Section 3 paragraph 1 of the Swedish Lotteries Act (LA) provides a broad definition of lottery:
…an activity where one or several participants, with or without a stake, can obtain prizes of a higher value than each one of the other participants may obtain.
Lotteries shall include
- drawing of lots, guessing, betting and similar procedures,
- amusement at fairs and amusement parks,
- bingo games, gaming machines, roulette games, dice games, card games, chain-letter games or similar activities.
When assessing whether an activity constitutes a lottery the general nature of the activity shall be taken into account and not only the greater or lesser degree chance present in the individual case.
Prizes (winnings) shall in this act also refer to continuation of the game.
All games and gambling where a winner is appointed primarily by chance will fall within the scope of the LA. The element of chance is, however, not the sole criterion – the general nature of the activity must also be considered. Consequently, chance-based prize draws, sweepstakes and games as well as betting in various forms will all be considered lotteries under the LA. In addition, activities ‘without a stake’ may be considered a lottery, which may not be the case in other jurisdictions.
On the other hand, skill-based contests and games fall outside the scope of the LA, as long as there is no degree of chance in the activity.
In this context it could be mentioned that the Swedish Supreme Court has found that certain games of Texas Hold’em during a poker tournament did not constitute a game of chance. The court established that a prominent Texas Hold’em player must have certain mathematical and strategic skills, and evidently skill is not an insignificant factor when the outcome of a game is determined.2
ii Gambling policy
The objective of the Swedish gambling policy is ‘to meet key public imperatives, such as combating criminality, countering the harmful social and economic effects of gambling addictions, and protecting consumers’.3
Accordingly, the Swedish gambling market is highly regulated. In principle, the only actors allowed on the market are non-profit non-governmental organisations, and state-owned or state-controlled companies. Thus, commercial actors are more or less barred from entering the market with only a few exceptions, chiefly that there must be a certain level of entertainment gambling (i.e., gaming with low-value bets and low-value prizes).
In addition to it being prohibited to arrange gaming in Sweden without a permit, it is also prohibited to promote participation in unlawful arranged gaming or gaming arranged outside of Sweden.
Nonetheless, it should be mentioned that a large number of gaming companies are promoting participation in gaming arranged outside of Sweden through the internet (e.g., by means of their own websites or newspapers) directed at the Swedish market. Competition exists as a result of this.
The profit from lotteries and gambling must, in principle, be used for the public benefit. Surplus profits from lotteries and gambling are to finance undertakings of public utility.
The turnover for the Swedish gambling market in 2016 amounted to approximately 46.7 billion krona, of which 77 per cent can be attributed to state-owned company Svenska Spel AB (Svenska Spel) and partially state-controlled AB Trav och Galopp (ATG).4 In 2015 the state’s profits from gambling activities amounted to 6.1 billion krona; consequently gambling is an extremely lucrative business for the Swedish state.
iii State control and private enterprise
Svenska Spel and ATG, which is owned by the horse racing industry, more or less enjoy a de facto monopoly of the Swedish gambling market operating under permits of the government.
Svenska Spel has the exclusive right to arrange sports betting and lotteries (with a few exceptions for local events) and to operate gaming machines and land based casinos, and ATG has the exclusive right to arrange betting on horse racing.
iv Territorial issues
Gambling is regulated nationally. No localities have any favoured status for gambling.
v Offshore gambling
As mentioned in subsection i, supra, a large number of gaming companies are promoting participation in gaming arranged outside of Sweden towards Swedish citizens. As the authorities do not have jurisdiction over the offshore gambling operators, they have instead focused on those in Sweden who carry advertisements for such companies.
Every year, the offshore gambling companies invest around 2.3 billion krona in advertisements in Sweden, a large part of which is invested in newspapers and TV.5 As a consequence, the authorities have issued a number of injunctions against media companies over the years. However, injunctions have also been aimed at billboard advertisers, sports teams and webpages with banners linking to foreign gambling companies.
II LEGAL AND REGULATORY FRAMEWORK
i Legislation and jurisprudence
The Swedish gambling market is mainly regulated by two acts: the LA and the Swedish Casino Act (SCA).
Additionally, the Swedish Marketing Practices Act (MPA), which has a general application covering all types of marketing activities, may apply to gambling issues. According to the MPA, marketing must, as a general rule, not be incorrect, unfair or misleading; however, the specific legislation of the LA supersedes the MPA within the scope of its parameters.
The travaux préparatoires of the LA states that a lottery is not considered arranged for the general public if the lottery in question is aimed at both a small and closed group of people who share a provable mutual relationship.8 Additionally, it is argued that the more people who participate in the lottery, the higher the requirement for a mutual relationship and closeness.9
Furthermore, a lottery is ‘deemed to be arranged for the general public also where membership is required of a certain organization, if its principal objective is to arrange lotteries, or where the lottery would otherwise as regard its extent or the conditions for participation be equivalent to a lottery arranged for the general public’.10
In order for the LA to apply on the arrangement of a lottery, it must be arranged within Sweden.11 Normally, a lottery is considered to have been ‘arranged’ as soon as it is marketed to the general public.12 The arranging of a lottery should be deemed to have taken place where the activities are organised and managed, and where the power over the activities is exercised.13 This means that it could be argued that a lottery provided from abroad, with the opportunity to participate in Sweden, is not arranged in Sweden according to the LA.14 On the other hand, under such circumstances, the prohibition to promote participation in lotteries arranged outside of Sweden must also be considered.15
ii The regulator
The Swedish Gambling Authority (the Authority)16 has the overall responsibility for granting permits and supervising the Swedish gambling market (the government grants some permits). The Authority is charged with issuing permits for:
- a lotteries that are distributed online;
- b lotteries that are to be arranged in more than one county;
- c gaming machines; and
- d games of roulette, dice and card arranged pursuant to the LA.17
The Authority is also charged with the centralised monitoring of compliance with the LA and the SCA, and the more detailed supervision of those lotteries that are arranged under a permit from the Authority or the government.
Furthermore, the Swedish Consumer Ombudsmen18 has the general responsibility of supervising all marketing activities and of protecting consumers’ interests, inter alia under the MPA.
iii Remote and land-based gambling
The Swedish legislation does not distinguish between remote gambling and bricks-and-mortar gambling in general. However, permits for arranging roulette, dice games and card games can be granted to for-profit entities in some premises, namely in restaurants and hotels that are licensed to sell alcohol, in amusement parks and on ships in international traffic. These ‘restaurant casinos’ are severely limited as to bets and potential winnings, and should only be used to complement the restaurant business.
Svenska Spel’s right to operate land-based casinos is regulated in the SCA. Svenska Spel has applied for, but has not yet been granted, the right to provide online casinos.
iv Land-based gambling
There are only four land-based casinos in Sweden, in Stockholm, Gothenburg, Malmö and Sundsvall. The casinos are established and operated by Svenska Spel’s wholly owned subsidiary Casino Cosmopol AB, under a permit granted by the Swedish government.
The restaurant casinos, operated by hotels and restaurants, consist of around 600 tables in 500 different locations.19
Bingo halls are operated by public interest associations, under licences issued from the county administrative board.
Gambling machines can be found in both restaurants and bingo halls and are operated by Svenska Spel, who has a permit for a maximum of 7,000 gambling machines in restaurants and hotels, and 500 machines in bingo halls.
Lottery tickets are sold in a number of venues, from local sport events and fairs, to grocery stores and betting shops. Many grocery stores and betting shops also offer sports betting via Svenska Spel and betting on horse racing via ATG.
v Remote gambling
Permits for remote gambling can only be applied for by Svenska Spel, ATG and public interest associations.
Svenska Spel has been granted permits to arrange online betting and poker. In 2014, Svenska Spel also applied for a permit to arrange online casinos, however, no decision on the matter has been taken so far.
ATG has a permit to arrange online horse race betting.
vi Ancillary matters
No specific licence is needed for manufacturing equipment for the gambling industry.
III THE LICENSING PROCESS
i Application and renewal
The LA is based on the general principle that all organisation of lotteries requires a permit, and all permits are to be supervised by the state of Sweden (Section 9 of the LA).20 A licence may only be granted if it can be presumed that the activity will be executed in a suitable manner, from the general public’s perspective.
Permits may, in principle, only be granted to a non-profit organisation that (1) has as its main purpose to promote an undertaking of public utility, (2) carries out its operations so as to achieve that purpose, (3) does not refuse anyone membership in the organisation unless there is a particular reason to do so, and (4) needs the income from lotteries to support its activities.
Permits are granted on a local, regional or state level, depending on the geographical scope of the lottery in question. On the local level it is generally the relevant municipal committee21 that grants licences, on the regional level it is usually the county administrative board22 and on the national level it is the Authority or the government that grants permits. The Authority has the central supervisory responsibility regarding the adherence to the LA and decisions based on the LA.
In addition to permits for certain non-profit organisations, as set out above, the government may grant special lottery permits in other cases.23 Svenska Spel and ATG operate under such permits.
The LA stipulates a minimum age of 18 years for the participation in gambling on horse races, gambling machines, roulette, games of dice or card games.24 It is for the organiser of the activity to ensure that no one under the minimum age is allowed to participate. Moreover, an organiser of a lottery is prohibited from granting credit for wagers in the lottery.25
ii Sanctions for non-compliance
Arrangement of a lottery without a permit is a criminal offence subject to a fine, or imprisonment for a maximum of up to six months in severe cases. 26
Additionally, promotion of a lottery arranged from abroad may constitute a criminal offence subject to a fine or, in severe cases, a maximum of two years’ imprisonment.27 However, following a Supreme Court ruling in 2012, this provision has been rendered practically unenforceable against lotteries arranged in other EU Member States, as it would be considered discriminating contrary to EU law, since promoting Swedish lotteries arranged without a permit is not criminalised in a corresponding manner.28 This issue has, however, been covered in a Swedish government official report29 and is expected to be implemented in Swedish legislation in due course.
The Authority has the power to issue injunctions and prohibitions required to ensure compliance with the LA. Injunctions or prohibitions may be combined with fines.
The gambling sector is not covered by the Swedish Act on Measures against Money Laundering (AML) and therefore licensed entities do not have to take any steps to prevent crime and other wrongdoing. However, a recent government report has put forward a proposal of a new AML where the most of the gambling sector would be included. If the proposed new act is implemented, most gambling entities would have to take certain risk-based measures to prevent gambling being used for money laundering or funding of terrorism, for example customers would have to be identified.
The permits granted to Svenska Spel and ATG include obligations to take steps to prevent crimes and other wrongdoing.
Participation in match-fixing is penalised under the Swedish Penal Code.30
Winnings from lotteries, which also includes poker games, are exempt from taxation if they are arranged within the EU. For lotteries arranged outside the EU, any winnings are taxed as capital income, at a tax rate of 30 per cent.
Companies arranging lotteries in Sweden are subject to regular corporate income tax (at present, 22 per cent) and must also pay lottery tax. The lottery tax is 35 per cent of bets less paid-out winnings and is deductible for income tax purposes. Non-profit organisations and Svenska Spel AB are exempt from lottery tax. Restaurant casinos are exempt from lottery tax, but must pay gaming tax based on the number of tables.
Gambling is not subject to VAT.
Winnings from skill-based contests or games will be subject to regular income tax.
VI ADVERTISING AND MARKETING
Generally, the LA prohibits the promotion of participation in lotteries organised without a permit or lotteries organised from abroad within Swedish territory in commercial operations, or otherwise for the purpose of profit.31 For the same purposes a person is also not allowed, without having the organiser’s consent, to sell lottery tickets or distribute profits in an allowed lottery.32
According to the travaux préparatoires of the LA, examples of the promotion to participate in a lottery include the offer, sale or supply of lottery tickets or certificates for participation in a lottery, as well as the collection, mediation of stakes or winnings.33 Moreover, the distribution of notices relating to the lottery in question (e.g., invitation or register of winners) may constitute a promotion under the LA.
It is not entirely clear how far the territorial scope of the LA reaches. As far as lotteries organised from abroad are concerned the LA will probably not apply simply because Swedish subjects may enter a lottery on a website or some such similar medium. An additional circumstance would have to be present in order to trigger Swedish jurisdiction. In this context a banner on a Swedish website linking to gambling activities provided by a foreign gambling company has been found to be a promotion of a foreign lottery.34
Television commercials promoting gambling services on television channels broadcasted from abroad under a foreign broadcasting licence are not that uncommon. And as far as we are aware such promotions have not been challenged under the LA. However, the Authority ordered a Swedish television channel to cease broadcasting sponsorship messages and odds of a foreign gambling company (Unibet) in connection to a sporting event.35 The Authority’s decision was eventually overruled by the Supreme Administrative Court who found that the order regarding sponsorship messages was in conflict with, among other things, the purpose of the Fundamental Law on Freedom of Expression, and that the odds were to be considered as editorial content and not advertising. The marketing measures were thus allowed.
Futhermore, a subsidiary of Betsson AB (publ) (Betsson), which organises lotteries from abroad under a Maltese licence, acted in a provocative manner when it established a betting shop in central Stockholm. By providing computers connected to the internet within the shop, the company made it possible for customers to place various bets with the company. The Authority declared this to be in breach of the LA and ordered Betsson to cease its activities subject to a conditional fine. The decision was appealed by Betsson, who relied on EU law for their appeal, but was upheld by the administrative courts.36
If a lottery is promoted in breach of the LA, then the Authority may issue orders and prohibitions subject to a conditional fine.
As mentioned above, the criminalisation of promotion of lotteries is rendered practically unenforceable against lotteries arranged in other EU Member States. As many gambling companies who target the Swedish market operate under a British or Maltese license, the promotion of these companies cannot, for the time being, be subject to criminal prosecution. A report to amend this gap in the legislation has been proposed to the government, but it has so far not been implemented. It should be noted, however, that orders and prohibitions subject to conditional fines can still be used against such promotion.
VII THE YEAR IN REVIEW
In the past few years, several newspapers and other companies have appealed injunctions issued against them by the Authority regarding advertisements for gambling companies who are based outside Sweden. In the court proceedings that have followed, the appellants have invoked that the Swedish Gambling Act is not compliant with EU law and have argued, inter alia, that the restrictions on gambling are not carried out in a consistent and systematic manner, as required by the case law of the Court of Justice of the European Union (CJEU), and that the Gambling Act’s main purpose is to provide revenue to the state.
The European Commission has directed several questions to the Swedish government regarding the LA and in October 2014 the European Commission issued a press release, in which it states that Sweden will be referred to the CJEU for lack of compliance with EU law in the areas of online betting services and online poker services. Despite this, the Administrative Court and Administrative Court of Appeal have, in a series of recent judgments, found that the Swedish Gambling Act is not in conflict with EU law.37
The gambling market has been expecting a proposed licence system for the Swedish market for a while, and has tried to prepare and position themselves for such a system.
A review of the Swedish gambling regulation have been considered several times over the past decade, but so far there have been no real changes.
In the past, the European Commission has raised concerns in regards to the Swedish gambling legislation and, as mentioned above, the European Commission issued a press release in October 2014 that Sweden would be referred to the CJEU for lack of compliance with EU law in the areas of online betting services and online poker services.
Immediately after the European Commission’s press release, the Swedish government announced that they would appoint a committee with the explicit assignment to submit proposals for a new gambling regulation, based on a licensing system.38
In its report, presented on 31 March 2017,39 the committee proposes a division of the gambling market into two sectors: one competitive sector and one exclusive. Seeing as Svenska Spel currently operates within both sectors, the committee also proposes a division of Svenska Spel into an exclusive and a competitive section, and that the competitive section possibly should be sold.
Svenska Spel’s exclusive sector would have a continued monopoly on gaming machines and land-based casinos, and would compete with public interest associations with respect to online and land-based lotteries. The non-profit sector would continue to have exclusivity in regard to land-based bingo.
The competitive sector of Svenska Spel would include online casinos, online betting, online poker, online bingo, land-based sports betting and land-based horse racing, where Svenska Spel’s competitive section, ATG and online gambling companies could be allowed to operate under licences. The inclusion of land-based horse racing in the competitive market would therefore mean that ATG will lose its current monopoly.
In order to obtain a licence to provide gambling, applicants should meet the requirements of insight, experience and organisation needed to operate the planned activities; there should be reason to assume that the activities will be operated in accordance with the law and other statutes; and the applicants must be deemed suitable, taking into account their reputation and financial strength. The requirements shall apply to the applicant company’s board, management and shareholders, who own at least ten per cent of the company.
Licences will be valid for a period of up to five years and can be granted to persons living in or companies established in the EU, or to persons or companies outside the EU, if the applicant has appointed a representative who meets the aforementioned requirements and has been approved by the Authority.
Licences would be issued by the Authority, and licence fees and supervision fees would be based on turnover, ranging from 60,000–700,000 krona and 30,000–1 million krona respectively.
The report also proposes a tax rate of 18 per cent based on the gambling revenue. Licensed gambling companies will also, like any other company, pay 22 per cent corporate tax on profits. However, licence and supervision fee, and gambling tax are deductible.
While the report thus opens up to a competitive licence-based gambling market, the committee also proposes that licences should be required to possess or manufacture gambling equipment, or to manufacture, provide, install or modify software for games in connection with online gambling – areas that are currently not regulated. For these areas, licence and supervision fees of up to 30,000 krona are proposed.
In order to maintain the new gambling regulation, the report proposes a strengthening of both the regulation regarding advertising of licensed gambling, as well as sanctions against providing and promoting unlicensed gambling companies, including harsher penal provisions and raised fines compared to the current legislation. No internet service provider (ISP) bans are proposed but the report suggests that ISPs should be required to display a warning message when a visitor attempts to gamble on illegal sites. The report further proposes that the blocking of payment transactions between illegal gambling companies and players should be considered.
The new legislation is proposed to enter into force on 1 January 2019, while licences can be applied for starting on 1 July 2018. The report will now be circulated for comments, and is subject to notification to the European Commission before adoption. However, seeing as there is a broad political support for a re-regulated gambling market, there is a strong possibility that there will be a licence-based gambling market in Sweden within a couple of years.
1 Erik Ullberg and Christel Rockström are partners, and John Olsson is a senior associate, at Wistrand Advokatbyrå.
2 Judgment of the Supreme Court of 6 April 2011 in case No. B 2760-09 (NJA 2011 p. 45).
3 See, e.g., SOU 2006:11, p. 26.
4 See the 2016 Report of the Swedish Gambling Authority, www.lotteriinspektionen.se/globalassets/dokument/informationsdokument/spelmarknadens-utveckling-i-sverige-och-internationellt-2016-trycksak.pdf.
6 The LA also applies to inter alia lotteries in the form of bingo, gaming machines, roulette games, dice games and card games that are not arranged for the general public, if the game is arranged for the purpose of gain (Section 1 of the LA).
7 Section 1, Paragraph 1 of the LA.
8 SOU 1992:130 p. 114.
9 Schwalbe, Lotterilagen, p. 54.
10 Section 1, Paragraph 2 of the LA.
11 See, e.g., SOU 2006:11 p. 270.
12 Government’s bill (Prop) 1981/82:170 p. 128.
13 Cf. judgment of Svea Court of Appeals of 17 September 1997 in case No. B 2482-97.
14 See, e.g., SOU 2006:11 p. 206.
15 See, e.g., SOU 2006:11 p. 206.
16 Sw. Lotteriinspektionen, www.lotteriinspektionen.se
17 SFS 1994:1000, as amended.
18 Sw. Konsumentombudsmannen, www.konsumentverket.se.
20 In some situations, a permit is not needed, but this is only under specific circumstances and is very restricted (Section 19-21 of the LA).
21 Sw. Kommunstyrelsen.
22 Sw. Länsstyrelsen.
23 Section 45 of the LA.
24 Section 35 of the LA.
25 Section 37 of the LA.
26 Section 54 of the LA.
27 Section 54 of the LA.
28 Judgment of the Supreme Court of 21 December 2012 in case No. B 3559-11 (NJA 2012 p. 1073). See also judgment of the Court of Justice of the European Union of 8 July 2010 in joint cases C-447/08 and C-448/08.
29 SOU 2015:30
30 Chapter 10, Sections 5 (a) and (b) of the Swedish Penal Code.
31 Section 38 of the LA.
33 Government’s bill (Prop) 1998/99:29 p. 8 ff.
34 Judgment of the Göta Court of Appeal of 20 September 2005 in case No. B 1884-04.
35 Judgment of the Supreme Administrative Court case No. 7800-07 (HFD 2011 ref. 46).
36 Judgment of the Stockholm Administrative Court of Appeal of 7 December 2009 in case No. 8900-08; leave for appeal to the Supreme Administrative Court was not granted.
37 See, e.g., judgments of the Linköping Administrative Court of 16 March 2017 in cases Nos. 3665-15, 5156-16, 8391-16 and 1146-16, and judgments of the Jönköping Administrative Court of Appeal of 30 June 2016 in case No. 230-15, 20 January 2017 in case No. 3215-14.
38 Directive 2015:95.
39 SOU 2017:30.