Scandinavia’s gambling monopoly in jeopardy
The gambling industry in Scandinavia is experiencing a unique situation. Despite some efforts towards liberalization, the industry is still heavily regulated through various monopolies.
Recently, there has been increasing pressure for these monopoly-driven systems to become more open to competition. Monopolistic sectors often face conflicts of interest, which are more prevalent compared to licensed-based industries.
While conflicts of interest have been an issue in Scandinavian sectors, what sets this case apart is that these sectors remain economically stable and viable.
In a recent study conducted in May 2021, it was found that gambling monopolies were the dominant form of regulation in Europe until about 20 years ago. However, today only Finland and Norway continue to operate under fully monopolistic gambling systems.
Following a series of rulings by the Court of Justice of the European Union (CJEU), which emphasized the importance of regulatory regimes, many European countries made a historic shift away from these monopolies.
Instead, these countries have embraced a licensed-based approach, which has quickly become the preferred method of regulation.
These licensed-based systems provide greater protection for both consumers and operators. They promote competition and eliminate any conflicts of interest by ensuring that regulators operate independently from the gambling industry.
The European Union permits the establishment of monopoly regimes in specific industries, provided they can be justified. In the gambling sector, for example, a monopoly may be allowed if it is necessary to prevent gambling-related harm and maintain public order. This is particularly evident in the Scandinavian countries.
In 2020, Finland paid out an incredible €1.6 billion in gambling winnings, making it one of the most successful nations in terms of per capita winnings. However, this economic boon comes with a downside. Three percent of gamblers are classified as problem gamblers, and an additional 11 percent of the population is considered at-risk for gambling addiction.
Considering that over 80 percent of Finnish residents participate in some form of gambling, these numbers are actually impressively low. This demonstrates the effectiveness of Finland’s state-regulated and operated system, which is controlled by Veikkaus.
The grey market in Finland is a widespread issue that demands attention. Despite efforts to regulate the industry, Finnish operators continue to supply gambling products illegally to their population for several years. Strict advertising laws have been put in place, but they have been cleverly bypassed too frequently to be effective.
Denmark, with a slightly more liberal system, has also faced similar problems. In just this month, the Danish Gambling Authority shut down an astonishing 49 gambling sites.
The limited diversity in the Finnish community is causing significant harm. Additionally, the government is losing out on billions of dollars in potential tax revenue that could be generated through a licensing model. It is crucial to address these issues and find effective solutions.
Sweden’s gambling landscape underwent a significant transformation in 2019. Previously, only state-owned or controlled companies were permitted to provide gambling services for monetary rewards, similar to Finland’s system. However, with the implementation of the new Gambling Act on January 1st, 2019, the industry was divided into three parts.
The government segment still maintains control over the majority of casinos and token machines. Additionally, a competitive segment was introduced, allowing private organizations to offer online gaming and sports betting. This new licensing regime is similar to those found in other European countries.
This division in the market efficiently prevents an illicit grey market, ensuring the preservation of tax revenue and the management of gambling-related issues. Furthermore, the industry has achieved diversification by allowing “public benefit” gambling such as lotteries and bingo, creating a safe and well-regulated segment that contributes to the industry’s health and profitability.
Finland’s monopoly on gambling may not be sustainable, even with its perceived safety advantages. However, there are concerns regarding the lack of competition, conflicting interests, limited product options, and economic feasibility.
Similar scrutiny has been observed in Norway, where state-owned entities, Norsk Tipping and Norsk Rikstoto, hold a monopoly on all forms of gambling. These strict regulations have prompted Kindred to challenge the recent accreditation given to Norsk Rikstoto, which granted a 10-year extension for exclusive sports betting on horse racing.
The monopoly itself is not being questioned by Kindred, which is interesting. Norway has recently determined that its gambling monopoly is in line with EEA law after seeking guidance from the European Free Trade and receiving approval from the Oslo District Court. The Norwegian Ministry of Culture and Equality has stated that the exclusive right granted for gambling is not a public contract subject to procurement regulations, as it is based on important gambling policy considerations and involves significant public control.
However, Kindred is challenging the fact that the absence of a licensing tender process prevented any competition for the race wagering license.
While there are arguments for the advantages of a gaming monopoly, it appears that there are alternative solutions that are more intricate yet equally effective in addressing these concerns.
The absence of competition is expected to exert a significant force, hindering the continuation and prosperity of gaming monopolies as they have in the past.
The potential loss of tax income, which is likely to exceed the revenue generated by a state monopoly, along with the excessive regulatory measures required to prevent illegal activities and disregard for addiction, are among the numerous factors that could prove insurmountable for traditional structures.