Q&A: Paf CEO blasts industry “hypocrites” as he insists sector’s profitability is “driven by addiction”

Christer Fahlstedt is now eight years into his reign as CEO of Åland Islands-based operator Paf and the outspoken Swede clearly has no interest in saying anything other than exactly what he thinks.

While speaking to EGR, Fahlstedt takes aim at the Swedish Gambling Authority’s (SGA) “inferior laws” that fail to protect both the player and the industry, as well as claiming fellow operators had deservedly “lost the respect of stakeholders”. 

Last year was an impressive one for Paf, with the company posting revenue of €177.1m, which in turn led to record high profit of €55.1m, the highest in the company’s 57-year history.

Midway through 2024, the operator announced it was once again lowering its mandatory loss limits for those aged between 20 and 24 from €10,000 to €8,000 (SEK90,000) – a reduced cap that was introduced in October 2023 to sit alongside the customer-wide loss limit of €20,000, which has since been cut to €17,500.

It was a move that represented the group’s steadfast commitment to responsible gambling, but Fahlstedt has made clear it’s not all smooth-sailing at Paf’s Mariehamn-headquarters.

Proposed tax hikes are a thorn in the side of the company that could well dent the levels of channelisation in Sweden – a key market for Paf, where a hike from 18% to 22% is on the cards from 1 July, while lawmakers, according to Fahlstedt, do not have enough of an interest in the industry they preside over.

In a lengthy, exclusive discussion,Fahlstedt rarely shies away from any topic and reveals what Paf’s focus is firmly on for the remainder of the calendar year in order to be “long-term successful”.

EGR: How have you seen both the company and the industry change during your eight years with Paf?

Christer Fahlstedt (CF): Eight years goes really fast. Back in 2016 we had some international exposure; we were present in some markets, but we were not successful. I think that has been the major change today. We are a truly international company now; we’re able to compete successfully in regulated markets in Europe. 

In terms of how we operate, we were a bit more than 400 [employees] and now there are roughly 300, so there’s less of us, but we are managing almost twice the size of the business. It has been a massive operational change and I’m proud of that. The industry is also very different. It’s very clear to know where we’re heading; it’s not a profitable direction, but it’s a good direction.

The tax is going to increase, marketing is going to be more and more restricted, and player protection will be more stringent. These changes are clear. It’s clear for all the markets we’re in and that will put a lot of pressure on us. It might be more fun to do double-digit growth every year – it’s going to be fantastic, open the champagne – but that’s not the kind of industry we’re in. I think that suits us quite well actually. 

EGR: Why does Paf put so much emphasis on responsible gambling, becoming a leader when it comes to protecting players from harm?

CF: I think there are two parts to that. One is we were founded in 1966 by the Red Cross and Save the Children. They are still beneficiaries, which means we have a different mission. We have a very different task; we have different requirements from our owners and our founders.

The second part is we have a clear vision in that we think gambling in Western and Central Europe is going to transform into entertainment in the semi-near future. What we mean by entertainment is that the addiction part will be severely reduced. 

That means the 1% or 2% of the player base that today make up maybe 30% to 40% of the business will go away to a large extent and what’s left is much more exposed to competition for other sorts of entertainment, such as Netflix.

Pretty much the entire profitability of the industry is driven by addiction and that is not sustainable.

EGR: In spring, Paf lowered customer annual loss limits further for those aged 20-24 to €8,000. What was the reason behind that decision and that age group specifically? 

CF: There’s a lot of scientific research saying that until you turn 26 your cognitive development isn’t fully complete, so you have a different sort of appetite for risk. You have more difficulties making the right calls in certain situations, that’s a scientific fact. 

You can see that for certain financial services, there’s different treatment if you’re 26 or younger. It’s also gradually becoming more and more clear for the gambling industry that the focus is very much on protection for the young. Gambling addiction is present across all ages, but it’s more pronounced and more noticeable in the younger player base.  

This is something that is the right thing to do. If you want to take care of those under-26, they have to be taken care of much more closely. Again, this is where the industry is heading, this is where the regulation is going. It’s better to lead than be led. We choose to lead. 

EGR: In May, you were quoted in a Paf press release on the lower loss limits for young people as saying: “We are not selling teddy bears, and we have a responsibility for the product we provide.” Do you think that’s a mentality shared by other operators in the industry? And if not, why not?

CF: I don’t think it’s shared. I think we have a big issue in this industry – I think we are hypocrites. Gambling for 98% of the population is entertainment, and then for 2% it’s devastation. You can take two views and say, ‘Well, 98% is fine’, but that’s simplifying it. The 2% is the entire profitability of this industry. Our profitability is entirely driven by addiction.

We shy away from it, it’s not nice to hear. It’s not easy when you want to hire young, talented people and say, ‘Hey, come and work in our industry’, it’s not easy if you want to promote our brand in mass media. You don’t want this part to be shown or visible and I can understand that, but in this industry, we need to be open and transparent.

We already have so little respect from the key stakeholders, and we’re not helping that by trying to pretend this 2% that is driving profitability don’t exist or are not a problem. It is a huge problem.

For us as an industry, it’s an existential problem that we must find a way to deal with. You go from, ‘We don’t have a law, we’re open, very liberal’ and that’s good for 18 months, then boom, you’ve turned 180 degrees and you have an existential threat to the entire industry. All of a sudden, you realise you don’t have any friends because probably you didn’t earn any and you’re all alone.

It’s an existential threat to the industry that could have been dealt with much better by being more transparent, by saying: ‘These are the issues we have; how do we, in this country, with this regulation, deal with these things?’ They are possible to deal with, but there is a clear lack of enthusiasm from the authorities, but also from the industry because there’s so much money in this.

EGR: Transparency is something Paf regularly advocates, so have you noticed any fellow operators following suit?

CF: We first proposed this in 2018 or 2019. I was convinced then that in, say, two years’ time, this would be a standard feature of all serious operators, but we have seen absolutely nothing.

Just because we try to ignore the side effects of this industry doesn’t mean it’s invisible to the rest of the world. We’re doing ourselves a disfavour by not being honest and transparent. It’s the first step for us to be able to earn a seat at the grown-ups’ table when these decisions were made. We must be much more transparent. It’s not pretty.

EGR: Paf announced the acquisition of evoke’s Latvian operations, including WilliamHill.lv and MrGreen.lv, and licences just over a year ago. How is the Latvian business performing?

CF: We just completed the technical migration [in June]. We have rebranded, obviously William Hill and Mr Green were not part of the deal – there was just a transition phase [in which a temporary license was used]. They are now rebranded and fully on the Paf technical platform. In that respect, all the heavy lifting has been completed and we are very satisfied with where we are now.

We have a stable business with three strong brands and three strong player bases, but now the difficult part starts, where you must build for the future. But we are very happy with the first 12 months.

EGR: Is there appetite for more M&A?

CF: For sure. We have been quite active on the acquisition front, and that means we always get people asking us when there is something available, so we are constantly looking at different profiles and targets. We are happy in the markets where we currently are. We don’t mind going to another market, but we are also aware that we are a relatively small company with 300 employees and adding a new market brings a lot of complexity.

For us to enter a new market there must be something special for us there. We’re still looking for scale in Spain, so Spain would be the most interesting area for us to make an acquisition.

EGR: Looking at the regulatory landscape, Sweden is poised to increase tax from 18% to 22%. How will it impact Paf and the industry generally?

CF: It’s a question of timing really. When we do our own forecasting, we are mentally accepting the fact that all our markets are going to be in the 30%-plus tax range. I think that’s very clear. If you look at some examples from recently regulated markets, such as the Netherlands, or if you look at the US, tax is going to be high, it’s going to increase.

For the tax to increase in Sweden, it was a question of when. A four-percentage-point increase is quite a lot, especially in a market where you don’t have all that much profitability. It’s really going to take a huge chunk out of the profitability of the market.

I think what has rightly upset the industry is that Sweden has a non-functioning regulation currently, where the authorities and especially the lawmakers for five, six years, have had inferior laws in place that cannot protect the players and the industry from illegal options.

I don’t think we have any right to object to paying 22%, or even higher in tax, if there is a proper regulation in place. But I don’t think the Swedish authorities have put in the required effort. They need to do better, but we’ll pay the tax and we’re also ready to pay more tax because we know that’s going to be the future.

EGR: Why do you think lawmakers are seemingly not listening to the industry’s concerns?

CF: I think it’s a competence issue, to be honest. Those who write the law, they don’t have any clue about this industry and, even more, they don’t have an interest in learning about it either. It’s very clear now, and we’ve been following it very closely for five, six, seven years, that no one knows anything. The supervising authority in Sweden, they don’t understand anything about this industry.

It’s a complex issue that I feel needs to be taken more seriously. Otherwise, there’s a real risk the legislation will fail. Currently, the Swedish legislation is depending on the goodwill of those players still participating in the market because it’s much more profitable and not even illegal to do it from the outside. It’s not good enough, we should demand much more.

EGR: What are the core focus areas and challenges for the rest of 2024 at Paf?

CF: We have a lot of tax increases that will eat at our profits. It’s a key feature that we need to use AI throughout the company in all functions – the rest of this year will be very much continuing the journey. I think we’ve made great progress, but we need to continue and embrace AI because it’s going to be necessary for us as a company in this industry. If we want to be long-term successful, that is our number one focus this year.