Swimming against the tide: Finland's Lotteries Act sparks fresh debate over its monopoly system

For most, Monopoly is a game dusted off once every other Christmas and then put back in its box until the next time someone decides they want to start an argument over the holidays. For Finland’s gambling population and state-owned operator, Veikkaus, monopoly is a 365-day-a-year reality.

The Nordic country operates a gambling monopoly system where only government-owned Veikkaus has the legal right to provide gambling services in mainland Finland. Veikkaus was created in 2017 when it merged with Finland’s state-run Slot Machine Association (RAY) and the sole purveyor of horserace betting in the country, Fintoto. Legislation clamping down on offshore operators offering gambling services in the country has come hard and fast since.

A recent note from Regulus Partners indicates that Finland is the highest cashflow conversion market left in the Nordics at roughly €350m a year. At €350m per year, Finland represents 40% of the gross profit contributions across the Nordics, discounting monopolies and Iceland, despite only accounting
for 13% (5.51 million) of the region’s population.

In addition, figures published in September 2021 by H2 Gambling Capital, on behalf of the European Gaming and Betting Association (EGBA), indicated that 1.7 million individual users had used Veikkaus products in the first half of the year. Revenue in the six months to 30 June 2021 was €527.1m, a figure that was down 13.2% year-on-year (YoY), although net profit remained even.

Time to review

With growing unease surrounding the impact of non-licensed activity on Veikkaus, it was announced in September 2021 that the Ministry of the Interior would be launching a review into the 2001 Lotteries Act – a move that has garnered criticism from many industry onlookers outside the country.

With a number of the implementations suggested in the review having already been introduced and some still on the horizon, it has led many to believe that rather than looking into ways that Finland can introduce a fully regulated and licensed environment, instead Veikkaus is further strengthening its position and grip within the market.

Speaking with EGR, Jukka Tukia, adviser to the Ministry of the Interior, says on the Lotteries Act: “One of the key focuses of the reform was combating marketing that violates the Lotteries Act, and directing the demand for gambling towards activities that are covered by the Lotteries Act (i.e. Veikkaus gambling services) with the aim of further strengthening the prevention and reduction of gambling-related harm.”

The review announced changes in marketing including banning any non-Finland-licensed gambling company from visibly marketing its products in the country. This was later extended to individuals to encompass social media marketing. Pan-European sports broadcaster Eurosport fell foul of this law when it was fined €800,000 in September 2021 for airing gambling adverts on its channels in Finland.

Additionally, Finnish banks have been unable to process any deposits into a dotcom betting account since the start of 2022, while payment service providers (PSPs) will be prevented from providing services to non-licensed operators from the start of 2023. All changes will be monitored by Finland’s police service in a move similar to its Norwegian neighbour, the only other European country to run a gambling monopoly.

The EGBA hit out at the amendments, with secretary general Maarten Haijer suggesting that the move was an “implicit admission that many of Finland’s gamblers prefer to bet on other websites rather than that of a state monopoly”. He states to EGR Intel that the decision to amend the Lotteries Act in such a way was a “missed opportunity” to have a serious discussion about changing the gambling landscape in the country.

Following Norway’s lead

The move to prohibit PSPs and deposits from Finnish bank accounts mimics similar moves made by the Norwegian government. In 2008, legislation was brought in to block online gambling through foreign firms. As in Finland, the police were tasked with monitoring whether these laws were being adhered to or not. The action taken to protect the model has not driven traffic to the monopoly sites, however, with offshore operators still proving popular with residents. H2 Gambling Capital research indicated that in 2021 there was just a 51% channelisation rate in favour of the state-run operators.

The same note from Regulus Partners also highlighted that in the early 2010s, Norway and Finland were largely similar in population, as they remain to this day, with a gambling revenue (including monopolies) of roughly the same amount. By 2020, Norway’s had shrunk to 45% of that, while the monopoly market in the country had grown by double that of Finland’s between 2014-2020.

Norway and Finland, with their monopolies, have a much lower channelisation rate than other markets

Taking responsibility

Veikkaus and the Finnish government have always insisted that the primary focus of the monopoly model has been customer safety. Research released by Veikkaus in December 2021 showed that the number of people who felt they had a problem with their betting activities was standing at 1.8% – a drop from 2.6% on the previous year.

The operator is hoping those numbers will continue to fall in 2022, with further responsible gambling initiatives being introduced throughout the year. In addition to current self-imposed customer gambling limits available, annual betting losses were introduced by Veikkaus which will see customers limited to losses of €15,000 over a 12-month period.

Susanna Saikkonen, VP sustainability at Veikkaus, points towards various implementations over 2021 that helped to reduce problem gambling figures: “We are really glad that problem gambling seems to have decreased, as we launched many new restrictions and responsible gaming tools during 2021.”

It has been argued, however, that such confidence in the model should not be overblown. It is the only gambling monopoly-type model remaining in the EU, yet is some way off the 0.3% problem gambling figures in multi-licensed Spain, the EU’s lowest rate.

Good neighbours

EGBA’s secretary general suggests the Finnish government should be looking to Scandinavian neighbours Sweden and Denmark rather than Norway, as a way of introducing a single customer view (SCV) within a fully regulated and licensed market.

Haijer tells EGR: “Both countries clearly benefited by replacing their online monopolies: it resulted in more of their citizens playing within their respective regulated online gambling environments.”

In 2012, Denmark replaced its monopoly market with an open-licensing model, while Sweden did so in 2019. In Denmark, extra competition within the market saw Danish bettors’ time on non-licensed gambling websites decline from 28% in 2012 to 8% in 2019, while in Sweden that number dropped from 56% in 2016 to 15% in 2020, according to the EGBA. Doing this ensured that more citizens were playing within their own regulated markets. This led to more customers being protected by local consumer protection laws, and more taxes were raised from online gambling in both countries, given that non-local gambling was significantly reduced.

Another observation was that the monopoly company in each country was not negatively affected through the introduction of multi-licensing. “Finland can achieve the same benefits,” Haijer says. “Replacing Finland’s online gambling monopoly with multi-licensing is not about getting more people in Finland to gamble, nor is it about defeating the monopoly company.”

Åland Islands-based operator Paf has urged a review into the monopoly system in Finland with Sverker Skogberg, senior vice-president of public affairs, saying: “The problem with a monopoly model is that it doesn’t work for online. A fully regulated, licensed market means the government can regulate, control and tax the licensed operators. In a regulated online market, responsible gaming measures and loss limits could be implemented for all licensed operators, a clear improvement from an overall responsible gaming perspective.”

Despite dismantling its monopoly in 2018 and going down the re-regulation path in 2019, Sweden’s government has increased regulation consistently in the subsequent period, introducing intermittent deposit and bonus limits during the Covid-19 pandemic, which are set to return on 7 February and run through until the end of June.

This has long been a cause of frustration among operators and trade bodies. The Swedish Trade Association for Online Gambling (BOS) has implored authorities to allow licensed firms to attempt to attract new customers as constant regulation has affected channelisation within the country’s licensed market. Channelisation rates in Sweden were already low in 2020 before pandemic restrictions were introduced.

Research by Copenhagen Economics suggested that onshore online casino play could be as low as 72%. That figure will have almost certainly dropped as a result of deposit limits introduced during various stages of lockdown in the country. It is believed it could have dropped a further 6% during 2021, despite the market aiming for 90%.

Online channelisation rates in Finland have declined steadily since 2016, according to data from H2 Gambling Capital in September 2021. The figure was already low at 70%, however the number has dwindled further to 65%, meaning that 35% of all betting taking place in Finland is with non-licensed operators. That is 10% lower than the European average and only greater than Norway. The UK market leads the way with 98% channelisation.

Competing on price

There are myriad reasons for the high numbers of offshore betting within monopolised countries, however, better odds being available is often cited as the main reason. Because Veikkaus controls the market, it can dictate the prices that are made available to consumers. These prices can often be significantly shorter when compared with other operators. A source of much frustration to customers and industry bodies alike.

Haijer says: “Gambling is a price-sensitive activity and, because the gambling offer available to Finns is so restricted, it is inevitable that some will look towards international websites for better betting odds and return rates.” Thoughts in Finland surrounding the monopoly model are split, with research by Kasino Curt in 2019 indicating that 31% of Finns would like to abolish it, 27% want to keep it as it is, and 42% being indifferent or preferring not to say.

The Ministry of the Interior has no intention of replacing the model for the time being, with the amendments in the Lotteries Act designed to drive custom to Veikkaus. Tukkia notes: “The key premise of the reform was that Finland’s gambling sector for the future would be based on the state monopoly.”

Jarmo Kumpulainen, spokesperson for Veikkaus’ president and CEO, adds: “Veikkaus clearly wants to maintain the following: the strongest and most accepted gaming brand in Finland.” Both Paf and EGBA’s secretary general are holding out hope that the model will be reviewed in the future. Skogberg has faith that change will be implemented one day: “Nothing will stay the same forever and we believe discussions will continue in Finland regarding the new lottery law.”

While there has never been any serious discussion within Finland surrounding an in-depth analysis of a licensing system, Skogberg believes that, following the 2023 elections in the country, there is hope conversations will begin soon after. As with the repeal of PASPA in the US under a Republican government, he thinks “most probably a right-wing government will speed up such a process”.

Haijer reiterates his hope that the Finnish people will have their say in the future: “In the online world, consumers vote with their feet and that is why we will continue to encourage the government to rethink, rather than reinforce, the country’s online gambling monopoly model.”

There are many counterarguments aimed towards Finland’s model, however, with the opportunity for discussion seemingly off the table for now, Veikkaus’ stranglehold on gambling in Finland is set to continue for some time.