19 May, 2021

Too Big to Fail

Gustaf Hoffstedt, secretary general of BOS, asks: Are all gaming companies created equal, or are some more equal than others?

Casino Cosmopol, a subsidiary of state-owned Svenska Spel, recently had its licence extended, with the Swedish Gambling Authority renewing the licence for Sweden’s only land-based casino operator for five years. The decision was made despite the Authority having found shortcomings in Casino Cosmopol’s anti-money laundering procedures at the end of 2018. The seriousness of such a lapse for a business that handles large amounts of cash can’t be stressed enough.

The Gambling Authority only awards five-year licences to operators who uphold the highest standard for the parameters the Authority uses to assess a gaming company’s conduct and suitability. In the absence of a spotless record, the Authority has the option to award a shorter licence term of two years. Rejecting a licence application is, of course, the most serious form of sanction the Gambling Authority can issue, but the seriousness and implications of only granting a two-year licence cannot be overstated.

Such a decision is noted by regulators in other jurisdictions, who may question whether they should award a licence to an operator their Swedish counterpart has found wanting. A second-tier licence is also noted by investors and creditors, who will demand compensation for the increased risk associated with a more time-limited licence. However, this was not the fate that befell Casino Cosmopol, which was instead granted a full five-year licence term. This story has reignited a question that is always smouldering in the Swedish gaming market: does the Swedish state treat its own gaming company differently from other players in the market?

This issue has been fueled further by the fact that both the lower and higher courts have more than halved the already low fine that was originally issued for Casino Cosmopol's money laundering violation, reducing the penalty from about €800,000 ($963,000) to €300,000. These sums can be compared to the fines of up to €10m that have been imposed on commercial gaming companies in the past for offences that, by all reasonable measures, must be considered less serious than money laundering.

In spite of this, I actually do not believe Swedish authorities give preferential treatment to Svenska Spel in this respect. I also believe that a high level of equal treatment, and therefore professionalism, is more prevalent the closer a regulator is to gaming regulation in its day-to-day work. In other words, it is even more important for the Gambling Authority than for a court to treat all operators equally.

To be fair, the low fines imposed on Casino Cosmopol were in part a consequence of new rules implemented with the re-regulation of the Swedish gaming market in 2019. That said, I have my doubts about the state’s ability to apply equal treatment in case of violations that are so serious they warrant the revocation of a licence. Would the Gambling Authority be capable of imposing the most severe sanction if Svenska Spel is found guilty of a violation that meets the requirements for a licence revocation, or is the state-owned company too big to fail? Would the Swedish courts be able to confirm the Swedish Gambling Authority's decision?

Let us assume the authorities would prove capable of living up to the standard of equal treatment. That allows us to focus on a form of preferential treatment that is ever-present in Sweden: how authorities initiate reviews. There is certainly no shortage of government reviews that lead to sanctions against the commercial gaming industry or, at the very minimum, blistering criticism of it.

Government initiatives that trigger reviews and fines apply exclusively to features of the commercial online gaming industry, such as bonuses. On the other hand, hardly any government reviews are initiated to examine the modus operandi of the half of the Swedish market that is still monopolised, such as the onslaught of advertising mailings from the Postcode Lottery, or the fact you cannot buy a newspaper in a Swedish kiosk without being swarmed by marketing signage for Trisslotten– the popular scratch off ticket that falls under the Svenska Spel monopoly.

Speaking of Trisslotten, in a blatant case of promotional marketing, this ticket is scratched live every day on TV4 – the country’s largest ad-funded TV-channel. What distinguishes this marketing from other adverts is that the scratch off doesn’t air within the usual advertising blocks, but as an ostensibly editorial segment, for which Svenska Spel pays TV4. And since TV4 and Svenska Spel have chosen to treat the segment as "editorial content,” they do not mention the mandatory consumer information, including the 18-year age limit and contact information to the Stödlinjen, Sweden’s national problem gambling helpline.

The Swedish Consumer Agency, which is tasked with representing the interests of Sweden’s consumers, has drawn the obvious conclusion that the Trisslotten segment constitutes advertising and that the absence of consumer protection information violates the Gambling Act. However, the Consumer Agency only reached this conclusion after BOS highlighted this blatant violation of gaming advertising rules. As an association, we believe responsible gaming programs should always be a central part of everyday industry practices, which is why we reached out to the Consumer. Needless to say, reviews of monopolist practices that are initiated by the authorities themselves have been few and far apart in the re-regulated Swedish gaming market.

In the wake of BOS’s action, the Consumer Agency asked to be given access to the commercial agreement between TV4 and Svenska Spel to gain a better understanding of how the broadcaster is compensated for airing the Trisslotten segment. Remarkably, Svenska Spel refused the agency’s request, despite the fact that only Consumer Agency staff would have full access to its content.

Let me repeat: the Swedish state-owned gaming company has refused a request by the Swedish Consumer Agency, the regulator that, alongside the Swedish Gambling Authority, has the most responsibility for monitoring the national gaming market. Meanwhile, Svenska Spel continues to scratch tickets on live tv, somewhere in between the weather forecast and the daily food segment, day in and day out.

What other gaming operator would have been allowed to keep its licence under such circumstances?


Gustaf Hoffstedt is the Secretary General of BOS, the Swedish Trade Association for Online Gambling, which brings together gaming operators and suppliers active in the Swedish market.