concerns that the temporary measures will not be lifted, and ultimately, the state operators will strengthen their positions and will dominate the industry.

Experts, on the other hand, are worried that these measures will have the opposite effect and will add up to the attractiveness of the black market to vulnerable individuals.

The Swedish Gambling Authority has reported that the number of people who have taken advantage of the self-exclusion scheme was around 59 000 back in 2020. This year, their number continues to grow, and it has already gone over 61 000, thus marking an increase of around 6%.

How the Industry Fares Under The New Regulations
The Increased Player Satisfaction