What is channelisation?
A gambling market is never defined by competition, available products or regulations. In a digitalised and globalised world, where individuals are empowered to find information, make decisions and execute their own free will, a gambling market is always defined by consumer demand and behaviour. The ability of policymakers to adopt regulations to the total effect of combined actions by consumers defines success rate of regulations. If most consumers decide to accept the gambling offer within a regulated system, the rate of policy success is high. This is referred to as channelisation. High channelisation enables regulators to monitor and act to assure compliance. Compliance equals consumer protection and minimised social harm. Not taking consumer demand and behaviour into account is the route to failure.
First-year learnings
The 2019 re-regulated Swedish market has, in parts, not turned out as expected. The regulator has paid much interest in issuing fines to licensed operators but very few and too inefficient measures have been taken to secure high channelisation. Bear in mind that the objective set forth by government and Parliament is to reach at least 90 per cent channelisation before 2022. Channelisation was early 2019 close to 100 per cent but has since continuously decreased, especially in those product verticals where policymakers argue the need for consumer protection is highest. Consumers are redefining the market.
The Swedish Agency for Public Management was tasked to follow up on the reform and report yearly developments. Its report in 2019 is clear on the need to focus more on channelisation. The report also mentions the inefficiency of protectionist measures to fence off unlicensed operators.
Is flexibility the beginning of chaos?
The Swedish Gambling Act is built up as a framework, delegating powers to government and regulator to issue detailed regulations. Kindred and other operators warned in 2017 that the delegated mandate was too wide and vaguely phrased, hence could be used by the government to deviate from the overall purpose of the reform. The independent Council on Legislation also made a strong remark. Warnings were not listened to.
On 23 April, the Swedish regulated market was hit by a proposal for a governmental ordinance which makes one wonder if Sweden aims for reversed channelling. By limiting licensed operators in their online offer, the government seems to aim to cool down consumer demand which allegedly increased as a direct consequence from the Covid-19 pandemic. No facts backed the claim. Kindred and other operators submitted views to the government, adding facts to the proposal and showing there is no such change in consumer demand as claimed. The proposal was then changed to encompass only online casino, leaving online betting untouched. As available facts show an increase in betting during the pandemic (horse betting as sports events cancelled) the new proposal is even further away from a responsible policy.
To help policymakers care for consumers and a sustainable policy approach CEOs of nine major operators have come together with suggestions on realistic measures to ensure consumer protection via high channelisation.
The proposal was enacted and will come into force on 2 July.
Way ahead
Kindred has always argued policymaking should be fact-based. One has to now realise that facts in terms of data no longer have a strong influence on decision making one would expect. To base decision making on facts and assess feasibility considering foreseeable consequences may be overrun by other agendas. This is not totally new to the gambling industry. Stakeholders to gambling regulations (operators, national courts, EU institutions, regulators, investors, policymakers, media etc.) should now expect an increased need for early on engagement in various agendas that may long-term effect on gambling policymaking as well as an increasing trend of court cases.
Long-term effects
Leaving effects on the gambling industry aside, there are two major disadvantages from the kind of policymaking we have witnessed.
Firstly, the capability to regulate a market follows the ability to predict market development by knowing how stakeholders will react, hence stability for operators is fundamental. However, the situation created reveals that a licensed operator may anticipate stability in basic market conditions only a few months into the future, as opposed to the unlicensed operator with an operative horizon of several years. As it’s no longer obviously more attractive to carry a local license the capability to regulate the market decreases over time.
Secondly, the societal need of minimising social harm, prevent criminality and reduce risk of problem gambling will probably not be catered for in a consistent manner when facts are substituted for indications and agendas are not directly linked to publicly spoken motives for policy-making and consequences of regulations are not assessed. The future benefit to societal needs from regulating gambling may simply turn out to be impossible to define, comprehend or follow-up. At that point regulating will have lost its attractivity to everybody, ending in a de facto de-regulation as the inevitable result.
Based on more than 20 years of experience, Kindred has shared its analysis of the Swedish governmental proposal with the Swedish government. Kindred’s view on the original proposal and the altered proposal is very clear. This is a shot in the waterline on the ship of gambling regulations now set off into unpredictable seas.
