Does the proposed Finnish gambling legislation make sense or not?

I have written this column for http://www.lotterydaily.com (published February, 1st), and Conor Porter has partly modified the text.

The Ministry of the Interior Affairs has published a proposal for Finland’s new gambling legislation early in January.

The preparatory work done by the officials lasted for almost one year. I think that they did a great job, as Covid-19 certainly made the process significantly more complicated and, nevertheless, the work was done on schedule. The outcome of the work was also excellent given the assignment of the task. Officials are not responsible for the fact that the political mandate of the work was anything but sensible.

The aim of Finland’s current Government Program is to secure Veikkaus’ monopoly and operating conditions. In addition to this, the objective is to combat gambling problems and to channel gambling to Veikkaus’ responsible and controlled offering.

The Government Program also states that other gambling companies’ marketing will be addressed, and ways will be sought to restrict gambling to other gambling operators’ sites.

Based on the gambling policy guidelines mentioned above set out in the Government Program, the Ministry of the Interior Affairs set up a working group in early 2020 to prepare the guidelines for Finland’s new gambling legislation. The starting point for the legal reform was that the Finnish gambling system would continue to be based on a monopoly system.

Therefore, the working group did not have the opportunity to carry out such proper preparatory work as analyzed and sought the best possible solution as a basis for the Finnish gambling system. The mandate stated unequivocally that the preparation should be based on a monopoly model. Therefore, well-functioning licence-based models in other countries were not even studied.

I have stated on many occasions that I am always, in principle, objected to monopolies. On the other hand, during my Veikkaus-years, I’ve understood that there are business areas where competition should be limited. Gambling is definitely an activity that states must regulate because of potential problems.

However, this does not mean that a monopoly is automatically the best solution for restricting operations. It is lousy preparation if not all possible sensible alternatives are analyzed, but one of the essential things is decided without examining them. On what grounds can the Finnish Government claim that, in preparing the matter, it has promoted the interests of its citizens in the best possible way by prohibiting the examination of possible better alternatives?

As a whole, the proposal for new gambling legislation is a huge disappointment. Maybe I expected too much when I hoped to see things change. Now I feel that just a few changes are promised, and they are taking some things in the wrong direction. Hopefully, even concerning the gambling problems, there are developments in the right direction. But I am not sure about it.

The number of gambling problems in Finland has changed incomprehensibly little during the 21st century compared to the fact that gambling has increased significantly. The share of Finns suffering from gambling problems has been at the level of about 3% from year to year.

Instead, the number of people suffering from serious gambling problems has increased somewhat, and I hope that the new legislation will help this unfortunate development. I will return to this topic shortly after commenting on the policies made on physical slot machines.

The Finnish gambling policy’s core problem has been the discrepancy between business profit expectations and the responsibility requirements set at the same time. The Finnish state has not been able to decide which issue it considers more important. Therefore Veikkaus, the monopoly operator, has had challenges in understanding what the owner wants from it.

Revenue expectations have been high, but at the same time, instruments to respond to competition have not been allowed to be used. It now seems evident that responsibility has gained and is gaining more weight. On the positive side, the choice has finally been made, but I think it is far too late and no longer enough to save the situation. Now there is a significant risk that the gambling problems will not develop in the desired direction. At the same time, gambling profits will collapse, and above all, Veikkaus will permanently lose its future competitiveness.

Mandatory identification for gambling is coming, which is now introduced a few weeks ago in physical slot machines. The requirement to register for other gambling products will take effect over a few years. It is a good reform in terms of responsible gambling, but it is also a reform that will significantly impact the decrease in gambling revenue. The potential positive impact of identified gambling on business is based on the utilization of customer data.

However, it seems that Veikkaus’ ability to use data as a modern business company will be restricted or even denied. This shows that decision-makers have no understanding of what can be done with customer data. Using it is not automatically the same thing as adding gambling problems. It seems that the Finnish state no longer even wants Veikkaus to operate a profitable business anymore, but at most just put its products on offer, as was the case in the 1980s. I’m sorry on behalf of Veikkaus’ knowledgeable and skillful employees because they do not get to do the job properly.

There have been significant changes in slot machine operations over the past year. Veikkaus voluntarily decided to reduce the number of those machines a lot. However, the number of slot machine locations did not decrease in almost the same proportion. The change that has now come into force, making slot machine play only possible for registered customers, is a good thing. The explanatory memorandum to the new law states that slot machines’ placement should aim for solutions that minimize the gambling problems.

However, many would like to see slot machines removed from public open spaces, but that is not the case. I have never understood why slot machines can be kept in entirely open spaces in Finland. Slot machines are an integral part of gambling, but I think the machines’ correct location would be mainly in arcades and other age-restricted areas, following the Danish model. However, this is not the case in Finland, even after the new gambling legislation.

One of the most positive reforms of the proposed legislation is the clarification of the marketing of gambling. The premise is that marketing should be moderate and channel gambling to games that don’t cause so many problems. The weakness of the current legislation in force has been the definition of marketing and product information provision.

Several years ago, I was among those who planned the current gambling marketing policies, and I am ready to raise my hand and admit a mistake (as in basketball). I am glad that from the new legislation, the possibility to share product information is removed. Appropriate legislation should contain as few interpretations as possible, and the situation now seems to be improving.

The introduction of payment blocking will cause my blood pressure to rise. It could be the best solution for everyone, that I advise you to read a blog written by Aki Pyysing on the subject (https://www.sijoitustieto.fi/sijoitusartikkelit/viisikko-blokkaa-pelkasta-rajoittamisen-ilosta – unfortunately only in Finnish). However, it is enough to say that this reform makes no sense.

The reform’s economic impact is entirely non-existent, and this will not reduce gambling problems, so why is such nonsense done? In light of Norway’s experience, the blockings may restrict banks and major payment companies’ activities. Still, they will be replaced very soon by new service providers beyond the control.

Personally, the most exciting reform proposal is the opportunity for Veikkaus, or its subsidiary, to start a new type of business. I was the CEO of that kind of subsidiary, Veikkaus Solutions Ltd, and most recently, my job in Veikkaus was to prepare for re-starting a new business. Now it seems that Veikkaus would again have the opportunity to establish a subsidiary for non-gambling activities. The intention is for the subsidiary to provide gambling products and services to other operators and not engage in consumer gambling activities.

This is an excellent thing in the long run. Sales contracts for gambling products and services today are based almost exclusively on the revenue share model. The compensation received by the selling company is based on how much the customers of the buying company end up buying those products.

Hopefully, the Finnish authorities will not interpret such sales for gambling purposes. A massive opportunity for Veikkaus, which is still one of the best lotteries globally, would be to start international B2C gambling operations. Selling gambling products directly to customers in other countries would generate significantly more revenue than trading among gambling companies. However, B2C operations are not possible under the Finnish monopoly system. It would have been one additional primary reason for moving to a license-based system.

In conclusion, the answer to my question in the title is NOT. This reform, as a whole, makes no sense. I consider it a much better option to omit this proposed change altogether and move on to the licence-based system’s preparation. The rationale for the licence-based model would be worth its own separate column.

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