OnlineLegal & RegulatoryIndustry

Online gaming regulation: The issue of Swedish channelisation

It’s almost expected for any newly re-regulated market to experience a few growing pains. However, the Swedish market has had more than its fair share. Since its re-regulation on 1 January 2019, the market has created difficulties for not only the Swedish Gambling Authority (SGA), which over the course of the year dished out fines to 18 operators for breaching regulation, but also for the market’s gaming companies, who endured a turbulent year with disappointing revenue figures.


Betsson saw full-year 2019 revenue of SEK 5.16bn ($509.8m) for 2019, a decrease of 5% year-on-year, while net income fell 27% to SEK 787.1m. The operator attributed much of this decline to its development in Sweden, which, they say, “continued to be weak”. Perhaps over-ambitiously, Pontus Lindwall, President and CEO of Betsson AB, predicted a recovery in Q4, a target which he humbly admits they “did not reach.”

Meanwhile, as another operator heavily reliant on its activities in Sweden, Kindred’s results also suffered. The operator saw marginal growth during the year with total revenue of £912.8m ($1.18bn), a year-on-year rise of 1%. Similarly to Lindwall, Kindred Group CEO Henrik Tjärnström attributed this in part to Swedish re-regulation, which he described as creating “headwinds” throughout the year.

While there have been a number of reasons suggested for why the Swedish market was such a regular feature in negative trading updates, one of the most prominent is the failure of channelisation.

In his last update for 2019, Lindwall explained why low channelisation rates had been such an issue over the year. He said: “We’ve seen declining channelisation, which makes it difficult for the licensed operators who pay 18% gaming tax and it also jeopardises consumer protection. High channelisation contributes to competition on equal terms for the companies in the sector that operate in the Swedish market.”

Gustaf Hoffstedt, Secretary General of Branschföreningen för Onlinespel, the Swedish trade association for online gambling, insisted the SGA’s punishment of license holders for regulation transgressions was unfair, considering the number of unlicensed sites that had managed to avoid punishment. At the time, there were 40 ongoing penalty cases towards license holders in Sweden and none towards unlicensed operators targeting the market - a ratio that Hoffstedt ensured was “not sustainable in a healthy licensing regime”.

However, in a meeting between the SGA and the licensed operators in September 2019, it seemed the Swedish market was meeting its targets for channelisation levels. SGA coordinator Marcus Aronsson announced the market had achieved a channelisation rate of 91% in H1 2019, based on data obtained in coordination between the SGA and Swedish taxation authorities. Despite this, many operators felt the issue was insufficiently addressed and that the rates had been miscalculated. A month later, the SGA lowered its channelisation estimations for H2 to 85 to 87%, also seeming to backtrack on the original figures for H1.

Recent figures released by an affiliate betting bonus guide also support this suggestion that channelisation rates are not as once thought. The research, carried out by, suggests up to 30% of players are searching online for ‘unlicensed casinos’ and other black market keywords, and while data released by the SGA suggests 91% of gambling is carried out by licensed operators, Bonusfinder claims this figure is closer to 70%.

In reaction to these contrasting figures, Bonusfinder Managing Director Fintan Costello said: “Instead of misguidedly declaring phase one of the Swedish legislation a success, regulators should be focusing on the rising proportion of players searching for unlicensed brands.” This also sets a precedent for other burgeoning markets, with Costello warning that German regulators appear to be ignoring the mistakes of Sweden - perhaps due to miscalculated figures.

Now Sweden is entering its second year of re-regulation; working on channelisation levels is in the interest of both the SGA and those licensees who rely on the market. In increasing traffic towards license holders, the SGA can ensure customers are betting in a safe environment with carefully monitored responsible gambling regulation. Meanwhile, increased traffic flow will increase revenue for those operators who have taken the time to earn a license.

With all this in mind, how can the SGA improve the market’s channelisation?

Tobias Fagerlund, CEO of Global Gaming, is one person who has a lot of advice for the SGA in this regard. Shortly after Sweden’s re-regulation, Global Gaming subsidiary SafeEnt’s operating license was revoked for “serious deficiencies” in business practices – a decision which ultimately ended the operator’s activities in the country. However, when speaking to Gambling Insider at ICE London 2020, Fagerlund’s criticisms were mainly centred on the SGA’s channelisation efforts, describing it as “vital” for channelisation rates to improve in the country.

In one potential solution to the problem, Fagerlund proposed the idea of greater scrutiny for licenses of gaming suppliers. He said: “They need to look at licenses and certificates for game providers and actually say to them that if they provide games to Swedish licensed operators, then you cannot also provide them to unlicensed operators – that will cost you something.”

As the SGA is limited in its ability to penalise unlicensed sites, this could offer them a method of restricting the activities of unlicensed operators through the supply chain. Fagerlund raises the interesting point that currently there is nothing to stop a gaming supplier from partnering with both licensed and unlicensed operators in the Swedish market – something that seems at odds with the SGA’s aims of channelisation.

There have also been interesting points raised about the role of advertising. During a regulatory conference at ICE London 2020, Camilla Rosenberg, Head of the SGA, ensured she was pleased with the reduction of gambling advertisement in Sweden over the past year – outlining plans to further reduce the amount of advertisement moving forward. However, Yanica Sant, Senior Counsel for the Malta Gaming Authority, had a warning for the regulatory body in regard to implementing a full ban. She said: “A complete ban might do a lot to appease the public, but not for channelisation”, a sentiment mirrored by Lindwall of Betsson, who insisted that advertising can provide a vital way for customers to distinguish between licensed and unlicensed sites.  

It’s no secret the SGA has been considering a blanket ban on online gambling advertising since April 2019, similar to that currently found in Italy. The Gaming Market Commission has been tasked with developing measures to limit advertising in the country, and has been asked to deliver a report by October 1 2020, assessing the benefits or negatives of more intense restrictions. In developing such a report, it would certainly benefit the body involved to take the warning words of Sant and Lindwall into account.

These are all factors for the SGA to consider moving forward in 2020, but most of all, it’s vital the authorities take a humble approach to the first year of re-regulation and are prepared to make any necessary changes. Ultimately, it’s important to remember the words of Hoffstedt: “We as an industry and the authority have a joint interest here.” Improved channelisation benefits everyone, from licensed operators to their customers and the SGA itself.

Premium+ Connections
Premium Connections
Executive Profiles
Galaxy Gaming
Churchill Downs Incorporated
Follow Us

Global Gaming Awards Asia-Pacific: Going live

The Global Gaming Awards Asia-Pacific are set for their firs...

Preview: SiGMA Asia 2024

SiGMA’s annual Asia summit comes back to Manila – signif...

Company profile: Praxis Tech

Being payments ready in Asia - A call to action for iGaming...