Finland’s Transition to a Gambling Licensing System
While many European countries have abolished their gambling monopolies and shifted to licensing systems over the last decade, Finland has not found a reason to follow the same path – until now. In this article, Antti Koivula of Legal Gaming analyses the reasons behind Finland’s belated transition to a licensing system, anticipates the key features of the new system, and sheds light on the upcoming process.
The Golden Goose Stops Laying Golden Eggs
The Finnish gambling monopoly, in which a state-owned exclusive rights-holder is the sole entity allowed to provide and market gambling products, was seen as an ever-growing and endless source of income for the state for decades, providing a billion euros in annual funding for so-called good causes. However, eventually, the absurdity of Finnish law and the inability of decision-makers to protect the “golden goose” led to the decline of the monopoly system, forcing Finland to re-regulate. While the starting point of Finnish law is the monopoly, it also allows foreign gambling operators with broader product catalogues and more favourable rules (from a player’s perspective) to offer their services to Finns. This legal loophole, an ancient relic from the time before gambling moved to the internet, was never addressed.
“Strict responsible gambling requirements, designed to combat problem gambling, had driven Finns away from the monopoly operator to their competitors, who were not bound by the same rules.”
With the world’s fourth biggest market when evaluated by per capita gross gaming revenue, and no requirement to pay licensing fees or taxes in Finland, it’s not surprising that the Finnish gambling market piqued the interest of foreign gambling operators. Only when the monopoly operator’s gross gaming revenue declined by 40% in five years, and the amount played outside the system roughly doubled, did decision-makers awaken to the harsh reality. Strict responsible gambling requirements, designed to combat problem gambling, had driven Finns away from the monopoly operator to their competitors, who were not bound by the same rules. By the summer of 2022, the monopoly operator finally reached the conclusion that the existing set-up could not be allowed to continue and it openly began to lobby for a licensing system, as this would bring the competition under the same regulatory umbrella and restore the state operator’s competitiveness.
“It helps the cause that there is extensive political agreement on the necessity for change, and for that reason, the upcoming steps are not expected to face any serious political resistance.”
It did not take long for the monopoly operator to convince the politicians that the change was necessary, and when the new government was appointed in June 2023, the aim of introducing a gambling licensing system by 1 January 2026 at the latest was included in the government programme. It helps the cause that there is extensive political agreement on the necessity for change, and for that reason, the upcoming steps are not expected to face any serious political resistance. The details of the new system are yet to be determined, as it has only been decided at this point that the licensing system will include only digital casino games and betting, while the other games will remain under the monopoly system.
It’s All About Finding the Right Balance
During the early stages of the ongoing transition, behind-the-scenes talks have been dominated by two partially overlapping aims: the need to increase state revenue and effectively prevent gambling-related harm. The success of the new system lies in finding the right balance between making the licensing conditions attractive enough to allow businesses to flourish, and implementing marketing restrictions and responsible gambling features to prevent problem gambling. When it comes to potential model countries, Finland always pays close attention to its Nordic neighbours, especially Sweden and Denmark, regardless of the policy area in question. In addition to the two countries mentioned, the Netherlands and France were also benchmarked in the preliminary study initiated by the Ministry of the Interior regarding alternatives to the current gambling system during spring 2023.
“The success of the new system lies in finding the right balance between making the licensing conditions attractive enough to allow businesses to flourish, and implementing marketing restrictions and responsible gambling features to prevent problem gambling.”
Currently, it is possible to anticipate the new system will be outlined by the following factors:
- Only digital casino games and betting will be included in the licensing system, while the rest will remain under the monopoly.
- A gross gaming revenue-based tax rate of 20–25%.
- The licence will cost approximately EUR50,000, and it will be valid for five years, with no limitation on the number of licensees.
- A centralised blocking system for problem gamblers, similar to Sweden’s Spelpaus, will be introduced.
- Cryptocurrencies and playing on credit will not be allowed.
- Payment service provider and domain name system blocking will be imposed on unlicensed operators.
- Notable restrictions will be placed on marketing, especially targeting children and young adults.
- A significant number of responsible gambling features will be integrated into the system.
Fast-Track Process Ahead
The new government has got off to a turbulent start, with several intertwined internal crises. Instead of providing political guidance to state officials to start preparing for the reform of the gambling system, the government’s attention has been elsewhere this past summer. This, combined with an ambitious schedule, has increased the likelihood of delays. At the same time, there are no circumstances in sight that could derail the reform itself.
“...a working group will be initiated to conduct an in-depth examination of the characteristics that should be included in the licensing system, and expert hearings will be held with a limited number of hand-picked industry experts.”
It is expected that a fast-track process will be used to meet the goal of having everything ready by the beginning of 2026. It is anticipated that during the autumn of 2023, a working group will be initiated to conduct an in-depth examination of the characteristics that should be included in the licensing system, and expert hearings will be held with a limited number of hand-picked industry experts. The results will then be incorporated into a draft law, based on which, a public hearing phase will take place, and notification will be submitted to the European Commission. After that, the draft law will be finalised, it will go through two hearings in parliament, and it will be scrutinised in parliamentary sub-committees before the law is confirmed and comes into force.
