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Finland’s sector is reportedly set for a major regulatory and market shakeup, regarding the divestment of the Veikkaus monopoly.
In a move many feel was overdue, Finland’s Minister of Europe and Ownership Management, Tytti Tuppurainen, was recently quoted as saying that the government was supporting a transition to a multi-licence system, something that opposition politicians are also receptive to.
To learn more about how this could work out, and what the pan-European betting and gaming space can expect, SBC News reached out to Antti Koivula, Partner and Legal Advisor at Legal Gaming Attorneys at Law, for some expert local insights.
Why the change of heart?
Despite calls from opposition politicians, gambling industry stakeholders and even Veikkaus itself for a changeup of Finland’s licensing framework, the government has proven reluctant to move forward with reforms.
So why now? In Koivula’s view, the answer was simple – ‘money and market share’, he explained. Concerns over these two areas have been the primary drivers between the cross-parliamentary agreement on the licensing transition of late.
“It is naturally a huge thing making the process faster and smoother,” he remarked. “As of now there is a widespread agreement among the parliamentary parties that the partial licensing system is the way in which Finland should head and it is more of a question when it will happen and what the partial licensing system will be like.”
“The reason behind the up-and-coming change is simple: money and market share. Veikkaus’ GGR and market share (which in this case is also a synonym for the channelisation rate of the monopoly system) has been rapidly decreasing and it has become obvious that the only way to turn this trend is to abandon the monopoly system.”
It is no secret that Veikkaus has been struggling to maintain strong market share for some time, with its current GGR for H1 2022 estimated at €1-1.1bn, with ‘offshore leakage’ – customers betting outside the regulated system – of €500m.
Meanwhile, the firm had an overall channelisation (market share) rate of 66% and online channelisation of 50%, whilst for online fixed odds sports betting this stood at around 20% and for online casino games 40|%, these being the products most likely to be moved under a new licensing system.
Compare these figures to the results from 2017, when ‘the new Veikkaus’ was launched to replace the previous three state-owned gambling companies, GGR was €1.8bn, offshore leakage €200m and overall and online channelisation 88% and 70% – it is no surprise stakeholders are pushing for change.
Prevention of problem gambling has been the main justification behind Finland’s gambling monopoly, Koivula further observed. However, with channelisation rates dropping drastically the monopoly cannot soon even ‘in theory’ achieve this aim, given that rates of 50% are generally considered ‘the magic line’.
He continued: “If the situation is allowed to develop to that point, Finland will have to abolish the gambling monopoly anyway, but the state would have less control over the change.
“Also, Veikkaus’ starting position for the licensing market would be much worse. After all, it’s easier to hold the market share, for example, at the level of 40% than to start from 15% and try to increase it to 40%.”
From the outset, it appears that Veikkaus, the government and the political opposition are in all favour of a transition from the monopoly system to a ‘partial licence’ system, as described by Koivula.
The benefits of modernisation
The benefits to Veikkaus, the Finnish gambling industry, consumers and the government are numerous – to Veikkaus specifically, it addresses the issue of declining market share.
Koivula added: “The most notable advantage is that in a well-constructed licensing system a great majority of gambling takes place under the regulated system.
“This would allow more effective supervision and for example extending the desired level of responsible gambling requirements to all licensed operators.
Meanwhile, for the government, revenue generation is the most obvious benefit, as the Finnish government could tax the aforementioned €500m that is heading towards offshore operations.
“Not to mention licensing fees, possible fines and so on,” Koivula remarked. “It is also rather obvious that the switch to the licensing system would have a positive impact on the Finnish gambling industry, meaning ultimately more jobs.”
This is not to say, of course, that everything the transition from a monopoly to partial licence model would be entirely smooth, and could only be positive.
It could be possible to ‘screw up badly’, he continued, such as by implementing a licensing system with ‘unreasonable’ conditions, potentially deterring operators from applying for said licences.
This would negatively impact the ever-important channelisation rates – in the worst case scenario, the situation would further deteriorate for Finnish stakeholders.
“So, it is of utmost importance to create a well-balanced licensing system in which taxation and restrictive characteristics are not overly strict but at the same time the state gets decent income and effective prevention of gambling problems is guaranteed,” he said.
“Finland has the chance of a lifetime to create the world’s best licensing system as we don’t have to reinvent the wheel but instead, we can look for example, in good and bad, from the other European licensing models.”
On the topic of countries looking to one another for legislative inspiration, Koivula observed that only Norway has a similar full monopoly in place. Overall ‘the two systems have in many ways been similar though not exactly the same’, he noted.
“I am well aware that our Norwegian neighbours are paying close attention to the developments in Finland and the fact that Finland is dismantling the monopoly system does not at least ease the pressure in Norway to re-evaluate their gambling policy.
“Gambling monopolies are historical remains and that is where they belong – in history. It would be naïve to think that Norway would not take the step to the future at some point too. However, I’ll leave it to my Norwegian colleagues to provide more precise estimations.”
Where next from here?
From the outset, it would be easy to assume that the transition from monopoly to partial-licencing in Finland will be smooth, as Koivula explained: “It is worth noting that this time it has been Veikkaus who have been lobbying on behalf of the system change.
From the outset, Veikkaus is a 100% state owned company, which has been granted exclusive rights to offer and advertise gambling in Finland under the Lotteries Act (1047/2001).
The firm has no legislative powers and according to the Lotteries Act, Veikkaus purpose is “to provide gambling services so as to ensure the legal protection of gambling participants, prevent misuse and crime, and prevent and reduce the economic, social and health related harm resulting from gambling”.
However, Veikkaus has been ‘‘de facto’ given a ‘a lot of weight’ historically on what it can say with regards to the gambling legislation, and Koivula noted that ‘system change is always a big deal and the process is lengthy including several steps and possible hurdles’.
“On the practical level, I’m not expecting it to be painless for the decision makers to agree on certain characteristics/details that will be included in the licensing system.
“For example, tax base, responsible gambling features and marketing restrictions might be something with which the decision makers might need to find a compromise. When it comes to legal hurdles per se, I cannot think of anything that could not be resolved during the process.”
Moving forward, it is also clear that the government has a long road ahead to achieve licensing reform, starting with a study on the existing system, which Tuppurainen stated last week would be ‘hastened’.
Koivula explained what can be expected from the study: “It identifies, among other things, the necessary legislative changes and how licensing systems have been implemented in other countries.
“The study also identifies how the change would affect states revenue and expenditure. It will serve as a basis for the upcoming legislative work. Finland has never before considered a licensing system as an option so no previous studies have been made meaning that we must start practically from zero.”
On 5 January, the Ministry of Interior named four people to conduct the study, which is expected to be ready by 15 April – however, the next stage could be impacted by Finnish parliamentary elections on 2 April.
The following steps will then have to be left for the incoming government in June, meaning it will not be possible to move to the second phase of the transition before the new administration – and its own programme – is in place.
Next up is the preparation of the government’s draft proposal and informing the European Commission (EC) followed by a standstill period – all in all, Koivula predicts that the entire legislative process to change Finland’s licencing framework will take ‘at least nine months, possibly more’.
The final two stages will involve the drafting of the government’s actual proposal, which should be already ‘a few months’ after the EC standstill has passed, after which there are ‘several stages’ in parliament – likely resulting in alterations – and finally the law will be ready for implementation.
“It only took three months from the gambling legislation reform of 2022 to pass through the parliament,” Koivula remarked. “That being said, it will likely take more time this time as the matter at hand is bigger. I am expecting at least six months.
“Considering the process as a whole, it is possible that Finland would have a licensing system in place as early as in the beginning of 2025, but this requires that everything must go smoothly from the beginning to the finish line and there will be no room for hiccups.”
With 2025 some time away, Finnish stakeholders, and any outsiders interested in the market have a lot of waiting to find out what a new licensing framework could bring – but what is certain is that all politicians are onboard, and the positive outcomes far outweigh any negatives.
