MONOPOLY – THE RIGHT SYSTEM?

I have recently analyzed a lot of different gambling systems and their real objectives and effects. Last week, my company The Finnish Gambling Consultants published a “white paper” report on the current state of the Finnish gambling system and its alternative solutions. We have got familiar with the gambling systems in Denmark, Norway, and Sweden, which differ quite a bit from each other and from the Finnish system. It has been interesting to note that it is possible to have different solutions to achieve similar goals. So what is the right solution? In order to answer this, you need to know what states are really aiming in the area of ​​gambling.

There have been two very interesting news from Norway about gambling business. First, the University of Bergen published an extensive study on gambling and, above all, gambling problems. According to that research, the number of gambling problems seems to have increased in Norway. The difference in research methods makes it difficult to compare the results both between different years and between different countries. Despite this, I dare say that Norway has more gambling problems than other Nordic countries. Why is this a strange result and how can it be possible?

Norway has a strict monopoly system for gambling. State-owned Norsk Tipping has the exclusive right to all other gambling products except horse betting which games are run by Rikstoto. There are some smaller companies in Norway that are licensed to run small-scale gambling, but this is not relevant in this context. The Norwegian state has imposed strict restrictions on Norsk Tipping’s operations. In Norway, it is only possible to play gambling products as an identified customer and there are strict maximum loss limits for gambling. So it seems that in Norway, the goal of the state has been to curb gambling and gambling problems, and not just to maximize the revenue from gambling.

In recent years, Norway has sought to restrict gambling for offshore gambling operators. The country has introduced a blocking of money transactions, which has made the customer’s money transactions to foreign gaming companies quite difficult. In addition, the country is making serious efforts to prevent foreign gambling companies from showing TV advertising in Norway, regardless of whether the TV channel is Norwegian or not.

Denmark and Sweden have opted for a quite different gambling system than Norway. Denmark decided to move to license-based gambling system less than 10 years ago, and Sweden followed to similar system from the beginning of 2019. In practice, only lottery and instant tickets games have remained in monopoly and other gambling verticals can be licensed. The volume of gambling has increased in both countries and players as a whole are losing more to gambling than before. Despite this, at least the number of gambling problems does not seem to have increased and the number of problems is clearly lower in both countries than in the strict monopoly country of Norway.

How can such outcome be possible? Studies show that there is a correlation between the volume of gambling and the number of gambling problems. The more you play, the more gambling problems you experience. However, studies have been conducted in situations where the actual amount of gambling has been known. This may no longer be the case in today’s digital world, where there is a large amount of gambling on offer via the internet and mobile that doesn’t show up in official gambling figures. Restricting the physical supply of games can only shift customers to the digital offerings of other operators.

It is often thought that in a monopoly system, state control is much stricter than in other systems. However, this is not self-evident. The regulator has just as good, or even better, opportunities to control gambling activities in the license model as well. An important factor is the channeling ability of the gambling system. The more the system makes gambling a legal activity in the country, the better the state control will work. At least after the change of the system, the channeling capacity of the Danish and Swedish gambling systems rose to a significantly high level and thus the operating restrictions worked better than before, with a large part of the gambling going to unregulated offshore operators.

So what should Finland learn from the experiences of the other Nordic countries? Before you can answer this, you need to know what Finland is really aiming for in the area of ​​gambling. According to the EU, a gambling monopoly system is possible if it can improve the protection of players and prevent criminal activities related to gambling. A particularly important justification for the monopoly system has been better prevention of gambling problems. It should be borne in mind that gambling revenues are not an acceptable basis for a monopoly system.

The prevention of gambling problems has gained more weight in the Finnish gambling policy and its practical implementation in recent years. The merger of gambling operators and the centralization of gambling operations in one company, Veikkaus, from the beginning of 2017 has given the regulator better tools to control the company’s operations. Veikkaus’ operations are supervised and regulated more than the three previously monopolies were supervised. This has been reflected in lower revenues from gambling operations. Unfortunately, and somewhat surprisingly, gambling problems have not diminished. The number of problems has been at the same level for long time. About 3% of Finnish adults suffer from gambling problems. Studies show that the number of people with serious problems is growing, which is a matter of real concern.

The operations of the monopoly company Veikkaus are thus controlled more and more, which reduces gambling through the company and thereby the state’s profit. According to research, a large part, almost all, of Veikkaus’ declining gambling is directed at other gambling companies. This way, overall gambling and gambling problems are not reduced. The regulator currently has little possibility to take action against offshore gambling companies. So something needs to be done and soon. Otherwise, the pace of development will only continue, and Finland will soon end up in the same situation as Denmark and Sweden years ago.

If the prevention and reduction of gambling problems is the primary goal, then Finland must be able to tighten control over all gambling activities, not just Veikkaus. This can happen in both a monopoly system and license-based models. The goal is to bring gambling under regulation in one way or another and then impose strict restrictions on gambling. According to results from Norway, it is not sure that monopoly would be automatically better from gambling problem point of view than license-based system.

If the goal of gambling activities is also to continue to generate revenue for the state but at the same time prevent gambling problems, the alternatives are more difficult to implement. Continuing in a completely monopoly system in this case is legally difficult to implement, at least in the way where customers would be satisfied. It seems to be obvious that license-based system would generate more money for the state than monopoly system.

I think it is particularly important that Finland now carefully considers the future of its gambling system and makes a comprehensive and neutral analysis of the matter before making a final decision! In our own report, we have described and calculated the effects of different gambling systems on gambling problems, government revenue levels, and customer experiences. We are happy to help you get a good and safe gambling system in Finland that is also good from customer point of view!

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