Lessons from Nordic peers on liberalising online gambling

The Nordic Region’s Online Gambling Liberalization: Lessons from Sweden and Denmark

The Nordic countries have historically stood as paragons of effective governance, characterized by progressive social policies and high standards of living. With reputations built on solid welfare systems, gender equality, and work-life balance, these nations have successfully addressed various societal challenges. However, their approach to liberalizing the online gambling market has revealed significant complexities and shortcomings.

For decades, a monopoly model dominated the gambling landscape across Sweden, Denmark, Norway, and Finland, with state-owned entities controlling lottery services, horse racing, and land-based gaming machines. While this model was effective prior to the digital revolution, the emergence of online gambling catalyzed an influx of private operators entering the market to provide more competitive, diverse offerings that state monopolies were unable to match.

In 2012, Denmark took a progressive step by becoming the first Nordic nation to liberalize its online gambling sector. The establishment of a licensing framework aimed at fostering competition while implementing player protection measures marked a pivotal shift. As of April 2024, Denmark boasts an impressive channelization rate of 90%, illustrating the effectiveness of its market structure.

### The Key to Denmark’s Channelization Success

Denmark’s high channelization rate serves as a model for best practices in online gambling regulation. According to Morten Ronde, CEO of the Danish trade association Spillebranchen, the successful use of data analytics has been integral in tracking player behavior and monitoring operator performance.

“It’s remarkable how Denmark leverages data,” Ronde asserts. “From the outset, licensed operators were required to submit transactional data, enabling real-time market analysis and regulatory adjustments.”

This proactive approach allowed Danish regulators to identify trends and remain ahead of potential issues, a stark contrast to neighboring Sweden during the pandemic. While Sweden imposed mandatory online casino limits in July 2020 to mitigate potential overconsumption during lockdowns, Denmark observed that their players’ behavior remained stable—an outcome attributed to effective data monitoring and regulatory oversight.

### Competitiveness vs. Regulation: The Danish Dilemma

Despite its successes, Denmark’s liberalization process is not without flaws. The state-owned monopoly, Danske Spil, continues to compete against private operators, leading to concerns of unfair advantages in the marketplace. This issue highlights a broader tension within the Nordic gambling framework: state involvement in a competitive sector creates inherent conflicts of interest.

Countries such as Sweden, Finland, and Norway maintain similar monopoly systems, with state ownership limiting the competitive landscape. Both Ronde and Gustaf Hoffstedt, head of Sweden’s trade association BOS, have vocally opposed these monopolies, arguing that the government should not engage as a commercial operator in an open market.

Hoffstedt elaborates, “The foundations of a healthy gambling market lie in separation: private businesses should operate freely, while regulatory bodies oversee compliance and safety.”

### Learning from the Nordic Experience

As Finland prepares to launch its regulated online gambling market, there are fears of repeating the mistakes made by its Nordic neighbors. Stakeholders in Finland have voiced concerns that Veikkaus, the state monopoly, could leverage its existing customer base of 2.5 million to overshadow new private entrants in the market.

To address these challenges, Finland’s government has recently unveiled draft legislation proposing restrictive marketing measures. Initial backlash from the industry prompted revisions to the proposed rules, exemplifying the importance of stakeholder engagement in shaping a fair online gambling environment.

Industry expert Jari Vähänen warns, “If Veikkaus is allowed to retain its existing customer base post-liberalization, it will dominate the market from day one, erasing any chance for new operators to compete fairly.”

### Addressing the Growing Black Market

Across Europe, tightening regulations have led to an unwelcome consequence—an uptick in black-market gambling. Industry stakeholders fear that excessive restrictions can drive consumers toward unregulated operators, jeopardizing player safety and revenue for the state.

As the Nordic countries navigate the complexities of liberalizing their gambling markets, it is crucial to strike a balance between safeguarding players and ensuring a competitive landscape. The growing prevalence of black-market gambling emphasizes the need for well-considered regulatory frameworks that create an attractive licensed environment.

### Challenges Facing Sweden

Recent developments in Sweden reveal the ongoing struggle within its gambling sector. On February 20, the Swedish government initiated a review of its Gambling Act, aiming to address loopholes that have allowed unlicensed operators to exploit the market. Although this presents a step in the right direction, Hoffstedt expresses skepticism about whether the government will implement measures that genuinely enhance the competitiveness of the licensed market.

“While it’s commendable that action is being taken, without meaningful changes to make licensed operations more appealing, Sweden may continue to grapple with channelization challenges,” he warns.

### Conclusion: A Path Forward for Finland

Finland stands on the cusp of an exciting yet challenging era with its forthcoming liberalized online gambling market. The lessons learned from Denmark and Sweden’s experiences offer valuable insights into navigating this transition. By fostering an inclusive dialog with industry stakeholders and prioritizing a fair and competitive environment, Finland has the potential to create a regulated market that not only protects consumers but also thrives economically. As the journey unfolds, the Nordics’ commitment to progressive governance will be put to the test in the rapidly evolving landscape of online gambling.