FINALLY, IT IS READY

Unfortunately, the changes to the Finnish gambling system have kept me so busy this year that I haven’t had time to write blogs. However, here is a new text that I wrote on behalf of http://www.finnplay.com.

When the Finnish government submitted a proposal for new gambling legislation to Parliament in early April, it was hoped that Parliament would make the decision before the summer holidays. However, this did not happen, and the discussion of the matter was postponed to the autumn. At times, it appeared the Parliament’s decision would be made before the summer holidays, but in 2026 rather than 2025. However, the discussion is complete, and the law’s official approval is a formality. The President’s signature will be required to confirm the law later this year, but it is just a standard part of the process. Fortunately, the postponement of the decision-making did not directly affect the planned schedules.

The delay in the parliamentary process was primarily due to a few potential constitutional issues and disagreements over the timetable for the law’s implementation. There was no significant political debate over the need to change the gambling system, but the parties’ views on the emphasis on responsible gambling and on business opportunities differed as expected. The current right-wing government places a slightly higher emphasis on business than the left, which emphasises responsibility. This is also reflected in the two dissenting opinions: the Left Alliance proposed starting the legislative preparation from scratch, and the Greens proposed adding several elements of responsibility to the legal text. The Parliament voted by a clear margin (153-21) in favour of the Administrative Committee’s report, which clearly illustrates the parties’ unanimity on the matter.

The law will take effect on January 1, 2026, and the application process for gambling licenses will begin on March 1, 2026. The most significant change concerns the timing of the practical transition from the current gambling system to license-based operations. Initially, this was scheduled for the beginning of 2027, but the go-live date has now been moved to July 1, 2027. At the same time, it was decided to move the introduction of the gambling software license (B2B license) to July 1, 2028. The schedule change will also affect the start date of the new supervisory authority. The current supervisory authority, the National Police Board, will oversee the licensing process and serve as the regulator until the end of June 2027. After that, the new Licensing and Supervision Authority, which operates under the Ministry of Finance, will become the supervisory authority.

Finland is an interesting market for gambling operators

The legislation aims to establish a system in which the channelisation rate is maximised (approximately 90%). This should be done in a way that does not increase gambling problems and allows gambling companies to conduct reasonable business in Finland. In my opinion, the creation of this entity was at least sufficiently successful. At least the Finnish Gambling Industry Association, PAF, and the current monopoly company, Veikkaus, seem reasonably satisfied with the outcome. There has been more criticism from smaller operators, but at this stage, there is no compelling reason to critique the system.

I have already discussed the content of the upcoming law in my previous blogs, and there were no significant changes to matters that would affect business opportunities during the parliamentary debate. If you want to learn more about the content of the law, you can read the blog post I wrote at the beginning of April. At this stage, however, the most significant change to the bill concerns the authorisation for search engine marketing. Games and the gambling license holder that operates them may be marketed in online search engines when the search term is directly related to the license holder or the game it operates. In practice, this enables, for example, the use of Google Ads as a marketing tool.

Finns spend more money on gambling per capita than most countries. I don’t know Finland’s exact ranking on that statistic at the moment, but we have been among the top 3 countries and are likely still in the top 10. So, the market is attractive to gambling companies. The new legislation enables a wide range of products to be sold through digital channels, and betting products can also be sold in retail channels. In addition, marketing opportunities are strong, particularly in mass media, where brand-level advertising can be conducted relatively freely. The same applies to sponsorship. The volume of gambling is not restricted; customers are required to set deposit limits for each operator they use, but there is no upper limit on these limits. I believe that, given these opportunities, we will see a surge in gambling marketing, at least in the first year of the new system’s operation. However, based on experience in other countries, it can be assumed that advertising volume will plateau at a level significantly lower than during the initial boom.

Although the business opportunities appear favourable to gambling companies, there are also risks to their operations. There is a risk that marketing will become so extensive that public opinion will turn against gambling. At present, Finns have a reasonably favourable attitude towards gambling. It is crucial for the entire gambling industry that operations ensure Finns are satisfied and that the climate remains positive. One of the most significant threats is related to the supervision of gambling activities. To achieve the most critical goals of the reform, the supervisory authority must make every effort to prevent companies operating outside Finland’s license-based system from doing so. In Sweden, the regulator has, in practice, focused on supervising only the operations of licensed companies, which is why “black market” operators have captured an increasing share of the digital casino market. The same must not happen in Finland.

We are on the threshold of a significant change. Finland is an interesting gambling market, but one with its own special characteristics. Finnish customers are not the same as those in Sweden, for example. Therefore, gambling companies should not copy the operating model directly from Sweden. A better approach is to develop a Finland-specific model that accounts for customer behaviour, partner networks, and specific technical operating requirements.

The result of my prediction and other notes on the content of gambling legislation

I wrote this text at the beginning of April for the http://www.finnplay.com.

In my blog, published on February 27, 2024, I made predictions about the content of Finland’s future gambling legislation. At that time, I promised to assess the success of my predictions once the bill had been passed. Parliament began considering the legislative package on March 25, so now is the right time to return to the matter, although the content of the law may still change in Parliament, at least in some details.
Toward the end of this blog, I will discuss the planned schedule for our new gambling system and highlight a few content issues that I will not cover in my assessment of my prediction skills.
So here are my guesses about 1 year and 1 month ago and my assessment of their success.

License-based system games: online casino, and sports and horse betting in both sales channels. The government program states that at least online casino games and digital channel betting will be transferred to the license-based system. However, I believe sports and horse betting will be transferred to the licensed side. It is crucial for the system to function correctly that the license entitles the operator to operate games in the retail and digital channels.
My prediction was correct. The gambling license allows for providing fixed-odds and variable-odds sports and horse betting in digital and retail channels. Licensed companies can also offer digital bingo games, online casino games (e.g., roulette, card and dice games), and digital slot games. The exclusive licenses granted for ten years, which effectively constitute a monopoly, cover scratch cards and lottery games in both channels and slot machines and casino operations in a physical environment.
License: Separate licenses for casino games and betting (including fixed-odds, pool-based sports and horse betting), with a license price of approximately 50000€. I support a system where one license would allow all games within the license-based system to be operated.
The prediction was incorrect, but the solution is a model I announced that I support. A gambling license granted for five years at a time will enable the provision of all games that have moved to the multi-license system, meaning that there will be no separate licenses for betting and digital casino games. The license application fee has not yet been published but is presumably low. The license system will include an annual supervision fee, the price of which is tied to the gambling company’s annual GGR. The minimum price is 4000€ (GGR under 100k€) and the maximum is 434 000€ (GGR over 50M€).
Tax rate: 20 – 25% of GGR. I would create a system where the tax rate varies depending on how dangerous the games are. With this logic, online casino games would have the highest tax rate, fixed-odds betting a slightly lower rate, and pool-based sports and horse betting the lowest.
My prediction was correct, but the model I saw as the best solution did not come true. The proposed tax rate is 22 % of the GGR (i.e., the money lost by customers). In addition, gambling companies operating under a Finnish license will also have to pay income tax to Finland, like other companies.
Marketing: Only brand advertising (company and product) is allowed. It is possible to advertise casino games on radio, TV, and other streaming channels for a limited time. Bonuses will be strictly restricted. Affiliate activities will be restricted. Sports sponsorship is allowed, but visibility for children and young people will be minimized.
The prediction was reasonably, but not wholly, correct. Gambling companies can advertise in mass media (TV, radio, print newspapers) reasonably freely. Still, there will be a long list of restrictions on the marketing content. In addition, advertising must include certain specified elements, such as an age limit for gambling. Marketing is also allowed in outdoor advertising and sports sponsorship, where only the operator’s brand but not products may be visible. Affiliate marketing and the use of influencers are completely prohibited, according to the bill. License holders are allowed to advertise on social media. Still, the advertising may not be interactive, meaning customers may not have the opportunity to comment, and third parties are not allowed to share those texts. Bonuses may only be given to existing customers; even then, the bonuses may not be based on gambling activity or volume. Welcome bonuses may not be used at all.
Gambling limits: Initially, a company-specific deposit limit applies to casino games if Finland ends up with separate casino and betting licenses. The deposit limit may also apply to betting games. If this happens, customers can apply for a higher deposit limit based on their income or other assets. In the coming years, the company-specific deposit limit may be replaced by a customer-specific limit when the monitoring system allows this. I think that a deposit limit is a better solution than a gambling or loss limit.
The prediction was reasonably accurate. A gambling company-specific deposit limit is coming into effect, which customers must set themselves before they can start gambling. No upper limit has been set for the company-specific deposit limit, at least for now. The bill allows the Government to issue a decree later on, which can tighten the deposit limit policy. Initially, there will be no other limits on gambling. Still, the Ministry of the Interior will have the right to issue a decree, which will later allow it to impose maximum bets and other restrictions on high-risk gambling products.
B2B license: The B2B license will not be implemented immediately, at least not when the system changes. Instead, technology and game suppliers will be set certification requirements that they must meet. The B2B license may be implemented at a later date if, for example, the experiences in Sweden show it to be a good solution.
The prediction was almost entirely wrong. The new gambling system is expected to come into practice at the beginning of 2027 when companies that have received a gambling license can start operating and marketing gambling activities. Finland will also introduce a gambling software license, the same as the B2B license. This system will be introduced at the beginning of 2028, i.e., with a one-year delay compared to the B2C license. Since 2028, gambling companies with a gambling license may only use gambling technology and products offered by B2B license companies. B2B licensees may not provide their technology and games to operators that have Finnish customers but do not have a Finnish gambling license.
Cooling-off: Finland will not introduce a cooling-off period. Since the gambling system’s practical entry into force seems to have been postponed to early 2027, the risk of using a cooling-off period has increased somewhat. I don’t think Finland will introduce new regulations just for one year, which I believe would be required if the cooling-off period were introduced.
This prediction is a bit challenging to assess. Officially, there is no cooling-off period coming to Finland, so in that sense, my prediction is correct. On the other hand, the bill states that a gambling license will not be granted to an entity that has been issued a prohibition order or imposed a penalty payment for violating the current Lottery Act after September 1, 2024. The purpose of this procedure is very similar to the cooling-off period, so based on this, I judge my prediction to have been almost wrong.
Supervision & Regulation: A new supervisory authority will be established in Finland. The new authority will probably no longer be under the Ministry of the Interior. It will be established under either the Ministry of Finance or the Ministry of Employment and the Economy. Supervision will require a new technological system and many new officials. The new regulator must be able to intervene more strictly than currently in gambling activities that are carried out without a Finnish license.
The prediction was correct. The current regulator, the National Police Board, will continue in its role until the end of 2026 and will handle the transition to a license-based system. At the beginning of 2027, a new Licensing and Supervision Authority will start operating under the administration of the Ministry of Finance. The new authority will act as the supervisor of the new gambling system from the very beginning. The pre-bidding for the technical systems required for supervision work has been ongoing since the spring of 2025. I still agree with myself that it is crucial for the functioning of the gambling system that the regulator has the ability and desire to intervene in illegal activities significantly better than in Sweden, for example.
Gambling products are not allowed to be purchased on credit, so using a credit card to pay for games is prohibited. Instead, payment applications may be used if they are based on debit payment. The use of cryptocurrencies in gambling activities is completely prohibited. Customers must be able to block themselves from all gambling with the click of a button. Blocking a specific gambling company or product group (e.g., digital casino games) must also be possible.
Regarding the overall legislation, it is essential to note that the bill allows the Government and the Ministry of the Interior to issue decrees (regulations) that can influence practical gambling activities. The Government can, for example, set maximum loss limits for gambling companies. In turn, the Ministry of the Interior can specify maximum bets, maximum winnings, and the possibility of using the autoplay feature for the highest-risk games, for example, digital casino games. The bill does not include payment and IP blocking, but they can be returned if the channelization rate cannot be increased to the desired level.
The bill is currently being considered by Parliament and is expected to be completed before Parliament goes on summer recess, i.e., by the end of June. The law will enter into force in early 2026 when the supervisory authority will start the gambling license process. The first phase of licenses is expected to be granted by autumn 2026. In practice, gambling operations based on the new legislation are planned to begin in Finland from the beginning of 2027.

Do the Finnish proposed marketing rules enable a competitive offering?

I originally wrote this text on http://www.finnplay.com in early September 2024.

The proposal for Finland’s new gambling legislation has finally been published, and stakeholders have commented on it. As many as 130 statements were collected during the public hearing process, and now the authorities are analyzing them and thinking about how they might affect the final content. According to unofficial information, the purpose is to complete the legal package during October 2024 and then send it to the EU notification process. At that stage, we will know even more precisely what Finland’s new gambling system will be like.

However, we can already evaluate the future system at this stage because it is assumed that the “big picture” will not change much compared to the proposal published at the beginning of July. As I have stated in my previous writings, Finland’s goal is to raise the channelization rate of the gambling system as high as possible, preferably close to the 90 % level. This is intended to be implemented so gambling companies get the best possible business opportunities. Still, even so, the number of gambling problems should at least not increase but rather decrease.

The business opportunities of gambling companies are greatly influenced by the marketing they are allowed to do in Finland. My focus in this blog is to evaluate the marketing and sponsorship content of the gambling bill. Will the operators acquiring the license have sufficient opportunities to market their brand, products, and services? Are those opportunities better than illegal companies operating without a Finnish license? Will the channeling ability of the gambling system rise to the desired level, and will the gambling problems remain under control?

Marketing will be allowed but limited

Gambling marketing will be allowed in Finland’s new system. Well-planned marketing regulation helps licensed companies attract customers and gambling into the legal system, increasing the channelization rate and enabling the authorities to regulate as much gambling as possible. Fortunately, the legislation’s drafters have finally understood how this dynamic works.

It is a pity that the starting point for marketing regulation is Finland’s current legislation, which only applies to the monopoly company Veikkaus. This shows that the law’s drafters either do not know or do not want to know the legalities of the modern gambling business. For some reason, the officials don’t understand that the current regulation that significantly limits the operation of Veikkaus is the main reason our gambling system’s channelization rate has collapsed, especially in digital sales channels. Veikkaus has been banned from several activities that offshore operators use daily. Active customers, in particular, have switched to other companies following better offers. The restrictions on the operation of Veikkaus would still be acceptable if they would have reduced gambling problems. However, the opposite has unfortunately happened, i.e., the problems have also grown.

In general, I can say that gambling marketing in mass media will be possible without any significant limitations. Still, in digital media, there would be many restrictions that offshore companies are not used to elsewhere. I am afraid that the restrictions may be so significant that at least some potential companies decide not to apply for a Finnish gambling license.

Finland wants to ban affiliate activity

Based on the bill, only the gambling company is allowed to market gambling. This marketing includes both brand and product advertising. The bill states that a “third party” is not permitted to do gambling marketing. However, the proposal does not define what marketing means in practice. Regarding this limitation, it should be noted that affiliate activity is not possible for the current monopoly company, so presumably, the law drafters have also taken this idea from the current legislation and have not sufficiently familiarized themselves with the operations of other countries.

The proposal aims to prevent celebrities and social media influencers from marketing gambling. However, the current definition also includes affiliate services common in digital channels. These services aim to provide sports punters and casino players with information about gambling content. Although these affiliates often make their income from customers’ gambling losses, these sites also offer valuable information to support gambling.

According to my understanding, the share of gambling companies’ new customer acquisition coming through affiliate operators is very high, in some cases even close to one hundred percent. Affiliate operators are search engine optimization professionals and will undoubtedly continue their activities, even if efforts are made to prevent their activities by Finnish legislation. In this case, the affiliates will serve operators outside the system, which will automatically decrease the channeling capacity of the system. This is not in Finland’s interest. Instead, a solution should be found to allow affiliate activity and bring it within the scope of Finnish legislation.

So, I’m in favor of allowing affiliate activity, even though I wouldn’t say I like it. However, I believe it is a better solution for everyone that affiliates can work in cooperation with licensed operators than that they remain tools of illegal activity.

Bonuses are going to be banned

Another common feature of gambling that I dislike is the offer of bonuses. In my opinion, bonuses are, generally speaking, “cheating” customers. However, I don’t think offering bonuses can be stopped in the world’s gambling business. For this reason, I consider the Finnish bill to be a lousy solution, based on which offering all kinds of bonuses and similar customer benefits will be prohibited.

I believe this proposal also originates from the current legislation, based on which Veikkaus is not allowed to offer bonuses, discounts, free spins, or give customers betting money. Such offers are widely used in the international gambling business. In Sweden, the supply has been significantly limited, but there is no complete ban there either. Gambling companies operating with a Swedish license consider the current bonus restrictions to be the biggest reason why the channeling capacity of the Swedish system is now rapidly decreasing. This happens especially in online casino gaming, where companies with a Curacao license take Swedish customers with bonus offers.

If affiliate operators and bonuses are prohibited, new gambling operators coming to Finland will have significant challenges getting customers. This primarily serves the interest of Veikkaus and possibly a couple of other big gambling companies, which already have many Finnish customers, and distorts the competition. Therefore, concerning bonuses, a way should be found to allow them, at least to some extent, in Finland as well.

I propose that bonuses be allowed so the gambling company can only set a wagering requirement of one round for them. The customer could, therefore, claim the bonus money for himself after he has played that amount in the company’s games once. In this model, it would be much easier for the customer to understand what he is getting than in the current offshore model, where the money has to be played dozens of times before he gets it for himself. From the point of view of the operator, the model I proposed is much worse financially compared to the current model, where the companies practically do not give out money at all.

There will be just few restrictions on mass media marketing

Based on the bill, the Finnish mass media has been highly successful in lobbying. In practice, gambling advertising in the mass media seems to be possible almost without any restrictions. Of course, there will be restrictions and prohibitions for marketing aimed at children and other groups of minors.

If the digital media marketing methods increasingly used by offshore companies are banned, there is a significant risk that the general public in Finland will encounter a lot of gambling marketing in mass media – TV, radio, and newspapers. In Sweden, this has caused public opinion to turn negative towards gambling. There has been far too much marketing in mass media, according to the opinion of ordinary Swedes. Finland should not find itself in the same situation because it is against the interests of all parties operating in the gambling business.

I propose that while digital media’s marketing restrictions are reduced, mass media marketing is tightened. One option to be considered could be a restriction according to which the mass media should only contain brand advertising of the gambling companies, which should not include an order to gamble. In this way, the gambling companies would make their brand known among Finns, but people would not have to face the “play now right now” type of advertising against their will. Operators could give such messages in their betting services when customers come to play.

Sports sponsorship will be possible

One crucial marketing tool, especially related to betting, is sponsorship. The bill allows gambling companies to enter into sponsorship agreements with sports and other parties. Restrictions are proposed for sponsorship to prevent or at least limit exposure to minors.

I have previously criticized proposals concerning marketing, but concerning sponsorship, it must be said that I think the bill is well-founded, and its content seems reasonable. However, in the proposal’s arguments, a model is presented for consideration, namely that the gambling company should not be the so-called title sponsor. If implemented, this proposal would make the current model, where Veikkaus is the title sponsor of the Finnish football league, impossible. I think that would be an unnecessary restriction.

Finnish sports, or at least the most prominent sports leagues, are already excitedly waiting for new revenue streams to open up. However, based on the experiences of Denmark and Sweden, I believe that only football and ice hockey will make up for the larger amount of money in the new model.

The Statement of The Finnish Gambling Consultants about the proposed Finnish Gambling Bill

Background

FGC would like to thank the government for the proposal, which aims to open the Finnish gambling market to competition partially. In the preliminary work section of the bill, the situation is well described to which the gambling system, according to the current monopoly model, has taken the Finnish gambling market. The channeling ability of the system in competing product groups has already sunk too low. When planning a new system, it is paramount that the channeling capacity of the system be restored to a high enough level, preferably close to the 90 % level. The responsibility measures that control gambling activities remain ineffective without a sufficiently high channelization rate because the authorities’ measures are only effective for regulated gambling.

FGC considers that there is a lot of good in the given proposal. The channeling ability of the Finnish gambling system would improve significantly if the new Gambling Act were implemented in the form presented. However, the 90 % channelization rate mentioned above would not be reached by this proposal.

Overall opinion on the proposed bill

The good side of the bill is that it aims to create a gambling system where gambling companies have the opportunity to do business, but at the same time, the number of gambling problems should not increase. The goal of expanding the channelization rate as high as possible is the only correct solution from the point of view of the realization of business and responsibility. However, FGC wonders why the essential solution for reducing gambling problems, moving all slot machines to age-restricted premises, is missing from the proposal.

According to FGC’s view, there are several contradictions between the individual sections of the bill and the overall goals. Products with a high-profit rate for the gambling company (Veikkaus) remain on the monopoly side, which is why the proposal inevitably shows that the real reasons for the presented product division are purely fiscal. Fiscal reasons, however, cannot justify a gambling monopoly according to EU law. In addition, the products, except slot machines, proposed for monopoly do not significantly cause gambling problems.

The apparent inconsistency of the bill is in marketing and operations as a whole. According to the proposal, gambling companies could not use bonuses or third parties, such as affiliates. Still, other marketing and sales promotions would be pretty accessible. This includes a significant contradiction in the pursuit of a high degree of channeling and decreasing gambling problems. FGC believes that gambling companies should be able to compete against illegal offerings specifically in digital channels. From the point of view of increasing the channeling ability, there would be no similar need for the abundant marketing of gambling in physical channels and Finnish mass media because illegal operators are not visible in these media. In the best comparison country, Sweden, gambling advertising in the mass media increased enormously some years before the actual gambling system change and has remained at a very high level after the change compared to gambling advertising in Finland. Due to abundant mass media advertising, the general opinion of citizens towards gambling in Sweden became significantly more negative than before because the media was full of gambling advertising.

Based on the proposal, the Finnish state wants to maintain a dual role, taking care of the legislation and supervision of gambling activities and, at the same time, owning the company involved in gambling activities. There is a high risk of conflict of interest in such a model. State ownership of a gambling company operating in a competitive market is at least a questionable solution. The Finnish Competition and Consumer Authority and the Chancellor of Justice have already raised this same issue in their statements.

In this statement, FGC writes its observations about the Gambling Act and proposes corrective measures and changes to the proposal.

General notes:

General note about potentially incorrect information appearing in the proposal

The material supporting the bill is comprehensive and of high quality. However, there is one very relevant piece of information in the background material that we believe is debatable, if not even incorrect. In the preliminary works, it is implied that the channelization rate of the Swedish gambling system would have remained high in recent years. The Swedish authorities’ assessments of channelization rate are used as justification for this. In Sweden, the authorities’ assessments have been strongly criticized by operators in the gambling industry. The biggest operator in the Swedish license market, ATG, the former horse betting monopoly holder, has independently investigated the system’s channelization rate with more credible methods than the authorities. ATG has analyzed and modeled the observed network traffic and mirrored it to existing accurate gambling and customer data numbers.

The total volume of the Swedish license system has remained practically constant since the end of 2020. However, according to ATG’s research, overall gambling in product groups belonging to the license-based market has increased, and all growth seems to have been directed to gambling companies outside the system. ATG does not present an exact estimate of the channelization rate of the license-based system but implies that it could move around 70 – 82 % level at the end of 2023. The channelization rate of digital casino games seems to be significantly lower than the average, and the channeling rate of betting games is correspondingly better than the average. FGC attaches to its statement a summary (Appendix 1) of ATG’s approximately 30-page research report, which FGC has received permission from ATG to distribute. FGC believes that, if needed, the full ATG research report is available for use.

FGC points out that if ATG’s estimates of the supposed weaker channeling ability of digital casino games are correct, there is a significant risk that the channeling rate of digital casino games in Finland will not rise in line with the goals if the final law is what the Ministry of the Interior has proposed. This would be particularly harmful from the point of view of addressing gambling problems. Based on the data obtained from Sweden, specifically problematic gambling tends to move outside the system more easily than other gambling.

General note on the proposed regulation

FGC points out that the proposal has left significant issues regarding the final implementation of the gambling system behind the regulatory powers. This applies, in particular, to items under section 31. From the point of view of ensuring the functionality of the system and its channeling ability, the appropriateness of the parameters behind the settings can decide the success of the final result. Suppose the parameters given through the settings are adjusted incorrectly. In that case, the success of the entire reform may be at stake, and the result may be the worst possible – a license-based system with weak channeling capabilities.

FGC’s improvement proposal: To maintain the gambling system’s overall objectives, overall control should be maintained when making regulatory-level decisions. The Government, not individual ministries, should issue the final regulations (settings) on gambling.

General note on the tax treatment of unlicensed gambling winnings

The proposal contained in the bill to regulate unlicensed gambling winnings as taxable requires changes. FGC considers the proposed goal of extending taxation to all digital gambling outside the system to be correct and consistent. However, it includes shortcomings and challenges to the fair treatment of citizens. According to the proposal, stakes used for lost games may not be deducted from taxation. This creates an unfair situation, especially for players with gambling problems who gamble outside the system more often than other customers. If a person with a gambling problem loses, for example, 10 000 euros in unlicensed digital casino games, he could, for example, have gambled 200 000 euros and received winnings of around 190 000 euros. About three out of four rounds may have been ones in which the player won nothing, and those stakes are not tax deductible. As a result, a problem gambler who lost 10 000 euros receives a taxable income of around 140 000 euros in this example, in addition to the losses. (Appendix 2 opens up the example case a little more). This unfair outcome significantly worsens the situation of the problem gambler.

FGC’s improvement proposal: Regulated tax penalties should apply to the net winnings generated from gambling during one calendar year. This means all taxable gambling winnings the player has achieved during the calendar year, minus all bets and losses of the corresponding period.

General note on Veikkaus’ group structure from a competition law point of view

Customer base and technology

Based on the bill, the part of Veikkaus that continues in the license-based market may have a competitive advantage due to Veikkaus’s monopoly operation. This cannot be considered an action acceptable under competition law. The draft of the proposal even admits that the chosen solution seeks synergy between the operation that will remain a monopoly and the company that will switch to the license-based side.

In FGC’s opinion, there should be a clear policy on whether Veikkaus’s current customers can be transferred to a company continuing in the license market in a way that it cannot be considered a benefit from customers obtained from the monopoly operations. The calculated value of the customer base is at least hundreds of millions of euros. FGC also points out that if the part of Veikkaus continuing into the license market were allowed to utilize all of Veikkaus’ current existing customer base, Veikkaus’ license company would be given a substantial competitive advantage compared to the operators entering the market.

A company operating in a competitive market may not use the same resources as a monopoly company from the same group in a way that distorts competition. Dividing Veikkaus into several companies includes a plan to establish a separate technology company. The plan consists of the risk that the monopoly company and the license-based company will use common technology, for which, according to the plan, compensation will be paid at the market price. Determining the amount of such compensation will be challenging and, in some cases, even impossible.

FGC’s improvement proposal: To avoid problems with competition law, it would be stipulated that the Veikkaus group companies should not use joint technical solutions related to gambling. That would be the same rule as in Sweden.

The games in physical slot machines

According to the bill, slot machines, which would continue to be thousands all over Finland, continue to be covered by Veikkaus’s monopoly. These machines would have the same casino games developed mainly by Veikkaus, which Veikkaus’s license-based company would offer in the competitive license market. Those slot machines would be a significant marketing channel for the games in question, from which Veikkaus’s license company would also gain a significant competitive advantage.

FGC’s improvement proposal: A single product or game would be offered only in the monopoly or license-based market so that the customer knows which group’s game he is playing. Veikkaus’s monopoly and license companies should not offer the same product or game.

Detailed considerations:

Note on mandatory limits

Based on the proposal, the customer would be forced to set limits on gambling when setting up a betting account, which would aim to prevent harmful gambling. FGC wants to point out that although ideologically, the idea sounds valid, the practical experiences of the gambling industry have been different. In practice, it has been noticed that when a problem gambling customer hits the limits, he rarely stops gambling. Instead, gambling continues either with another official operator or, in the worst case, outside the legal system. Mandatory limits are not a good way to curb problem gambling but an excellent way to weaken the channeling ability of the gambling system.

FGC points out that making gambling limits mandatory was the biggest reason that Veikkaus’s channeling rate, especially in digital casino games, started dropping rapidly at the end of 2018. In the new system, the effect of the obligation to set limits to the channelization rate would not be as dramatic because the customer could continue gambling with the service of another licensed operator. In practice, however, players would be forced to change gambling operators. In connection with such a change, the risk of the customer switching to gambling for an operator outside the system is always tangible.

FGC’s improvement proposal: Setting gambling limits should be suggested to the customer during registration, but setting them should not be mandatory. The Ministry of the Interior should consider implementing gambling limits, for example, according to the Estonian model. In Estonia, the gambling operator must give customers the opportunity to set their limits during the customer registration process, but if the customer does not want to set them, he can, by his active decision, not set the limits.

In this context, FGC would also like to point out that if a solution is decided in the future where standard mandatory gambling upper limits are set for all players, customers should be able to increase their limits if they wish if they can demonstrate that their financial situation allows this. Such a solution ensures that the system’s channeling ability is maintained so that the risk of gambling problems does not significantly rise.

Note on bonuses

In FGC’s view, the categorical ban on all bonuses in the proposal is problematic when considering the system’s channeling ability. FGC agrees with the Ministry of the Interior that bonuses that encourage gambling can increase problematic gambling and, thus, gambling problems. Still, that would be a significantly smaller disadvantage than leaving the bonuses only for operators outside the system and helping channel gambling outside the system.

The importance of bonuses, especially for the customer experience of digital casino games and the profits of gambling companies, is enormous. The more active the customer is, the more critical the customer considers bonuses and other loyalty rewards offered by the operator. In general, the most active customers are problem gamblers or players whose gambling problem is developing. Suppose operators redeeming their licenses are denied all bonuses. In that case, the system’s channeling ability will fall significantly below the target level, as customers who are used to bonuses will move to gambling companies outside the system. It will be especially problematic if the players, who the system should be able to protect, move to play for operators outside the system.

FGC would also like to highlight that at most current international gambling companies, the implementations of bonuses and loyalty systems are often so complicated that not all players even understand how bonuses work and are available. If bonuses were partially allowed in the license-based system to improve consumer protection, it would be possible to demand clarity and simplicity from them so that consumers could understand the structures of the bonuses in detail.

FGC’s improvement proposal: The Ministry of the Interior should consider allowing bonuses in legislation so that bonuses can be given to the player, but their complicated wagering conditions would be prohibited. The bonus recycling condition should only require the customer to play the bonus money he received once through games, after which he could withdraw the remaining money for himself if he wished. With the presented change, the competitive conditions of legal operators would improve against supply outside the system, and the channeling capacity of the system would improve considerably. From the point of view of gambling problems, the legal offering would cause a few more disadvantages than the current one, but keeping customers who gamble especially problematically within the scope of the gambling system would bring a significantly more significant benefit. The society remains informed about possible problem gambling and can target actions to reduce problems only when the customer plays games from a legal operator.

Note on the categorical ban on marketing by third parties

The bill proposes that gambling marketing can only be done by licensed gambling operators. FGC considers that the categorical ban on the marketing of gambling by third parties is problematic and causes significant problems when evaluating the legality of various activities. To some extent, the regulation could be improved by defining illegal marketing more precisely, but such a solution will not completely eliminate the problems.

Affiliate activity – business-like marketing

In the categorical ban on marketing by third parties, problems arise, especially with regard to various affiliate sites. These are typically international online sites that directly or indirectly advertise gambling services. It is not always clear which country’s regulation the affiliate operates under. FGC points out that the gambling legislation of many other countries allows the use of affiliate services.

FGC points out that leaving the entire affiliate activity outside of Finland’s official gambling system poses a significant risk to the system’s channeling ability. Existing affiliate operators already have an extensive customer base of Finnish customers. In Finland, a lot of searches related to gambling are made through search engines, especially Google, which direct people to affiliate sites. People do not stop such searches, and the direction of internet traffic to affiliate sites does not stop, even if affiliate activity is prohibited in Finnish gambling operations. In this case, affiliate operators would direct customer traffic to the pages of gambling companies operating without a license, weakening the gambling system’s channelization rate.

The bill has defined strict boundary conditions for all gambling marketing. If affiliate activities were allowed in Finland, these companies would have to follow the same marketing regulations as gambling operators and media companies. Affiliate activity should become significantly cleaner compared to the current practically completely unregulated situation.

FGC’s improvement proposal: The Ministry of the Interior should look for an implementation method to bring affiliate operators into the scope of official regulation. An alternative to be considered could be, for example, the Romanian model, where affiliate operators are required to have a separate business license, which could be part of the proposed supplier license.

Note on the presented product groups in exclusive and multi-license systems

In FGC’s opinion, the arguments for leaving certain product groups under exclusive rights seem artificial. The reasons given are that there is currently no competition in the product groups in question and that transferring those products to the multi-license system would increase the marketing of these products. This, in turn, would increase the gambling problems caused by these games. However, based on the proposed law, the monopoly would mainly be in those product groups that, according to studies, cause little or no gambling problems. Only physical casino and slot machine operations are an exception in this respect. For example, the inclusion of lottery game operations in the scope of monopoly cannot be credibly justified with these arguments.

In particular, FGC considers leaving pool-based horse betting and digital eInstants within the scope of Veikkaus’s exclusive right to be an incorrect solution, and no credible justifications have been presented for the proposal.

Pool-based horse betting (Tote games)

In the case of Tote games, the existing high channelization rate and the fact that competition could increase the marketing of the products, and thus, the resulting gambling problems are presented as justifications. FGC points out that in the studies of both The Finnish Institute for Health and Welfare and the helpful line, Peluuri, Tote games have been one of the product groups that cause the least harm. Releasing them to the license-based system could increase the marketing of the products, but this could be considered mainly to direct the demand for less harmful gambling. In addition, concerning the channelization rate of Tote games, it must be understood that the high channelization rate is realized only because Veikkaus has a cooperation agreement to offer Swedish horse races with the Swedes in a common pool for Veikkaus’s customers. If the agreement were to cease to be valid for some reason, the majority of existing betting would be transferred to other operators operating without a Finnish license, and the high channelization rate of Tote games would collapse immediately.

Tote games are currently part of the license-based market in Sweden and Denmark. This is the digital sales channel situation in all European countries that have switched to a license-based gambling system. In the Netherlands, only one company can operate pool-based horse betting, but even that has gained its status through bidding. In Denmark, Tote games were initially on the side of the monopoly system. Still, that arrangement was found to be problematic and dysfunctional, as a result of which Tote games were moved to a competitive market in 2018.

FGC would also like to point out that section 26 of the draft law prohibits the organization of betting for gambling events/draws that are used in the monopoly business. In practice, the operating model would mean that operators applying for a business license in Finland would no longer be allowed to offer fixed-odds betting at those races where Tote games would be organized. This can be considered a significant regulation aimed at limiting competition because large international listed companies would apply for a Finnish license, and they compete against pool-based horse betting in Sweden with fixed odds betting products.

FGC assumes that section 26 and its justifications are written mainly from the point of view of lottery games. If Tote games were to be left as a monopoly, the proposal should be supplemented so that fixed-odds betting on the outcome of horse races would be possible. If Tote games are moved to the side of the multi-license system, this definition problem does not exist.

FGC’s improvement proposal: Pool-based horse betting/Tote games will be transferred to a multi-license system.

Digital eInstants

Regarding eInstants, FGC wants to point out that with the proposed regulation, Finland would return to the situation that led to the merger of three gambling companies at the beginning of 2017. The main reason for the merger was the weakening of the differentiation of Veikkaus’s and RAY’s products in the digital channel. The proposed regulation would do the same – not least because the proposal would allow eInstants draws to be made at the time of game purchase (RNG technology), just as in digital casino games. The visual implementation of eInstants and digital slot machines can be very identical. FGC wonders how the separation of these products can be handled reliably and how the consumer has the opportunity to identify which product group’s game he is playing.

FGC’s improvement proposal: eInstants would be included in the category of digital casino games and would, therefore, be moved to the side of the license-based system. Alternatively, eInstants could be arranged to be implemented technically so that their technical and visual implementation would differ significantly from the implementation of digital casino games.

Note on the possibility of the supervisory authority to regulate the activities outside the system

FGC considers it good that the bill aims to give the supervisory authority the means to intervene in the offering and marketing of unlicensed gambling in Finland. However, according to the FGC’s view, it seems that the vast majority of the proposed measures would affect the operations of license companies in particular. However, blocking payment and online traffic (IP) can be a reasonably effective way to reduce gambling outside the system.

FGC does not identify measures in the bill and its explanatory text that the supervisory authority could use to monitor gambling outside the Finnish system. According to FGC’s understanding, gambling outside Veikkaus is significantly more significant than the authorities estimate. It is practically impossible for the authorities to intervene in illegal supply if that supply is not even recognized. Technical systems and services would be available for monitoring and intervening in gambling, which could be used to significantly improve the system’s channeling capacity and increase the state’s tax revenues.

In the bill, great attention is paid to preventing betting-related incidents. At worst, match manipulation and other abuses are a problem for sports comparable to doping, or even worse. The bill says that Veikkaus’s own measures, FINCIS’s (Finnish Center for Integrity in Sports) operations, and ULIS’s (United Lotteries for Integrity in Sports) cooperation are excellent and sufficient measures to prevent abuses. In FGC’s opinion, this is unfortunately not the case. Finnish sports are likely also currently being used to organize illegal activities. Monitoring and preventing match manipulations should not remain the responsibility of the betting companies. Still, the authorities should take a more significant role in the matter than at present.

FGC has requested a description of the benefits of a modern monitoring system from Sportradar, which focuses on monitoring international gambling activities and preventing sports manipulation. That description is included in the appendices to our statement (Appendix 3).

FGC’s improvement proposal: The authority supervising gambling activities would be obliged to acquire technological systems that monitor and supervise gambling activities outside the license system. In addition, the regulator or other separately defined authority should join an international network that could be used to monitor global betting activities and identify possible abuses related to Finnish sports.

Minor notes

The proposed ban on using a credit card for money transfers does not protect those with gambling problems, even though that has been the explanation. In practice, that means the customer first transfers the money from the credit card to his bank account and then to his betting account. In practice, the regulation intended to protect those with gambling problems mainly results in a small additional cost for them. The ban on the use of credit cards, and especially debit cards, causes problems, especially for transactions at retail channels. In addition to the customer, the affected parties are especially retail outlets and Veikkaus, which offers gambling products in the retail channel.

The proposed procedure for lifting the indefinite gambling ban is problematic. When a customer wants to start gambling again after a break of at least a year, he is given the option of waiting three more months or moving to gamble outside the system. FGC considers that a person who hasn’t gambled for more than a year should have the opportunity to lift an indefinite ban immediately. There must be a separate consideration period to cancel short and fixed-term bans. However, if bans are valid indefinitely and have continued for over a year, that three-month consideration period will not accomplish anything other than the player moving to play outside the system.

Sincerely yours,

Jari Vähänen

Partner

The Finnish Gambling Consultants Oy

Finland has submitted the new Gambling Act for consultation

On Wednesday, July 3, we finally found out what kind of gambling legislation the Finnish government is planning for Finland. The published proposal has more than 400 pages, and I have only been familiar with it for a working day. So, my observations and opinions in this text are only preliminary, but I still want to share them with you. Finland has started the public hearing/consultation process, which will last until August 18. In principle, anyone can express their opinion on the bill during that time. According to the information I have received, this time, based on the consultation process, Finland is still ready to make changes to the gambling legislation. Because of this, it is not yet time to make assessments about how right the guesses I presented at the beginning of the year about the content of the law turned out to be in the end.

The schedule of the process has been specified. After the consultation process, changes are made to the law, after which the bill is sent to the EU notification process. After the EU notification, the proposal will proceed to the Finnish parliament in the spring of 2025, and the law is supposed to be approved during the next year. Part of the content of the bill will enter into force already in 2026, but in practice, Finland will switch to a partial license-based gambling system from the beginning of 2027. Some things will not be implemented until 2028, so there should be enough time for the preparation.

Monopoly and other licenses

In current Finnish legislation, Veikkaus’ gambling monopoly is defined in law. In the new system, monopoly games will be granted an exclusive license for a period of ten years, which can only be given to a company under the direct control of the Finnish state, i.e., Veikkaus in practice. According to the proposal, the product areas covered by the monopoly are scratch cards (including eInstants), lottery games (e.g., lotto products and Keno), slot machines, physical casinos, and pool-based horse betting. The product areas that will be transferred to the license system are fixed odds betting (also includes horse racing), pool-based sports betting/games, digital casino games (roulette, craps, card games – poker), and digital slot machines and digital bingo. A gambling license is granted for five years.

In the list of monopoly products, pool-based horse betting, which accounts for 3-4 percent of all gambling in Finland, is the most surprising. It is not an important matter from the point of view of the whole, and therefore, keeping it within Veikkaus’ monopoly is strange, especially when the horse racing industry would like to transfer the games to the licensing side. I’m sure it will be a hard-fought battle in the coming months. I guess that pool-based horse betting will eventually be moved to the license side, where pool-based sports games already are.

The price of the gambling license is tied to the size of the operator’s gross gaming revenue. The minimum payment is 4000 euros, and the maximum price is 265000 euros if the GGR is over 50 M€/year. The gambling tax will be 22 % of the GGR, which is quite reasonable.

B2B license in 2028

Finland also introduces the “Game software license.” However, this license is not required immediately in connection with the change in the gambling system but from the beginning of 2028. The B2B license application process will be started at some point during 2027, and the license will be valid for five years. A game software license practically means that the license holder is obliged to use only the software and games of the game software license holder. The price of the license will be very affordable, i.e. only 1500 euros.

As a general rule, gambling IT systems must be located in Finland. There are two exceptions when IT systems can be somewhere else. If the supervisory authority of the country of location has a cooperation agreement with the Finnish supervisory authority, or the Finnish authority can verify the gambling IT system and its operation via a remote connection.

The supervising authority will issue all licenses. The current regulator, the National Police Board, is responsible for the legislation’s practical preparation. Still, a new agency, the Finnish Supervisory Agency, will be established under the Ministry of Finance to supervise the new gambling system. The new agency will start operating at the beginning of 2027.

Marketing is allowed but limited

Gambling marketing is allowed, but there are restrictions. The law has a list of prohibited gambling marketing, such as describing gambling as a way to solve financial problems. Sports sponsorship is also allowed, but there will be restrictions related to minors.

Marketing regarding the brand gambling companies and games may only be done by the gambling company itself. The law states that no other entity may do marketing related to gambling. This will significantly complicate the position of affiliate operators. On the other hand, the definition of advertising and communication will be complex, thanks to which, at least in betting, affiliates will also find their place in the Finnish market.

Gambling services and sites must not use interactive marketing. That means companies cannot discuss gambling issues with customers on social media, and operators are not allowed to offer customers the possibility of forwarding the gambling company’s publications.

Customers must give permission for direct marketing on their own initiative. The gambling terms must not automatically contain direct marketing permission, but they do require the active approval of the customers themselves.

The most interesting thing, and certainly one that receives a lot of criticism from current offshore companies, is the banning of bonuses. According to the law, gambling companies may not offer bonuses, either free games or games at a reduced price. In addition, the law has separately stated that using bonuses in all gambling marketing is prohibited.

Some other relevant matters of legislation

There is currently an option for payment blocking in Finland, which targets money transfers from Finland to gambling companies. In the new legislation, payment blocking is possible in both directions. Legislation has also specified that the blocking will also apply to cryptocurrencies, even though cryptocurrencies may not be used to pay for gambling at all. You also cannot pay for gambling with a credit card or buy it as a debt anyway. In addition to payment blocking, Finland can also implement network traffic blocking for gambling companies operating without a Finnish license.

There will be gambling company-specific money transfer limits, which the player must set (day and month) and can change. Those limits mean the amount of money that can be transferred from a bank account to a betting account. The state can set operator-specific maximum loss limits (daily, monthly, and annually) if it wishes, but this is not an automatic assumption.

The customer must have the option to set centralized prevention for all gambling, like Spellpaus in Sweden. In addition, the customer must be able to set himself a prevention for a particular gambling company’s games or part of them (a specific game or group of games).

JARI VÄHÄNEN

jari.vahanen@finnishgc.fi

Happy New Year!

I have written this text initially for http://www.lotterydaily.com, and Charlie Horner has partly edited it.

In the last three years, the world has suffered from significant problems. First, Covid-19 messed up the world, and when we were getting over it, Russia started a war in Ukraine. The war continues and causes great harm in Ukraine and other parts of the world. The world economy is threatened by a particularly embarrassing problem, stagflation, against which no effective “medicine” has been developed. In any case, inflation is at an exceptionally high level, and on top of that, there is a risk that the economy will plunge into recession.

Along with others, the gambling industry has also suffered from these global problems. The Covid-19 pandemic caused the biggest problems for gambling companies operating in the retail channel and for operators focused on sports betting. The retail channel still makes up a substantial share of the lotteries’ business, so lotteries were in big trouble in 2020 and 2021. Due to competition law reasons, the lotteries’ financial data for 2021 will be published now, and we have to wait for the data for 2022 until the end of 2023. So, unfortunately, accurate information about the lottery business’s current state is unavailable.

In any case, it seems that lotteries have recovered from the effects of Covid-19 and gotten their business back on track for growth. The difficulties in the retail business have accelerated the transition to digital sales, which will certainly increase the companies’ competitiveness. In this case, adversity has ultimately been beneficial.

In these lottery columns, I have tried to highlight areas of development where lotteries should invest more than they currently do. Recently, it has been great to notice that lotteries have been ready to change their operations and invest in finding new innovative solutions. The basis of the operation is still lottery games and highly responsible operations, but these things have been managed to be implemented even better by utilizing modern technologies.

However, there are new challenges ahead. The difficulties of the world economy cause problems for everyone. In addition, lotteries have found themselves in a situation where people’s attitudes towards gambling have turned in a more negative direction. As a result, politicians and regulators limit the visibility and marketing of gambling more than before. The risk might even be a total marketing ban on gambling, as has already happened in Italy. In any case, gambling companies, including lotteries, must find new ways to maintain and increase customer interest in gambling without the support of mass media marketing.

Lotteries face more and more competition not only from other gambling operators but also from other gaming companies. Because of this, lotteries must keep up with development and utilize the possibilities of technology better than at present. We have to be present in the devices that customers use anyway. Although the transition from the retail channel to digital sales has started at a good pace, it is no longer enough because digital development is moving forward rapidly and brings new ways of playing and entertainment to the market, which lotteries must also respond to.

The key to future success is understanding the competitive situation through the eyes of the customer. So what options are available, i.e., who are the lotteries competing against for the popularity of their customers? Companies must know the most significant consumer trends for this understanding to emerge. So it’s no longer enough to know where the development is at the moment; we also have to know how to look ahead. This still requires a significant change in the lotteries’ way of thinking, which was based on their “own bubble” and defending their own position for a long time. A successful company must constantly be able to develop its products and services to maintain customer interest.

Lotteries still have the challenge of arousing the interest of young consumers in lottery games, and why not also in other gambling products. The social importance of lotteries is probably no longer as familiar to young people as it is to us, who are a little older and hardly faced any other gambling companies besides lotteries in our youth. In addition to emphasizing the social role, supporting beneficiaries, and running responsible activities, lotteries must also be present in young people’s everyday lives. Therefore, monitoring and utilizing consumption trends is critical from a business perspective.

Being at the forefront of technological development usually costs a lot. Because of this, it probably makes economic sense for lotteries not to try to develop new solutions first. Instead, a good course of action is to monitor developments actively and acquire technology partners who can react quickly enough when a new technology begins to reach a level considered to be something of general use. The utilization of machine learning and AI is already starting to be at this level, so they should already be at least on the active planning table of lotteries. Virtual reality and metaverse are emerging technology trends we must prepare for soon. However, it must be remembered that simply offering technology is not enough; the content must also be relevant and exciting to customers.

In my own “crystal ball”, 2023 seems to be full of possibilities from lotteries’ perspective. The companies have sufficient resources and know-how to succeed in the ever-increasing competition for customers’ money and interest. Now you need to increase your understanding and courage to join the competition. It is excellent to note that, for example, European Lotteries actively organizes development-oriented seminars for its member companies, with well-known speakers from other business sectors as well. This kind of information sharing certainly promotes the development and improvement of member lotteries’ business.

Good luck and success in the upcoming challenges to all my lottery friends!

The end of the monopoly

I have written this text for http://www.lotterydaily.com, and Charlie Horner has edited it.

Besides Norway, my home country, Finland, is the only country in western Europe where the entire gambling business is still based on a monopoly system. Some years ago, Norway seriously considered changing the system, but in the end, the country ended up with the opposite solution and only started strengthening the monopoly system. Finland reached the same solution, as a result of which the previous three gambling companies were merged into one monopoly company. That new company, Veikkaus, has been operating for almost six years, and the results have been anything but what was hoped for.

What is wrong with the monopoly system, and what are the reasons for failure in Finland? First, a few basics need to be explained.

It is a general fact that monopoly reduces business because the market economy does not get to work in the best possible way. Monopoly causes inefficiency, which has been considered a good thing in controlling the gambling business. According to the legislation of many countries, gambling is a business that has been prohibited in principle and which the state has then given an exemption to a company to operate. The basic idea has been to limit the activity significantly and thus protect people from the harmful effects of gambling. This kind of activity worked well in a situation where business was only done in the retail channel, but the situation changed radically with the internet.

It is generally thought that doing a gambling business and responsible operation are mutually exclusive things. This is fundamentally a wrong way of thinking. There is no direct correlation between gambling sales and the number of gambling problems, and increased gambling sales do not automatically increase the number of gambling problems. Responsibility measures to prevent gambling are not the best possible way to prevent gambling problems. We must definitely try to reduce the problems, but there must be more effective tools than making it more difficult to play.

The basic idea that monopoly itself prevents gambling problems is completely wrong. If that assumption were valid, Norway and Finland should have the fewest gambling problems in Europe. However, this is not the case; the situation is even the opposite.

Generally, wrong assumptions cause incorrect operating models and unrealistic goals. The functionality of a good gambling system does not depend on whether the system is monopoly or license-based. I believe that a monopoly can be a good model, but it requires excellent regulation to work, which correctly understands business fundamentals. Simply restricting the operation robs the system of its legitimacy in customers’ eyes. In such a situation, the official restrictions no longer work. Similarly, a license-based system can cause unnecessary problems if the regulation is not up to date.

What has gone wrong in Finland? In Finland, the state tried to protect the gambling system based on monopoly when it decided to merge the previous three companies (Fintoto, RAY and Veikkaus) into one company. The goal was to enable more efficient business operations when there was no longer a need to prevent competition between Finnish companies. The assumption was to increase gambling revenues and satisfy customers who receive international-level products and services from their own company. The single company model was also believed to help prevent gambling problems, as customers’ total gambling and potential problems can be monitored from one system.

The Lottery Act, which entered into force at the beginning of 2017, strongly emphasized responsible gaming. The legal text stated that Veikkaus’ task is to prevent gambling problems. In fact, this was the sole function of the gambling company by law. Not a word was mentioned in the law about the two other big goals mentioned in connection with the change, a competitive offer and a moderate increase in the level of profits.

New Veikkaus has had difficulties getting permits for new products and services from the beginning. At the same time, international gambling companies have continued their product and service development, the results of which have been easily available to Finnish customers via the internet and mobile channels. Although offshore companies have not been allowed to do marketing in Finland, information about the companies has spread widely, and an increasing number of Finns play money games for companies other than Veikkaus. Veikkaus, which used to take good care of its channeling task, has fallen from the top ranks of the development of the gambling world. Because of this, active Finnish gambling customers have moved to other companies.

The situation has escalated little by little. Veikkaus’ sales and GGR have decreased every year of the company’s operation. Veikkaus’ GGR was around €1.8bn when the company started operations. According to this year’s forecast, the GGR is about €1.0–€1.1bn. The drop has been in six years by about 40% Veikkaus’ market share of all gambling in Finland was at the 90% level, but now it is only about 2/3. Veikkaus has only 50% of gambling in digital channels, compared to 73% six years ago. The worst situation is in particularly competitive areas, in fixed-odds betting and online casino games, where Veikkaus’ market share is only about a third. That has happened in a situation where Finland further tightened gambling legislation from the beginning of 2022 and made it more difficult for offshore companies to operate.

The poor business results could even be justified in some way if the primary goal of reducing gambling problems had been realized. The previous nationwide gambling problem research was conducted in 2019. At that time, it was found that there had been no significant change in the overall level of gambling problems. On the other hand, the number of players suffering from serious problems had increased somewhat. After 2019, Veikkaus’ sales and GGR collapsed. Unfortunately, we will have to wait at least a year before we know how this has affected the number of gambling problems. The following nationwide research will be made next year, and the results will probably be known in early 2024. According to Veikkaus’ small-scale survey, gambling problems have decreased somewhat, but it does not seem that a tremendous change has occurred.

Veikkaus is not allowed to develop its business, and at the same time, the number of gambling problems does not seem to be developing as expected. Gambling has become more difficult for Veikkaus due to stricter responsibility requirements, e.g., mandatory identification and strict loss limits. As a result, customers have increasingly transferred their gambling to other operators. Finns’ overall gambling seems to be slightly increased after the Covid-19 pandemic, but at the same time, Veikkaus’ GGR continues to fall sharply. The new stricter monopoly legislation seems to be driving customers to offshore companies. The money flows outside of Finland, the customers are no longer under the supervision of the Finnish authorities, and the number of gambling problems does not decrease.

The situation cannot continue like this, and now it is better for everyone that the gambling system in Finland would change. That opinion was said by the CEO of Veikkaus in August when the company reported its H1/2022 result. Veikkaus, therefore, announced that it no longer considers it reasonable to continue as a monopoly company, at least in competitive gambling areas. A similar announcement by a monopoly company led to a rapid change in the gambling system in Denmark and Sweden. Judging from the comments of the political parties, the same will also happen after the parliamentary elections held in Finland in April next year.

No one yet knows what Finland’s new gambling system will be like and when it will come into force. I’ll try to help political decision-makers design the best possible model for Finland, where legislation and regulation are based on a comprehensive understanding of the gambling business. I believe that new, much better legislation will come into force in Finland within 2–4 years.

How can lotteries succeed against digital gambling competition?

I have written this text for http://www.lotterydaily.com, and Charlie Horner has partly edited it.

The summer vacation season is coming to an end here in Northern Europe, so here comes my new column after a two-month break. As you have noticed from my previous writings, I consider it important that the offer of lottery companies is competitive compared to other gambling operators. That is especially critical in digital sales channels, where a massive number of other companies offering gambling products are available to customers.

Many lotteries have thought the competition does not concern them because the company has a monopoly on lottery games. That kind of thinking has not been very harmful in a situation where the sale of lottery games has taken place in the retail channel because the customers have faced only a few other gambling offerings. However, the digitalization of business and the change in customers’ consumption behavior have changed the situation dramatically. Fortunately, most lotteries have already understood this change, and a reaction to the matter has begun.

It is easy to see from the statistics of World Lottery Association and European Lotteries that there are considerable differences in the digital business shares of the world’s lottery companies. At its peak, the percentage of digital business is more than half of the entire company’s operations. However, dozens of lottery companies worldwide have not even started selling their games on digital channels. In all cases, the reason for this is not in the company itself but the legislation of the country in question, but it does not eliminate the existence of the problem.

Some lotteries have deliberately delayed the start of the gambling business in digital sales channels. The reasons for such a decision have been, e.g., fear of the reactions of the retail channel, considering digital sales as an irresponsible activity, the “competition doesn’t concern us” idea, etc. According to experiences from several countries, the agents’ reactions to starting digital sales have been very moderate in the end, and no significant problems have followed. Lottery digital sales have not increased gambling problems. In fact, running a responsible gaming operation in the digital channel is easier to implement than in the retail channel because, in the digital channel, all customers play with identification. The “competition does not concern us” thinking is ridiculous and dangerous. Lottery activity is not a separate “business bubble” but part of the customers’ regular choice.

What do lotteries have to do in order to stay involved in the development and remain attractive in the eyes of their customers? Short-term solutions depend on the company’s current starting point. Suppose a large part of the lottery’s business already comes from digital channels. In that case, the tools for operational development are entirely different from those of a company just starting the digital business. I will return to these concrete solutions a little later.

My university professor taught us that a company could improve its weaknesses by doing the same as others but doing so does not gain a competitive advantage. A successful company always needs at least one competitive edge over other companies participating in the competition. Lotteries have had at least two traditional competitive advantages. Lottery’s retail sales channel is the most expansive gambling sales network in several countries. Lotteries have also offered the highest jackpots in the gambling market, which have interested customers. In addition, the lottery profits to the beneficiaries and the responsible brand of the companies have brought a competitive advantage. Lottery’s strengths are still there, but they are not enough because there have become too many weaknesses in the operation.

People are used to doing their affairs more and more on digital channels. Entertainment and leisure consumption, in particular, has moved quickly to the digital age. Gambling products are a product group that is very easy to sell in digital channels because games are not about the physical product. Because of this, the supply of gambling games on the internet and mobile channels has exploded during the 21st century. Customers are offered an enormous number of games that are more entertaining to play than traditional lottery games. The availability of games is easy, so customers can decide where and when to play. If lotteries do not offer games on the same principle, they will develop a competitive disadvantage. By starting digital sales, lotteries, therefore, do not gain an advantage over other gambling operators, but in this way, they prevent the occurrence of a business disadvantage.

Lottery, which is planning to start selling its games on digital channels, has a lot of help available. Benchmarking and best practices information is available from other lotteries. The traditional technology suppliers of the lottery world also offer technology solutions for digital channels. In addition, several technology providers specializing in digital channels have entered the market. In addition to the technology solutions needed for sales and running games, there are also, e.g., technologies and services related to data and customer relationships. In the end, starting operations is quite simple, as long as the legal issues have been solved.

The most advanced lotteries in the digital gambling business are hardly satisfied just being in the business. Their aim is certainly to be better than other gambling operators in at least some aspects. Working with traditional technology suppliers of the lottery world has been a challenge. Because of this, many developed lotteries have ended up in a multi-supplier situation, where companies try to use the best providers on the market in different areas and no longer acquire all technology from one supplier. The best data and customer solutions are not necessarily found in the same place as the best game technology. The same situation applies to games and related services.

New game studios have entered the gambling business, developing entertaining games those interest customers. For one reason or another, there have been far fewer new game producers in the lottery game area than in other game verticals. I know that lottery games can be developed to interest customers significantly more than they do now, also in digital channels. So far, just a few companies have realized that. I follow with great interest what, for example, my former employer Veikkaus’ new subsidiary Fennica Gaming accomplishes in this area. I believe that by developing new responsible and entertaining lottery games, lottery companies can gain a competitive advantage and succeed in the digital gambling competition.

The role of the state in the gambling industry

I have written this text for http://www.ice365.com and they have partly edited it.

In this column, I will look at the activities of states in the field of gambling, though I’m well aware that each nation has its own approach and desires for legal gambling.

For example, the EU has granted member states significant control over gambling. Because of this, or thanks to it, gambling activities in EU countries differ markedly from one to the next, more so than almost all other areas of business.

When we assess the activities of states in the gambling business, it is worth recalling that gambling is, in principle, a potentially dangerous activity that can cause significant problems for some consumers.

For this reason, gambling is regulated all over the world, and there is no desire to make the sector free from regulatory scrutiny. The methods and degrees of regulation, on the other hand, vary greatly from country to country.

At one end of the spectrum are countries where gambling is prohibited entirely, such as in several Middle Eastern countries, or those with Islam as the prevalent religion.

The starting point for many other countries is that gambling is prohibited, but special permits can be issued for it.

A number of markets have permitted gambling through a monopoly model, from which it has gradually transitioned to allowing different activities from a wider range of licensed operators.

When considering the different gambling systems, it is important to acknowledge these historical developments, because this helps to explain countries’ differing approaches.

States have several different roles and interests in the gambling business. It is the entity that enacts and organizes the regulation of laws in the country, and because gambling has been a restricted activity, many states have been responsible for operating gambling under the monopoly model.

The gambling monopolies have thus been under the direct control of the state, in which case the country has been the main beneficiary – and the profits from gambling are enormous, of course.

Hence, states have a very high financial interest in controlling and managing the revenue from gambling, which they can then redistribute to their chosen causes. Minimizing the disadvantages of gambling is also a key goal, as the state often has to cover the cost of treatment for those who suffer gambling harm.

But with differing goals and expectations, there are often conflicts between different stakeholders. In general, there will be a variety ministries dealing with different products and verticals – there are only a few countries in which all gambling is centralized under a single ministry.

That is why, for example, increasing financial profits and reducing the number of gambling problems is viewed as a contradiction in many countries, leading to conflicting and unclear regulatory policy for the industry.

Gambling is often divided into three overarching verticals: lottery, betting, and casino, each of which is subject to significantly different regulations.

Lottery operations are generally still based on a monopoly system in which one company takes care of all operations. In most countries, this monopoly is still overseen by a state-owned entity.

Betting can be split into sub-divisions: horse and sports betting. In many countries, there has been a de-facto monopoly for horse betting, where racetracks and betting operators have worked in tandem.

This differs from sports betting, where there have traditionally been several operators competing, which has also been true of the casino business. Thus, monopoly systems have traditionally been more common in lottery operations than in sports betting and casino operations.

When analyzing European gambling regulatory frameworks, it is easy to see that the lottery business tends to have remained close to the monopoly model, rather than opening up to private operators. State-owned companies run the activities, or the state has direct ownership while awarding operating rights to one provider through a tender process.

In contrast, monopoly systems for betting and casino operations are few and far between. Of the European countries, only Finland and Norway continue to operate all gambling activities based on a monopoly system.

As I said before, the EU has given its member states a great deal of decision-making power when it comes to gambling policy. The precondition is that the legislation must comply with the general principles of the EU and that restrictions on doing business must be justified.

The premise is that gambling activities can be regulated and restricted to prevent gambling problems. That is an understandable and acceptable principle, but is it being put into practice?

In general, a monopoly model is an inefficient way of running the business activity and is therefore a worse system than the free competition, or in the case of gambling, a license-based model. However, a monopoly can be defended, if it can be proven to be more effective in preventing gambling problems than the license-based model.

However, this is not backed up by studies, which show little evidence of fewer gambling problems in countries with gambling monopolies.

But the effectiveness of preventing gambling harm cannot be the only deciding factor in the value of a regulatory model. But in an increasingly digital industry, the jury is also out on the licensing model – traditional borders no longer have the same significance as they did ten years ago. This online shift has posed regulators with challenging questions they have not yet properly answered.

When the rationale for a gambling monopoly in an EU member state should be to prevent harm, one may rightly ask why that model is only prevalent for lotteries. After all, studies show that traditional lottery games cause little or no gambling harm.

In contrast, online casino, particularly slot machines, is often said to be the most harmful gambling product. Yet online casinos are regulated through the licensing model almost everywhere.

This discrepancy is explained in part by historical reasons but certainly also through states’ financial interests – the lottery has been a goldmine for many nations. Revenue from lottery games can account for around 60% of a country’s gambling spending, compared to 5% to 10% for sports betting and casino.

The private gambling operators’ lobbying efforts, which have sought to and succeeded in breaking the digital betting and casino monopoly, have undoubtedly also had an impact. Lottery games have not been part of the product range of these private companies, so legal battles have therefore not centered on lottery operations.

What will happen in the future? I’m not even trying to answer that, but I’m sure the change will continue.

The weight of responsibility in gambling is growing strongly, which is why states’ legislative and regulatory roles will be maintained and even strengthened. But it is important to note that states are fundamentally unsuited to owning commercially significant activities.

It would be best for all stakeholders that states will give up direct ownership of gambling companies. If operations still need to be tightly controlled, a limited number of licenses is a better solution than a state-owned monopoly.

Can a lottery be an international operator?

I have written this text for http://www.lotterydaily.com and it is partly edited by Conor Porter.

Lottery companies have traditionally been directly state-owned or at least controlled by the states. The companies have operated in one country and mainly sell lottery games on an exclusive basis. However, the situation has changed in many ways in the 21st century. The digitalization of business has reduced the importance of traditional land borders and made it possible to start new types of business. As a result, competition in the gambling market has intensified, which has also affected lottery companies operating on a monopoly basis.

Economies of scale work very well in the gambling business. Expanding market areas will do little to increase costs for selling games on digital channels. Adding new gambling verticals to the product range increases costs one-time, but these additional costs are also marginal compared to the volume of the total operations. In economic terms, the gambling business could eventually end up in a so-called natural monopoly, with the largest company dominating the entire gambling market in the world. Therefore, there would be a very considerable economic and competitive benefit from economies of scale.

The gambling industry also seems to be of interest to companies traditionally operating in other sectors. To my knowledge, media companies, in particular, have analyzed the possibilities of expanding their operations into the gambling industry. There have even been rumors that the “Big 5” companies, or at least some of them, are considering joining the gambling business. However, there is already an internal consolidation in our industry, where technology suppliers have sought the operator’s role and a few operators have started a B2B business.

The lottery world may still be reasonably at ease, but there are already many signs of a change in traditional activity in our area as well. Most lotteries have started selling their games on digital channels, several companies have expanded their product range beyond lottery games, technology vendors operate games in several markets, ownership of lottery has been shifted to private investors, and Lottoland-type companies have mixed up the monopoly on traditional lottery games.

How should lotteries react to a changed situation? Traditionally, the lottery world has sought to resolve issues through legislation, which has been primarily a defensive struggle in which states have sought to secure the status of their “dairy cows” through laws and regulations. This kind of thinking is still prevalent in many countries, but luckily, lotteries have also been able to change. Keeping up with developments requires a critical review of your own operations and the ability to make the necessary changes. Many times an attack is the best defense. So could lotteries take over from other markets?

As I have said in my previous columns, defining a lottery is pretty challenging these days. The product ranges, operating principles, and ownership bases of the companies in the lottery organizations (EL, WLA) are very different. At the extreme are directly state-owned companies that sell lotto games and scratch cards only through retail channels in their own countries. On the other side are privately-owned companies that operate all gambling products in all channels and many different countries. Therefore, the operation of lotteries cannot be generalized in any way. I will now focus on that other extreme, the members of the lottery world who have entered the international competition.

Among the member companies of the European Lotteries organization, there are at least three different types of models to implement internationalization. The ownership base of lottery companies has changed, and private investors have joined. An example of such a change is the public listing of the French lottery operator FDJ on the stock exchange, in which state ownership of the company fell to a 20-25% level. Another even fresher and more interesting example is the acquisition of SISAL, an Italian company in which Flutter Entertainment, one of the giants of the gambling world, became the owner of the lottery company. Another change occurred years ago when another traditional Italian lottery operator, Lottomatica, and technology supplier IGT (GTech) merged. The FDJ, SISAL, and IGT have in common doing the gambling business in different roles and different countries.

FDJ and IGT are also examples of another way for lotteries to go international. These companies sell gambling-related technology to other gambling companies. For IGT, this has been the company’s core business, but for the FDJ, it is a significant change in which the traditional lottery has expanded into another industry. Years ago, the FDJ made acquisitions to acquire technological know-how aimed at developing better tools for its operations. As FDJ developed a larger entity from its technical solutions, the company established a new subsidiary, FDJ Gaming Solutions, to sell these technologies primarily to other lotteries. An example of a similar type of business is Camelot, which operates the UK lottery on an exclusive basis but at the same time sells technology and consulting services to other lotteries through its subsidiary Camelot Lottery Solutions. The newest entrant to such activities is my former employer Veikkaus, which has a monopoly on all gambling in Finland. Fennica Gaming, which is 100% owned by Veikkaus, started operations a month ago, and the company’s goal is to sell self-developed games and technology to other gambling companies.

A third exciting model for implementing the internationalization of gambling is to expand B2C operations to other countries. The best example of this in the European lottery world is the Czech lottery company SAZKA, which currently operates internationally under the name Allwyn. The company has bought holdings in several European lotteries. In addition to the Czech Republic, Allwyn operates in Austria, Cyprus, Greece, and Italy. In addition to these, the company is competing for the UK lottery license with Camelot and SISAL. At least Allwyn is not yet in a position to take full advantage of economies of scale in its lottery operations, as the laws of the countries in which it operates do not allow this. However, the situation could change significantly if the lottery business moves from a monopoly to a license-based system.

It is already clear that a company operating a lottery in a country on a monopoly basis may also operate internationally. That, of course, requires a group structure in which international operations are handled through another company. Therefore, expansion of the business is possible, but it involves, e.g., significant competition law challenges, at least as long as the lottery operates under a monopoly. It is interesting to note that the most active expanders have been the forerunner and most advanced lotteries. Does this mean that others will follow them in this area as well?