Legal Alerts / 4 Jun 2019

Will the New Government Block Access to Foreign Gambling Sites?

As you may know, in Finland only the holder of exclusive rights (Veikkaus Oy) has the right to market gambling, which means that marketing performed by other operators is strictly forbidden. The current Veikkaus was established in 2017 when the former Veikkaus merged into betting and gambling agencies Fintoto and Finland’s Slot Machine Association (RAY) as a result of the first major reform of the Finnish Lotteries Act.

The second phase of the Finnish Lotteries Act’s reform is still in process. The Ministry of the Interior ordered a pilot study as part of this second phase where the Ministry solicited and received statements from several parties with regard to the reform. The Ministry has also taken measures to assess whether authorities can prevent Finns from accessing and transferring funds to foreign gambling sites in future. The Ministry has assessed what technical constraints exist and whether they could be introduced in Finland. The results of the pilot study were published on 29 May 2019. Pursuant to the Government Programme published on 3 June 2019, the new Government will further explore measures to restrict gambling outside Finland.

Background

The Finnish Lotteries Act forbids e.g. gambling companies that operate in other countries from marketing gambling in Finland. In a precedent, the Supreme Administrative Court of Finland stated that, although the sports site addressed in this case was in English, site was targeted at Finland and at Finnish consumers due to  the contents of the site and because the site was sponsoring a Finnish sports team. The Administrative Court of Helsinki had earlier stated in the same case that online marketing, as such, must be considered as targeted at a specific state (such as Finland) due to the fact that the internet is a global channel. Furthermore, the Helsinki District Court has ruled that the foreign location of servers, customer service or other operations is irrelevant when assessing whether marketing is targeted at a specific state.

The Finnish gambling market is monitored by the National Police Board of Finland, which has taken measures against several parties in terms of gambling violations. The powers of the National Police Board are currently limited to communities and corporations, which means that private persons (e.g. celebrities) cannot be subject to administrative decisions, prohibitions or conditional fines. The National Police Board can only send letters or requests for further clarification to private persons. Nonetheless, organised gambling and lottery offences are criminalised in the Criminal Code of Finland. For instance, an editor of several magazines who had published advertisements for a foreign gambling company was found guilty of a lottery offence and subjected to a fine.

The Åland Islands are an exception to mainland Finland as Åland has the right to independently decide on matters regarding gambling. Organising gambling and lotteries and marketing them in Åland is subject to a licence, and licences are granted by the provincial government. Only public corporations that direct their profits to the provincial government’s budget can be granted a licence. The resulting economic benefit will be used to promote public-benefit projects. The relevant legislation does not prohibit playing on foreign gambling sites, but it is prohibited to target their marketing to Åland in the same way as to the mainland Finland.

Arguments for and against the monopoly of Veikkaus

There has been intense debate in the media for and against the deregulation of the monopoly of Veikkaus. Veikkaus claims that the competitive situation is unfair and that no system can withstand the presence of informal players alongside official players. For this reason, Veikkaus has stated that informal players should be blocked by preventing access to gaming companies’ IP addresses and the transfer of funds.

In addition to Veikkaus, the Network of the Beneficiaries of Finnish Lottery (Veikkauksen edunvälittäjien verkosto) has also been a particularly active advocate for the preservation of the monopoly. According to the Network, introducing a licensing system – which is widely used elsewhere in Europe – would only aggravate gambling problems in Finland. The Network argues that the drawbacks would stay in Finland, but the profits would pass on to foreign companies.

The market share of Veikkaus is currently 86%, but it has decreased in recent years. According to H2 Gambling Capital, Veikkaus has a market share of 67% in online gaming whereas its foreign competitors possess the remaining 33%. The Network argues that the ultimate limit for the durability of the monopoly is 50%, but a monopoly with less than 50% of the national gaming market is not a monopoly by any definition.

The recent plans to block foreign sites have caused bad blood among professional bettors, and they responded to this by setting up a sports betting association on 15 March 2019. According to Aki Pyysing, one of the founding members of the association and a professional poker player since 1995, the profit margins of Veikkaus games alone are not sufficient to make a living as a professional player in Finland.

The European Gaming and Betting Association (EGBA) has recommended that Finland introduce gaming licences similarly to Sweden and the rest of the EU. According to Maarten Haijer, the Sectary General of EGBA, this would improve consumer protection and bring more taxes to Finland paid by licensing companies. In addition, the Finnish Competition and Consumer Authority has repeatedly questioned the need for the existence of the monopoly.

What comes next?

The long-awaited pilot study from the Ministry of the Interior refers extensively to the Evaluation of Regulatory Tools for Enforcing Online Gambling Rules and Channelling Demand towards Controlled Offers published by the European Commission in January 2019. Technological blocking measures referenced in the pilot study include both website blocking and payment blocking. Payment blocking could be used to block both gambling deposits and payouts to players. Pursuant to the pilot study, there appear to be no legal or technical obstacles to using blocking measures to prevent gambling outside of Finland. However, these blocks can be bypassed, and it may prove difficult to target the blocks properly.

The pilot study does not comment on whether these blocks should be introduced, but it emphasises that the introduction of such blocks requires more thorough research in particular on the implementation of relevant technical measures and their costs and impacts. The possibility of introducing these blocks will be explored as the monopoly of Veikkaus and its operating conditions are protected under the Government Programme. The second phase of the Finnish Lotteries Act reform will be carried out at the beginning of the new Government’s term meaning that the first blocking measures may be seen in the early 2020s.

Borenius’ lawyers are available to assist in addressing any questions you may have regarding this legal alert. Please feel free to contact any of the Borenius’ attorneys listed in this alert or those with whom you usually work.

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