Tottenham Report: Igaming Sweden — An opportunity to win the channelization battle?

December 6, 2023 11:00 PM
Photo: By Cecilia Forsberg - Own work, CC BY-SA 4.0, https://commons.wikimedia.org/w/index.php?curid=75886310
  • Curtis Roach
December 6, 2023 11:00 PM
  • Curtis Roach

When Sweden re-regulated its igaming market in 2019, it was seen as a hugely positive change for the industry, stimulating a raft of exciting market-growth opportunities for ambitious operators and generating extra tax revenue for the state. 

It’s no secret that for many years leading up to that point, Sweden had been losing millions in potential income due to unlicensed betting activity.  

With this new licensing system, Spelinspektionen (SGA) were able set a new channelization goal, aiming to drive at least 90% of all betting activity through strictly licensed gaming offerings. However, the latest market research from industry associations has made abundantly clear that the SGA are failing significantly in reaching this target. In this article, we look at the key dynamics of why this is happening and more important, what happens next for this maturing igaming hub. 

Losing the unlicensed battle
In Sweden, licensed providers are exposed to intense competition from unlicensed alternatives offering similar products. Studies show that the average Swedish igaming consumer considers licensed and unlicensed casino sites to be substitutable with respect to trustworthiness and overall product characteristics. In addition, unlicensed casino providers often outperform their licensed counterparts in terms of the attractiveness of bonus schemes and ease of registration, as they’re not confined by legal limitations. These aspects are the most critical factors in marketing, enabling better acquisition, and retention of players. 

Last month, new data published by industry association, Aktiebolaget Trav och Galopp (ATG), showed that channelization rates in the third quarter had dropped as low as 70% in some verticals. In fact, it also reported that visitor traffic to unlicensed websites has increased 10-fold since 2019 and the market is now worth between SEK3.4 billion (£258.4 million/€297.4 million/$324.6 million) and SEK6.7 billion annually! 

Online sports betting had a channelization rate of 88% in Q3, whereas online casino was lower at 74%. It was also noted that channelization for both sectors, as well as the entire market, has been decreasing steadily since the re-regulation in 2019. 

ATG CEO, Hasse Lord Skarplöth, recently voiced his concerns over these figures. “The results of our quarterly surveys are alarming and the ATG will do what it can to tackle the issue moving forward.” 

Before the re-regulation, Svenska Spel, ATG, and the four largest national lotteries accounted for over 95% of turnover on the regulated market. However, after the re-regulation, the Gambling Inspectorate has responsibility for more than 600 licence and permit holders. Considering this sharp increase in volume, it’s easy to understand how levels of market control can vary, while they work hard to adapt to the new bustling igaming environment. 

Taking back control 
The concerning results of this ATG survey have now prompted direct government intervention, due to fears that the actions of the Spelinspektionen (SGA) may be having a negative impact on the economy. Sweden’s National Audit Office has sprung into action and last month announced plans to launch an immediate audit, investigating whether the SGA’s supervision of the market is effective. 

The Riksrevisionen (Sweden’s National Audit Office) investigation into Spelinspektionen will examine how the body has adapted to the challenges presented by re-regulation and whether it’s meeting its obligation to supervise the regulated market sufficiently, which was created to increase channelization. The results of the review are set to be published in September 2024. 

In addition to this, the Swedish government also plans to combat channelization by raising taxes, which has been met with a mixed reception by industry stakeholders. The Regeringen (Swedish government) has stated that the decision to raise taxes is based on the belief that the market should have stabilised since re-regulation in 2019. If approved, the tax rise will come into effect in Sweden starting on July 1, 2024, and could bring in an additional SEK540.0 million (£39.3 million/€45.5 million/$48.4 million) in additional tax revenue each year. 

Regeringen says a new tax rate of more than 20% will help achieve channelization of at least 90% — especially now, given the new measures that have been taken to exclude unlicensed gambling from the Swedish market, which came into effect earlier this year. 

Still cause for concern?
Despite these planned actions by the Swedish government to take back control of market channelization, some industry stakeholders remain concerned. 

Speaking recently, Gustaf Hoffstedt, secretary-general at BOS, emphasised the seriousness of the low channelization rate. 

Gustaf believes that “far too much power has been spent on the part of the state to force the licensed gambling companies to implement measures that have not been well received by gambling consumers.” 

The key to winning the battle clearly lies within the SGA’s ability to focus on finding and shutting down unlicensed offerings on the market. This will require both a shift in resources and most importantly a shift in mindset. 

Encouragingly, this seems to be a sentiment echoed by the key industry stakeholders. Sweden’s Aktiebolaget Trav och Galopp (ATG) has vowed to take action over illegal Swedish gambling. CEO Skarplöth said, “We want people to feel good about their gaming. And we work for a gaming market that will do better tomorrow than it does today. Therefore, ATG will do what we can to help ensure that the fight against the unlicensed gambling companies continues day by day, month by month.”