Are iGaming Regulations About to Be Tightened in Sweden?

Posted by Harry Kane on Thursday, February 6, 2020

When online gambling operator ComeOn and their parent company Cherry AB announced that they were leaving the UK’s iGaming market last September, it was largely due to their desire to prioritise “more favourable markets”.

The inference here was clear; with the operator of the opinion that the increasingly stringent regulatory and legislative nature of the UK market was beginning to have an impact on profitability.

At the same time, it was perceived that markets such as Sweden offered huge growth potential in the short and medium-term, and this was one of the reasons that AB acquired the ComeOn brand in the first place. Now that Sweden is looking to introduce a raft of regulatory changes to clamp down on advertising and marketing practices, however, we ask whether this is good news for the long-term prospects of the UK sector and if other markets are likely to tighten in the months ahead.

What Regulatory Changes Are Sweden Planning?

According to Ardalan Shekarabi, Sweden’s Minister of Social Security, the government is poised to publish ‘stage two’ of its regulatory approach on gambling. This follows on from the re-regulation of Swedish online gambling laws during 2018, which created an immature and burgeoning marketplace that drove considerable growth and attracted licensing interest from operators across Europe.

However, the next phase will look to introduce tighter regulatory measures that return some control to the industry regulator and the government as a whole, with a key focus on the advertising practices used by operators and the criteria imposed on license holders. The announcement followed the first quarter of trading, during which time Shekarabi publicly criticised licensed operators for “excessive and aggressive marketing practices” that supposedly targeted audiences across various channels.

He also commissioned the Swedish gambling inspectorate Spelinspektionen to carry out a comprehensive review of gambling advertising, with this likely to lead to the introduction of further controls and systems that restrict marketing practices wherever necessary. Despite the pressing need to address these challenges and create gambling legislation that established transparent codes of conduct for operators, Shekarabi has revealed that the government’s existing framework is working and that the revamped gambling market should be regarded as a significant “success story”. Shekarabi cited the government’s so-called ‘channelisation strategy’ as evidence of this success, as this has encouraged consumers to engage with authorised operators and agents rather than unlicensed providers.

How Will This Impact on the Swedish Marketplace?

Interestingly, the announcements were met with caution in Sweden’s iGaming market, particularly given the industry’s relatively poor financial performance in Q3 and Q4 of 2019.

In fact, total revenues plunged by 3.4% between Q2 and Q3, with the combination of the nation’s poor economic performance and a lack of clarity regarding the new regulations creating huge uncertainty in the marketplace.

While it’s hoped that the announcement will provide this and boost performance, operators remain concerned about the precise form that the new regulations will take.

Similarly, there are a number of industry stakeholders who believe that the market would actually benefit from removing or significantly altering specific legislation, particularly the laws pertaining to channelisation. The argument for this is simple; with Gustav Hoffstedt (the Secretary-General of the Swedish online gambling trade body BOS) claiming that the existing licensing system is actively leaking players to the black market due to some of the restrictions placed on licensed and reputable operators. With such a juxtaposition between the government and the gambling trade body in Sweden, it’s clear that the market-leading operators will need further convincing about the validity of the new regulations.

So long as this uncertainty and division continues, it will be difficult for the market and its leading operators to optimise profitability and realise the potential that it showcased throughout 2018. It would also be interesting to gauge the thoughts of operators like ComeOn, who left the UK market precisely because of regulatory certainty and the potential impact of legislative changes on future profits.

After all, while parent company Cherry AB has also announced its intention to target similar growth markets such as Denmark, the creation of a potential regulatory minefield in Sweden represents a disappointing and problematic stumbling block.

The Last Word – Will These Changes Have an Impact in the UK and Beyond?

While it stands to reason that the iGaming industry in Sweden will be directly impacted by regulatory uncertainty and any subsequent legislative changes, the question that remains is will markets throughout Europe be affected?

If we start with the UK, for example, we see that ComeOn is one of numerous gambling brands to have left the market over the course of the last year. BetBright announced that it was closing its virtual doors to UK customers last summer, while 188Bet also decided to cease operations in both the UK and Ireland. In August, Vera&John and InterCasino were also withdrawn, with each of these operators citing the competitive nature of the UK market and its incredibly mature regulatory climate as key reasons for their decisions.

In some of these instances, there’s absolutely no doubt that the presence of a lucrative and burgeoning market such as Sweden also influenced the decision of operators, as this provided a potential opportunity to redefine existing business models in a bid to boost profitability.

However, the changing regulatory landscape in Sweden may cause brands in a similar position to think twice before making such a move, as the time and cost implications of changing course are easier to bear when it’s likely to deliver increased profits.

In this respect, companies may look to consolidate the position in the UK or similar European markets rather than embrace new opportunities in Sweden, at least until they’ve received further clarity on what the most recent announcements mean. Ultimately, this could represent good news for the UK market, which remains under incredible and unrelenting pressure from both the regulator and the legislative body.

Most important, it could discourage further operators from leaving the UK market, particularly those that are determined to thrive in Sweden.