The supply chain

The subject of suppliers and shared liquidity in the new Swedish regulations has been a talking point for a while now. To put everything in context let us first remember that in the period leading up to the introduction of the Swedish Gambling Act in parliament the draft bill included a licensing framework for suppliers, but due to lobbying this was removed. To make matters worse, the supplier part was removed without adjusting the Act to accommodate this, leaving the regulator in a very difficult situation.

What we are left with is Section 1 (shared liquidity) and Section 6 (suppliers) in chapter 11 of the Act. Keeping in mind that these were not added or changed to deal with this new situation, understanding their original purpose will bring some perspective. Section 1 was added to the Act to deal with cooperation between state-run lotteries pooling their resources across Europe. It seeks to describe and regulate a situation that already existed before the Act and retain the status quo for that situation.

The same is true for Section 6. There is a long tradition for non-profit lotteries in Sweden and many of these non-profits have outsourced most, if not all, of the operation of their lotteries to for-profit companies. So again, we protect a situation that already existed and the objective to retain the status quo.

With regulations covering supplier licensing taken out, all stakeholders, including the regulator, must solve the problem of no direct supplier licensing by applying what was left in. Since section 6 is fairly simple to apply to egaming and in principle is less restrictive than the previous framework, I will not spend any more time on this.

What is interesting however, is the application of Section 1. Firstly, it specifies international cooperation, so applying this to the situation where two operators with a Swedish licence would like to cooperate, is the first big question. The cheeky interpretation would, of course, be that since it is not regulated directly – while international cooperation is – there are no special conditions attached to this and the only requirement is to submit game rules covering the shared liquidity and so on for that particular game.

This view is further supported by the fact that all the ‘special’ requirements on international cooperation are in place to ensure some level of compliance with the Swedish regulations which a Swedish licence would automatically ensure. The less cheeky version would be that it is not allowed but as the Swedish regulator would not be permitted to discriminate between EEA companies, Section 1 would have to be applied equally to a local operator as well.

Either way, there will be quite a few operators without a Swedish licence in the shared liquidity pools out there, so the first major hurdle is that the regulator must actively approve the cooperation which means that anyone interested in using the option must present its case. I would think using section 6 to farm out the compliance review of each cooperating party would be the simplest solution for several reasons, first of which is that no operator would let another operator review them directly.

Naturally, the first place to look would be the supplier of the pool game but that would still be limited to each supplier, so I think an audit or compliance specialist could review and issue a certificate stating that a company is fit to cooperate in Sweden, submitting this with each operator wanting to use shared liquidity. Now, whether there is a market for such a thing is something that my company is looking into.

Kristian Wind, a partner at Complianza Gaming Consultants, has been heavily involved in both the re-regulation of Denmark and Sweden, working with Danish and Swedish regulators for four years and two years respectively