I have written this text for http://www.lotterydaily.com, and Charlie Horner has partly edited it.
I start 2022 by writing about the situation of my home country’s Finnish gambling system. Less than a year ago, I wrote about the proposed new Lottery Act, which was after that in the EU‘s notification process until August. The Finnish Parliament passed that new law just before Christmas, and the law came into force on January 1st, 2022. A few points in the law have been given a transitional period, which is why some of the reforms will be implemented later, at the latest, during 2023.
The government has stated that the purpose of the new Lottery Act is to help Finland maintain its monopoly system of gambling and at the same time enable the reduction of harm caused by gambling. In the past, the de facto goal has also been to optimize the revenue collected from gambling for the state and its beneficiaries, but now it seems that this goal has been abandoned. Responsible gaming is thus a clear new main goal of the Finnish gambling system. However, I am not sure that the new law will help achieve that goal.
Before I justify my view that the new law is not a good solution, I will go through the things that change with the law in Finland. With the new law, the operations of offshore gambling companies in Finland will be even more difficult. Finnish customers are still allowed to play to foreign gambling companies, but the companies are not permitted to market and have sales operations in Finland. Marketing restrictions now also apply to individuals, and that change is intended to prevent social media activity, mainly from celebrities. Concerning the marketing ban, the challenge is that the law does not define what is considered marketing and promotion in sufficient detail.
The gambling regulator, the National Police Board, maintains a blacklist of companies that it thinks have violated the marketing ban. If the gambling operator does not change the activity that the regulator has deemed illegal, the company will be blacklisted. Finland plans to introduce payment blocking from the beginning of 2023, which will prevent Finnish customers from transferring money to offshore gambling operators. Banks and payment service providers must prevent money transfers to those companies that have been blacklisted in Finland. The aim was also to prevent money transfers in the other direction, i.e., from gambling companies to customers. However, this blockade could not be enforced because, according to the interpretation of the Constitution Law, customers are entitled to winnings from their legally played games. As gambling for offshore companies is still legal, the payment of wins cannot be blocked.
It may appear that the new Lottery Act seeks to protect the operations of the monopoly operator Veikkaus. However, that is not the case in practice. There will be more restrictions on Veikkaus‘ operations. The company’s marketing will be restricted, there are maximum limits for gambling, by the end of 2023, all gambling will only be possible for registered customers only, the number of slot machines will be reduced a lot, etc. All these measures aim to reduce gambling problems.
The above measures have already caused a significant decrease in Veikkaus’ revenue. A few years ago, the Finnish state and beneficiaries received about 1.2bn euros a year from gambling. Now that amount has already fallen to around EUR 700m, the new law will not improve the situation. Finns have been highly supportive of the gambling monopoly system. An extensive network of beneficiaries has received a monopoly revenue of around EUR 1bn a year, and that network has been the main reason for defending the monopoly system. Now the reasons to support the system have at least diminished significantly.
Veikkaus will receive some slight relief for its operations with the new law, but their total revenue-increasing effect will not exceed, even in the best case, a few tens of millions of euros. In addition, Veikkaus will now have the right to establish a subsidiary focusing on the B2B business, which is expected to generate tens of millions of euros in annual revenue in the long term. The new company will likely focus on selling games and supporting technology solutions to other gambling companies, mainly lotteries. I cannot comment on this matter neutrally because the disagreement over the content of the operation was the main reason for my resignation from Veikkaus. In any case, I wish Veikkaus good luck with the new company’s operations!
Therefore, the new law will be detrimental to offshore companies, the monopoly company Veikkaus and its current beneficiaries. Even from the point of view of ordinary customers, the law causes at least some difficulties, and there is nothing particularly good about it for the customers. However, the new Lottery Act can be a good solution if it helps achieve the state’s biggest goal, reducing the number of gambling problems. Finland has now clearly chosen a line in which the income from gambling no longer has the same significance as before. Veikkaus has been balancing between conflicting goals, while the state has expected more revenue and fewer gambling problems at the same time.
The critical question is whether gambling problems will decrease in Finland with the new law. I hope so, but I’m not sure at all. According to official research, about three percent of Finns suffer from gambling problems and less than one percent from serious ones. That level of gambling problems has remained roughly the same throughout most of the 21st century. Veikkaus runs its own unofficial monitoring of gambling problems. According to the company’s study, the number of gambling problems has dropped to just a 2 percent level during the Covid-19. Most of Finland’s gambling problems are due to slot machine operations. Now, reducing the number of slot machines, allowing only registered customers to play them, and temporarily shutting down those devices because of Covid are likely to have reduced the number of problems. According to the new law, Veikkaus can still keep slot machines all over Finland in so-called open spaces, such as supermarket lobbies, cafés, and petrol stations.
In the current monopoly system, the possibility for the regulator to control is limited to the monopoly company. With the new law, the regulator will also have some tools and resources to intervene in the operations of offshore companies. About 1/3 of Finland’s gambling is already played at companies other than Veikkaus. In digital channels, the market share of offshore companies, including PAF from Åland, is already about half. Veikkaus’ market share is no more than a quarter in some product groups, such as fixed-odds sports betting. Gambling limits thus do not extend to offshore companies, so no one has an idea of the volumes of gambling by individuals and cannot control it. In that situation, it is challenging to prevent potential gambling problems.
Finland will hold parliamentary elections in April 2023. We will not receive official information on the effects of the new Lottery Act on gambling problems before that, but hopefully, we will have some idea about it. The money received by the beneficiaries will probably no longer come directly from Veikkaus’ profit from the beginning of 2024. Thus, if the gambling problems do not diminish, the beneficiaries no longer strongly protect Veikkaus’ monopoly, and the market share of offshore companies continues to grow, then the probability that the new parliament will decide to change to a license-based system is very high. I predict that Finland will follow the path of Sweden in about five years.