Expert opinion by Mattias Kelmeling, Wiklund Law
In recent years, the Swedish Government and the judiciary has been struggling to uphold an illegal and de-legitimised monopoly, which by now has publicly been deemed obsolete by a governmental proposal. Meanwhile, the de facto liberalised and unregulated market is filling the corporate purses of the private operators. This state of affairs has prompted Swedish politicians to make a third attempt to re-regulate the Swedish gambling market.
For the first time in 20 years, there seems to be a broad political consensus to make a third and lasting attempt to regulate the market by introducing a licensing system for predominantly online gaming. The Proposal on the re-regulation of the Swedish gaming market (SOU 2017:30), was published on 31 March 2017. The proposal was sent following consultation with the public, where anyone interested could submit their comments to the government before 4 August 2017. Thereafter, the Government processed all consultation responses and sent a revised proposal to the Constitutional Council and to the European Commission in December 2017.
On March 21st 2018, the Constitutional Council approved the legislation with some comments regarding the lack of legislative ‘foreseeability’, adding that some definitions need to be clearer. At the same time, the draft law’s three-month-long standstill at the European Commission expired without receiving a detailed opinion or any comments. Hence, the Government is clear to take the next step and submit the proposal to the Swedish Parliament in the form of a Government bill, which, at the time of writing this article, is planned to be presented in May or June. Thus, we are now one step closer to a licensing regime in Sweden.
The whole re-regulation process and the proposal have been embraced by the state-controlled corporations as well as the tax-exempted non-profit sector. The major private operators have officially given their thumbs-up, although there has been some criticism to the draft bill – especially with regard to the proposed limitation on bonus payments to the players.
Regulations Aiming for Channelisation
The proposed licensing regime (the Proposal) covers a broad spectrum of gambling products: online casino, online betting, online poker and online bingo. Land-based sports betting and horse-race betting will also be included in the licensing regime. Lotteries and land-based slot machines will remain monopolised. The Proposal is ‘framework’ legislation, only establishing the regulatory framework without getting into any higher level of detail. Instead, the Proposal leaves vast powers to different regulatory bodies, where the new Swedish Gambling Authority (Spelmyndigheten) will be vested with the primary regulatory responsibilities.
The new regulations include a 18 percent tax on GGR, and no pay-out ceiling on winnings is recommended on the parts of the gambling market that are subject to re-regulation (even if the Swedish Gambling Authority will have the power to regulate the pay-out ratio using secondary legislation in the future if deemed necessary).
The state-owned-and-controlled entities SvenskaSpel and ATG will be able to apply for licenses to participate on the competitive market. However, SvenskaSpel will continue to have exclusive rights for operating token gaming machines and land-based casinos in designated premises – Casino Cosmopol.
The proposal envisions a tax rate of 18 percent on gambling in the competitive sector. The tax rate is to be calculated on gross gambling revenue, i.e. profit after paid winnings. Through a tax rate of 18 percent and a regulation that does not entail an excessive administrative burden, it is anticipated that at least 90 percent of the competitive market will be channelled into regulation.
The gambling licenses must be held by the operator offering the gambling service to the player. Hence, no formal license under the Proposal is required for suppliers of services to online gambling operators, such as payment and games providers or affiliates. There are no limitations in terms of numbers of licenses – if a gambling operator meets the formal requirements it should be awarded a license.
It is proposed that in principle all gambling companies should pay a license and supervision fee. In the proposal, the fees are based on the companies’ turnover and the number of games involved. The license fees in the competitive area of the sector vary from SEK 60,000 to SEK 700,000 (which is the price for a joint sports-betting and online casino license) and the annual supervision fees are expected to be between SEK 30,000 and SEK 1 million.All gains from wins that stem from unlicensed operators will be taxed on the player as income. This is proposed as a method to deter users from gambling on unlicensed sitesAn effective system of sanctions is a prerequisite for the sought channelling effect. A number of criminal offences are introduced. A party that intentionally or through gross negligence provides (in Sweden), arranges in Sweden or otherwise facilitates (in Sweden) participation in gambling for a person resident or permanently staying here without a license shall be sentenced for unlawful gambling activities to a fine or imprisonment of at most two years. If the crime is gross, the penalty is imprisonment of at least six months and at most six years.
For the promotion of illegal gambling, i.e. a breach of the promotion ban, it is proposed that the range of punishment should be significantly raised in relation to what is applicable today. It is proposed that the range of punishment should be the same as for the principal offence, i.e. from fines or imprisonment of at most two years or, if the crime is gross, imprisonment of at least six months and at most six years.
Apart from these sanctions, the Proposal introduces a number of additional burdens on operators. Most notable are marketing restrictions and a wide arsenal of player responsibility provisions to be complied with, including mandatory limits in terms of time and money which can only be raised after 72 hours and a “panic button” accessible from everywhere on the operator website, where the player can self-exclude for 24 hours by pressing the button.
Furthermore, it is proposed that internet service providers should be required to display a warning message when a visitor attempts to play on illegal sites. The message shall inform the visitor that the game provider does not have a license in Sweden and is not under Swedish supervision.
The Proposal does not propose the blocking of electronic communication to sites offering games that are not legal in Sweden. However, it is proposed that the blocking of payment transactions between illegal gambling companies and players should be considered. For reasons of competition, this should be introduced simultaneously by all concerned parties or payment transfer providers. The provision of payment transfers to and from unlicensed operators will be criminalised with a range of punishment from fines or imprisonment of up to six months.
Lack of ‘Foreseeability’
Going forward from now, a framework law has to be filled out and completed through regulations by the Government and the administrative authorities such as the new Gambling Authority, or by court practice. In the Proposal, we find a number of indeterminate and vague objectives to be achieved, as well as regarding the general principles to be respected in the enforcement of the law. These vague provisions must be filled with the standards of more tangible impact if they are to be meaningful. When this wide discretion is left to the courts and authorities, it creates legal uncertainty and potentially sharp divergent court practices, this was also criticised by the Constitutional Council as it results in a lack of foreseeability.
So far, the Swedish Gambling Authority has presented the requirements regarding qualifications for operators to be granted a gambling license, and they have also presented necessary technical standards for future licensees on the Swedish market. However, the forms and formal process has not yet been presented.
In her statement, the General-Director Camilla Rosenberg, has remarked that an operator’s timely success on being granted a license is dependent on the quality of the application and the date it was submitted to the Swedish Gambling Authority. Hence, interested operators should already start preparing their license applications to avoid being left behind and going through a delayed process when the applications open. There are also other aspects that will be taken into account when the applications are evaluated and processed, such as the company behind the application, that the operations are conducted in a serious way and that there are customer protection measures in place.