Who guards the guardians of the gaming realm?

Quis custodiet ipsos custodes?” The question posed by the Roman poet Juvenal, asking “Who guards the guardians?” remains fundamental to democracies everywhere. It emphasises the people’s responsibility to oversee their leaders’ conduct and hold them accountable when they stray from their constitutional duties.

Sweden boasts a tradition of governmental entities subjecting its own government’s activities to such rigorous oversight, recognising that the operational authority, in this case the Swedish Gambling Authority (SGA), is often ill-suited for robust self-scrutiny. Instead, independent agencies serve as overseers, ensuring the operational authorities’ accountability. In Sweden’s administrative framework, the answer to the age-old question of who guards the guardians lies with these auxiliary agencies.

One such vigilant agency, the National Audit Office (NAO), recently embarked on a comprehensive evaluation of the SGA’s performance in regulating Sweden’s gaming market. The success of Sweden’s gaming regime hinges on the proficient execution of the SGA’s duties. It is my hope that the NAO will affirm that the quintessential yardstick for measuring the regulator’s efficacy lies in channelisation, namely the proportion of gaming activity within the licensing system versus outside it.

Switching channels

Channelisation is rarely proactively addressed by the authorities. When the topic is broached by the gaming industry, it is not uncommon to encounter responses along the lines of: “Yes, but surely channelisation cannot be the answer to every question?” To this, I offer my own qualified affirmation: “No, but it comes remarkably close.”

The centrality of achieving a high channelisation rate cannot be overstated. Every safeguard instituted by the Swedish state for the protection of consumers loses its potency if gamblers seek their fortunes outside the regulated market. It leaves them without the protective mechanisms of the licensed market, vulnerable to fraud and unfair practices. It is bewildering authorities remain disinterested in channelisation.

This disconnect was evident at a recent SGA conference where its representatives advocated for raising the minimum age for licensed gaming from 18 to 21. Those familiar with the market understand the ramifications: if implemented, few young adults would stop gaming; instead, more would turn to the unregulated market, easily accessible to a generation born in the internet era.

In 2019, when Sweden opened its market to competition, the state set a channelisation target of at least 90% in order to ensure the success of Sweden’s transition from a monopolistic to a licensing-based gaming system. Regrettably, by March this year, the channelisation rate had dropped to 77%, according to a study commissioned by BOS, with online casinos even lower at 72%. Another study confirmed an overall channelisation rate of 78%, with online casinos at 68% and declining.

The precipitous decline in channelisation coincided with the introduction of so-called ‘temporary pandemic restrictions’ by the previous Swedish government in 2020, which specifically targeted licensed gaming entities. Ironically, these measures persisted, stifling the licensed gaming market for half of its existence. Sweden’s channelisation rate never fully recovered from this.

Now it remains to be seen if a vigilant NAO can help not just the regulator but all stakeholders become better guardians of the Swedish gaming realm.

Gustaf Hoffstedt has been secretary general of BOS, the Swedish Trade Association for Online Gambling, since 2015. Among the association’s members are all major private operators and suppliers that operate in Sweden. Prior to joining BOS, Hoffstedt served as a member of the Swedish Parliament for the Moderate Party, and prior to that as vice-mayor and chairman of the social board in his constituency, Gotland.