Can Sweden iron out its early regulatory teething troubles?

The regulation of the Swedish market has stolen many an industry headline over the last six months. The Scandinavian country wrestled not only with the problem of turning what has been a grey market into a fully licensed and regulated egaming economy but doing so within six months. The first licensed egaming activity officially began on 1 January for some operators but reports in Sweden claim as many as 30 operators are still waiting for their licences to be issued at the time of writing. These licensing shortcomings have been mirrored by issues with its newly launched self-exclusion platform, Spelpaus.

Despite over 10,000 individuals registering to self-exclude on the site in the first week alone, problems have occurred where Swedish licensed operators such as Aspire Global, Genesis Communications and notably bwin have failed to connect to the system. All have since done so, but when discussing these failures with EGR, operators cited a late technical change by (the newly-rebranded) Spelinspektionen as the reason for the technical issues.

So, is the regulator to blame for the market’s initial teething issues? Or is it a case of making the best out of a bad situation for Spelinspektionen? For Kristian Wind, partner at consultancy firm Complianza, the regulator “has done a very good job dealing with the rather lousy hand they were dealt by the politicians”.

When the government announced in January 2018 that it was looking to replace its old legislation with a new system of regulation and licensing, many in the industry welcomed the news, heralding it as the end of the restrictive monopoly system and the opening of the Swedish licensed market for the first time. With general elections taking place in Sweden later in 2018, the government had two choices: proceed on re-regulation quickly, or delay until 2020 and risk a potentially anti-gambling government derailing the process in that time.

Choosing the lesser of two evils, the Swedish government delivered on its pledge to replace the act in May, signing off SFS 2018:1138, a bill which replaced the existing grey market with a fully regulated market with effect from 1 January. Giving his assessment of the decision, Wind believes that leaving the regulator with six months to implement and process applications was “of course not the best course of action but presumably it would have been either that or pushing the launch until 1 January 2020, so damned if you do damned if you don’t”.

Under the new bill, the previous monopoly system was to be replaced by a six-licence system for all different strands of land-based and online gaming, together with new regulations governing all corners of the gambling market. This was effectively year zero for the Swedish gambling industry.

Assembling the new market

To its credit, the newly-empowered regulator did not sit on its hands and within one month of this decision, licence application forms were made available on the Spelinspektionen website with a view to accepting applications on 1 August 2018.

On 1 August alone, applications were received by the regulator from 20 operators, including the likes of Betsson, tombola, Betclic Group, Global Gaming and Videoslots, together with monopoly operators ATG and Svenska Spel. The clamour for licences was obvious, with Global Gaming CEO Joacim Möller telling sister brand EGR Compliance that applying early was “a no-brainer” for the business as “we want to be operating as soon as the regulated market opens for business”. These sentiments were echoed by Tsachi Maimon, CEO of Aspire Global, who said “we want to obtain the licence at the earliest possible opportunity”. The potential for the newly re-regulated market was a big factor for others including Henrik Tjärnström, CEO of Kindred Group, who called it an “important step towards fair and equal terms within the Swedish market, competing on the same level as other operators”.

In addition to the licence applications, the regulator unveiled an obligation that any licence applicant obtained a certificate from an accredited game testing body, one which had been providing game testing services for a minimum of five years. Applicants for licences were also required to conduct a “risk and vulnerability analysis and on a systematic basis” and identify and document their information assets in a list. In addition, all licensed gaming companies operating in Sweden were required to put in place software which assigns each player a unique eligibility code every time they log in to the respective operators’ website, while also verifying player ages and bank accounts.

The combination of a complex application standards, plus a high demand for licences from international operators, created an additional layer of pressure to an already time sensitive process. For Dr Ola Wiklund, founder of Wiklund Law, the regulator made a rod for its own back in doing so: “Most of the case handlers were new to the material, with little to no knowledge or experience regarding the international gaming market.” Expanding on the effect of this on licensing, Wiklund adds: “These factors caused delays which meant that the case handlers didn’t know where to start, and so the first contact between the regulators and operators regarding applications was not until the end of September.”

The government mandate to Spelinspektionen also required the creation of a national self-exclusion scheme, for which all licensed operators were to be subject to installation on their respective websites. The Spelpaus scheme, while wildly embraced by Swedish citizens since its launch in January, has enjoyed a somewhat troubled relationship with licensed operators as we have previously mentioned. But where does the fault for this lie?

Speaking to the operators concerned, the fault lies with the regulator and the database sources being used as part of the process. At present the Spelpaus system is divided into two distinct data sources, one to stop marketing materials and one to self-exclude players. While the first works well, the second was only rolled out on 20 December, a mere 11 days before the new licensed market was due to begin and unfortunately also coinciding with the festive break. The failure by operators to connect with the self-exclusion database in time for the market launch were a natural by-product of this late delivery.

So, what would have stopped this? Wind believes the issue lies once again with the government, which failed to provide the regulator with the required funding in a timely fashion. Late funding aside, Wind believes shifting resources away from licensing operators and onto the register would have made no difference: “The system is developed by a third party so there is very little overlap between the resources working on the licensing and the system, so moving resources from one to the other would not have made any sense either,” he says.

Moving forward

Now that both regulator and operator have made the step into this brave new world, what could have happened to make this journey a smoother one? Maria McDonald, partner at Nordic Gambling, believes there should have been more dialogue between operator and regulator “before and during” the legislation and licensing process as there would “have been a better understanding of the different perspectives and some confusion, questions and late requests could have been avoided”.

McDonald predicts a second wave of licence applications hitting the regulator’s mailbox during Q1 2019 “when licensing requirements are clearer and they will be able to offer their welcome bonuses after many others have used theirs” so the hard work may not yet be over for the regulator.

Indeed, as a spokesperson from the regulator confirmed, the legislation is written in an “open” way and puts a lot of responsibility on the operators to interpret the law by finding solutions to meet the requirements. Often interpretations can be wrong and, in the case of the Swedish regulator, have led to litigation in the past, so there is a possibility of further court cases being used to clarify the legislation more fully.

During the roll-out process, the Swedish government confirmed that it would conduct an evaluation of regulation over a three-year period, potentially bringing the faults in the regulation process into the light.  But that is far in the future. In the immediate present, the challenges for the regulator are very much related to the regulatory roll-out, namely licensing of all operators and dealing with the consequences of opening a new market.