It has been nearly five years since the EU Commission told Sweden that its gambling laws contravened EU law, but finally the country has bowed to the pressure and passed new laws that will liberalize the gaming market from Jan. 1, 2019.
The only nationally regulated online poker operator in Sweden is Svenska Spel which has a state monopoly over online gambling. However, because of the EU infringement proceedings foreign operators, including big names such as PokerStars, PartyPoker, 888 and Unibet have been able to ignore Sweden’s gambling laws and operate in the country with impunity.
The new laws introduce a licensing system from Aug. 1 this year, and foreign gaming operators will be able to apply for a license to offer their products in line with Swedish law.
It took major efforts by the EU to convince Swedish politicians to change their laws. In October 2014, after Sweden had made no progress after being warned that it infringed EU law, the EU Commission took the extraordinary step of beginning court proceedings against the country in the Court of Justice.
The court referral notice stated that:
“The Commission considers that the way that the Swedish exclusive right system for sport betting is organised is inconsistent with the aim of achieving the public policy objectives of preventing problem gambling and criminal activities and lacks the necessary state control. Changes to the Swedish gambling law in order to make it compliant with EU law have long been envisaged but never implemented.
In the second case, the referral to the Court of Justice is based on restrictions on the provision and promotion of online poker games. The Commission is of the opinion that the exclusive right holder is not subject to adequate control by the Swedish authorities and that the restrictive policy in the area of poker games is not consistent as the Swedish authorities tolerate the unauthorised offer and promotion of poker games.”
Sweden then requested more time for the political process and launched a research project to provide the basis for the shape of the new laws.
What has resulted is a liberalization of the national online gaming market with foreign operators free to apply for a license. Taxes have been set at 18 percent of gross gaming revenue, and Swedish players will not be segregated from the international player pool. Both outcomes were recommendations from the research project.
Interestingly, the state monopoly, Svenska Spel sees the changes in a positive light despite the fact that it has spent years railing against the offshore operators (paywall) as they “stole” market share. CEO Lennart Käll commented:
“This is a reform that creates order and reforms a market which, as mentioned before, was the wild west! Now we can look forward to a gaming market with equal conditions for gaming companies, increased revenue to the treasury, clear rules to protect customers from excessive gaming and opportunities to put match fixers behind lock and bar, and above all much stronger and better consumer protection. (translated)”
Sweden has a population of similar size to New Jersey, so it’s not a globally significant poker market, nor is it a politically powerful member of the EU like France, Spain or Italy.
The real significance of the legal changes are that they indicate the direction in which the EU is taking online gaming law, and how the EU will play a major role in reshaping the European market over the coming decade.
Sweden’s laws bring its online gambling industry into line with the Treaty for European Union (TFEU) which mandates that the EU must provide a common market for goods and services. In other words, if online poker is legal in an EU member state, then:
There are of course caveats to both of these simplistic statements, but they represent the broad principles of free trade that the EU Commission is required to enforce in its role as “guardian of the treaties.”
In the announcement of November 2013, the EU Commission launched infringement proceedings against six other states as well as accusing Sweden of failing to comply with EU law. These were Belgium, Cyprus, the Czech Republic, Lithuania, Poland and Romania.
In addition, the commission reiterated that cases were also open against France, Germany, Greece, Hungary and the Netherlands.
Since then all these countries have moved towards bringing their laws into line with EU treaties, albeit with varying success.
The combination of relentless EU Commission pressure with judgments by the ECJ set out a trend which should result in liberalized online gaming across the EU.
It won’t happen in quick time, but for both operators and online poker players, the direction is positive.
Over the last 12 months, France, Portugal, Spain and Italy have been trying to resolve the problems in establishing shared liquidity between their national markets which have historically been segregated in one form or another.
A lot of progress has been made, and there is now limited shared liquidity between some of them. In its first quarter report The Stars Group reported that sharing the PokerStars.fr player pool with PokerStars.es in Spain had resulted in a 30 percent revenue boost.
The EU is now divided between countries which have retained segregated markets, but which are on a path of merging their segregated pools, and countries which regulated gambling but allow players to play in the global player pool.
Two possible long-term outcomes are now visible. Either the EU moves its member states towards an EU-only player pool, or player pool segregation will eventually end.
The EU Commission is likely to favor the second option, as adopted by Sweden. However the countries which do have segregated markets are powerful and so the concept of an exclusive EU market cannot be ruled out.