Dissecting Finland’s gambling reform plans

A liberalised online gambling sector has been a long-time coming in Finland, and the government’s 417-page proposal sets out a path to launching a competitive market by 2027.

“They have tried to have balance between business opportunities and responsible gaming,” Jari Vähänen, a former Veikkaus executive turned industry consultant, says of the draft. “The goal has been to raise the channelisation as high as possible.”

This focus on channelisation aims to rebalance a market where the majority happens outside of the current monopoly. Veikkaus reported in 2023 that unlicensed play accounted for approximately 54% of Finland’s online gambling market, according to data from H2 Capital.

“The starting point of the government’s program was that too much of the online gambling in Finland was trickling to illegal operators on the grey market, and the aim of the proposal is to ensure that there are enough legal opportunities to channel gambling into licensed operators instead,” Ek explains.

Draft law sets out plans to curb gambling marketing

But certain measures outlined could hinder those channelisation goals, Ek and Vähänen warn.

In particular there’s strict rules around marketing, including a ban on bonusing. Influencers and public figures will not be allowed to market gambling online to their followers due to the potential appeal to minors.

Channelisation could be further hindered by a ban on targeted advertising, such as quick tips and keyword search advertising. This would significantly hinder activity for traditional affiliates, warns local lawyer Antti Koivula.

“How high of a channelisation rate can be achieved by prohibiting bonuses and traditional affiliates?” he queried on Linkedin. “Marketing is a crucial tool for companies entering a new market to make customers aware of their brands and products.”

Affiliate marketing is one of the most important customer acquisition channels, followed by bonusing, while many use influencers to promote their brands as well.

“Take all that away (or severely restrict it), and what’s left? Percentage-wise, not that much,” Koivula wrote. This, he said, would push customer acquisition efforts to TV, radio and newspapers, potentially creating a backlash against a perceived oversaturation of above the line channels with gambling ads.

Marketing restrictions build on existing Veikkaus controls

According to Ek, some of the marketing restrictions proposed by the draft are identical to the current legislation which governs the Veikkaus monopoly.

There is a significant onus on protecting minors from gambling advertising, Including a ban on marketing or advertising gambling directed at minors that will extend to sports events for youth teams.

This could present challenges for stadiums and venues featuring gambling ads, Vähänen suggested.

The draft also stipulates that licensees may have the obligation to report their marketing and development activities, including turnover, to the regulator on an annual basis.

How much will it cost to operate in Finland?

Licensed operators will be subject to a 22% levy on gross gaming revenue, a rate designed to help companies compete effectively while still generating returns from the market.

This could be aided further by amending the Income Tax Act to make licensed market winnings tax-exempt, while keeping unlicensed winnings subject to a levy.

There is also a license fee, to be paid annually, that will be determined based on each operator’s net gaming revenue. Applications will be assessed by a new authority under the Ministry of Finance, shifting responsibility for gambling away from the National Police Board.

Licence terms differ depending on the company. For operators, licences will run for 10 years, though this falls to 5 years for suppliers. B2B providers will need to be certified, with regulations stating licensees must only work with approved suppliers from 2028.

This gives operators and suppliers a year’s grace period, after the regulated market launches in 2027.

However there does not appear to be any sort of cooling-off period for companies already active in the market. A similar measure in the Netherlands ended up blocking leading brands such as Entain, Betsson, 888 and Kindred Group from launching when that market opened.

While this will be welcomed by operators, Vähänen warned there was no need for legislation to impose a cooling-off period as the regulatory process develops.

Could parts of Veikkaus be privatised?

While plans to divide current monopoly Veikkaus into four units have long been touted, the timing has only now become clear. Its monopoly over online gambling will end in 2026, though it maintains exclusive rights for lottery, horse race betting, as well as land-based slots and scratchcards.

Vähänen spent seven years in various executive positions at the operator between 2013 and 2020. He said the breakdown of the business into various segments, including a licensed-based business and technology-focused entity, has been in the works for many years.

“There has already been a note from the Finnish Consumer and Competition Authority raising the question around the risk that Veikkaus could utilise its monopoly position within the licensed market,” he says. “How can the regulator be sure that won’t happen?”

This may result in parts of the business being sold off, something the government alluded to when it set out plans for reform. Vähänen added this could see Veikkaus’ online arm spun off and sold rather than having the government compete in the private market.

There have been similar calls in Sweden for Svenska Spel to divest its commercial online arm, amid concerns its previous monopoly gives it an unfair advantage.

Is there an opportunity for a competitive retail betting market?

As Veikkaus’ monopoly doesn’t extend to sports, there could be scope for operators to move into retail betting in the market, thought that is unclear.

“It’s another story, on what will happen for horseracing, now it’s on the monopoly side,” Vähänen says. “I know the horseracing industry is lobbying heavily to move to the license-based system. If that happens, I suppose that horseracing betting will be also allowed in retail salons.”

But he questions the interest operators may have in retail betting as he believes it’s a struggling vertical. Veikkaus reported a 5.6% decline in betting revenue for 2023, but did not split out how the retail channel performed.

But the operators is clearly looking to beef up its betting offering, as it this week appointed former Kindred director of  sportsbook Andreas Reinblad as its new vice president of sports betting.