The Finnish Ministry of the Interior has introduced a draft government proposal to reform the country’s gambling system. This proposal, which aligns with the Government Programme, aims to dismantle Veikkaus Oy’s current monopoly on betting and online casino games and open these markets to competition through a licensing model. The consultation period for this draft legislation ends on August 18, 2024.

Key Changes and Objectives

Under the new proposal, Veikkaus Oy will no longer hold exclusive rights to arrange betting and online slot machine games and casino games. These areas will be opened to competition via a licensing system managed by the Finnish Supervisory Agency. The goal is to reduce gambling-related harm and channel demand toward a regulated gambling system.

Currently, Veikkaus Oy maintains a monopoly over gambling games in Finland, but a substantial portion of online gambling occurs outside this system, involving enterprises not regulated or supervised by national authorities. The new legislation seeks to regulate these activities, ensuring better oversight and consumer protection.

Licensing and Supervision

The proposed act outlines the provisions for licensed gambling and its supervision. To increase regulation and minimize gambling-related harm, enterprises can apply for licenses to operate gambling games in Finland. There will be two types of licenses: exclusive licenses and gambling game licenses. Additionally, the provision of gambling game software will require a specific software license.

Licensing will require payment of an annual supervision fee to the regulatory authority. Lotteries, pools, totalisator betting, physical slot machines, and casino games will remain under exclusive licenses, maintaining Veikkaus’ monopoly over these areas. However, the monopoly and competitive market activities will be separated into different entities within the same group.

The government will decide on the annual compensation Veikkaus pays the state for its exclusive license. The proposed legislation also grants the state owner more flexibility regarding future decisions about Veikkaus Oy’s ownership, including reducing state ownership if deemed beneficial for shareholder value.

Marketing and Player Protection

The draft legislation includes stringent provisions on the marketing and sponsorship of gambling games. Licensed gambling enterprises can advertise within specific restrictions, ensuring moderate volume, scope, visibility, and frequency of marketing efforts. Prohibited marketing tools and practices include collaboration with social media influencers on their accounts and targeting minors or vulnerable persons.

A centralized register for self-imposed gambling bans will be introduced, allowing players to exclude themselves from any gambling games any license holder offers. The act will also govern the registration of gamblers, verification of their identity and residence, age limits for gambling, and the use of gambling accounts.

New Supervisory Agency

A new Finnish Supervisory Agency, operating under the Ministry of Finance, will replace the National Police Board as the regulatory authority. This agency will have extensive powers to regulate the market, including imposing administrative sanctions, prohibiting unlawful activities, rescinding licenses, and conducting test purchases. It will also oversee compliance with anti-money laundering and terrorist financing legislation.

The agency will use network barring and payment blocking to prevent unauthorized gambling and steer demand toward licensed operators. Additionally, the Ministry of Social Affairs and Health, through the Finnish Institute for Health and Welfare, will monitor, study, and assess gambling-related harms.

Implementation Timeline

The government plans a phased implementation of the new system:

• August 18, 2024: End of the consultation period.
• Spring 2025: Submission of the government proposal to Parliament.
• Early 2026: Opening of license applications for operators.
• End of 2026: Veikkaus’ monopoly on sports betting and online casino games ends, with the company split into separate entities.
• Early 2027: Suppliers can apply for software licenses, and licensed gambling activities commence.
• 2028: Requirement for operators to use only locally licensed software providers.

The draft legislation represents a significant shift in Finland’s approach to gambling, aiming to create a more regulated and competitive market. Feedback from industry stakeholders and government departments is being sought to refine the proposals before final submission to Parliament.

Source:

Draft legislation on new gambling system submitted for consultation, intermin.fi, July 3, 2024.

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Florida’s mobile sports wagering market can become one of the largest in the United States. However, JMP Securities analyst Jordan Bender predicts limited competition could present unique challenges, damaging the sector’s profitability. Hard Rock International, the gaming arm of the Seminole Tribe, will have exclusive control over the state’s mobile sports wagering offerings, presenting substantial revenue implications.

Ongoing Legal Disputes Still Disrupt the Fledgling Sector

The Seminole Tribe holds exclusive rights to sports wagering in Florida, as stipulated in the Class III Tribal-State Gaming Compact signed into law in 2021. This agreement, endorsed by Governor Ron DeSantis, designates the tribe as the sole operator of sports betting in the state. In return, the Seminole Tribe must contribute $500 million annually to the state’s revenue.

Despite legalizing and launching sports betting for a brief period, the activity remains on hold in Florida due to the ongoing legal battle between the state’s casinos and the Seminole Tribe. Casinos alleged that the gambling compact granting Hard Rock total exclusivity violated federal law on several points, resulting in the current drawn-out proceedings.

However, even a resolution in favor of Hard Rock might not resolve the state’s sports wagering woes, as Jordan Bender predicts yearly revenues can reach $1.3 billion to $1.5 billion, significantly below the potential $2 billion in revenue if the market were open to competition beyond the Seminole Tribe.

Healthy Competition Can Foster Higher Revenues

The potential exclusivity of Hard Rock International in Florida’s mobile sports betting market could limit the sector’s profitability. Such a scenario has occurred in other states, including Connecticut, Oregon, and Rhode Island, where a lack of competition has affected revenue growth. States like New Hampshire, where a single operator enjoys a monopoly, have faced similar challenges.

States that have gone the route of one to three licenses… have underperformed… with a core reason being less incentive to invest in players and the product with no competition.

Jordan Bender, JMP Securities analyst

Bender highlights that competition often benefits states seeking to maximize sports betting revenue. For example, New York should see sports wagering revenue of $2 billion at maturity despite having a population and per capita income statistics similar to Florida. Arizona and Colorado have thriving sports wagering markets because they allow multiple competitors to participate alongside tribal casinos.

While Hard Rock International operates the Hard Rock Bet sports betting app in several states outside Florida, technology constraints have limited its ability to secure a market share and compete with industry leaders. An undisputed monopoly in its home state could mitigate these limitations despite its potential long-term negative impact.

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A recent study into the gambling monopoly system conducted by the Finnish government has concluded that maintaining the status quo is not a recommended option. 

Unlicensed Gaming Amounts to $600m Loss for Finland’s Exclusive Rights System

The report stated that around 50% of all gaming activity takes place on unlicensed sites, which amounts to a considerable loss of money outside the exclusive rights system, estimated to be around EUR500-550 million ($549-603 million) per year.

Furthermore, engaging in gambling outside the system can lead to considerable drawbacks, which are difficult to prevent under the current system’s framework.

Veikkaus’ top management welcomed the report and its findings and highlighted the scale of the offshore industry, expressing readiness to implement a licensed system to increase Finland’s channeling rates.

According to Olli Sarekoski, the CEO of Veikkaus, it is significant that the gaming revenue outside the exclusive rights system has been confirmed to be within the range of EUR500-550 million ($549-603 million), which is consistent with the information presented by H2 Gambling Capital.

Sarekoski further added that in Veikkaus’ opinion, if there is a shift towards a licensing system, it would be preferable for this change to occur quickly rather than gradually.

Already back in September 2022, Veikkaus’ deputy CEO Velipekka Nummikoski suggested that implementing a licensing system similar to Sweden’s, which reached 90% channelization, may be a good solution as more and more Finnish players are turning to unregulated markets. 

Several independent policy agencies recommended dropping the monopoly system, but the Social Democrat Party rejected the proposal. Veikkaus also asked for a delay in identification checks implementation, citing difficulties in supplying the necessary hardware.

Finland Considers Two Paths for Gaming Market Reform

The government report presented two possible paths for reforming the country’s gaming market. The first option – based on the Norwegian model – would be to reduce the availability of unlicensed offerings to Finnish consumers. This would be achieved by giving new powers to the regulator and law enforcement to make it more difficult to successfully deliver such gaming to users.

The second option would be to introduce a licensing model, which is the model embraced by the majority of Finland’s neighboring countries. 

According to the preliminary study, a licensing system could potentially result in a higher channeling rate for online gambling than the current situation.

The study further noted that a possible licensing regime would in principle cover online casino games and online betting. Veikkaus would retain exclusive rights for slot machines, physical casinos, on-premises betting, and lotteries, as well as lotteries and sweepstakes, regardless of the channel.

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