Recently, a committee appointed by the Swedish government published an extensive report proposing reforms to the Swedish gambling sector.

Current regulation of the gambling industry

The industry is currently regulated based on the principle that all gambling must be under governmental control; this means the system is ill-equipped to deal with the growing online gambling market. Permits allowing entities to arrange gambling activities have only been granted to three types of entities: AB Svenska Spel ("Svenska Spel"), a state-owned company; AB Trav och Galopp ("ATG"), a company owned by Swedish non-profit horse racing associations and with significant state control; and non-profit public interest associations.

However, the gambling market has evolved over the last 20 years, with technology developments, changes in consumer behavior, and the entrance of foreign-based online gambling companies that hold an increasingly large share of the Swedish market. Since the current legislation has only applied to Swedish entities holding a government-issued permit, this has resulted in much of the market being unregulated.

Proposed reforms

The committee has proposed the adoption of several key measures to modernize the rules governing the gambling market:

• The separation of Svenska Spel, whereby physical gambling establishments (such as casinos and slot machines) and lotteries will continue to operate as a state monopoly (together with non-profit public interest associations with regard to lotteries), and sports betting and other online gambling (excluding lotteries) will move to a partially deregulated market.

•  A recommendation to sell the Svenska Spel operations that will be active on the deregulated market.

•  The removal of ATG's monopoly in the area of horse racing betting, as this form of betting will be included in the deregulated market.

•  The introduction of a licensing regime for the deregulated market.

In the deregulated market, a licensing regime would be established requiring all gambling companies that wish to operate on the Swedish market to obtain an appropriate license. By doing so, common rules would be created that would apply to all market participants. This would provide tax income for the Swedish state (the suggestion being an 18% tax on net gambling revenues, i.e., the gambling company's profits after winnings have been paid out), and it would address gambling-related issues, such as gambling addiction. All licensing matters will be handled by the new Swedish gambling authority, Spelmyndigheten. The new authority should enjoy more extensive rights to adopt regulations and be responsible for handling licensing matters.

Potential benefits and downsides for companiesPotential benefits of the deregulation include:

Potential benefits of the deregulation include:

• greater legitimacy, as companies may seek, and obtain, a license to conduct their (currently unregulated) activities.

• common gambling rules, whereby all companies operating on the market will compete by the same rules, resulting in fairer competition and greater predictability.

Potential downsides include:

•  additional administrative work, since companies will bear greater responsibility for managing social issues, in that they will be required to help prevent and reduce problems associated with gambling.

•  onerous requirements to provide extensive information to consumers about how the game works, the risks of gambling, and how they can gamble responsibly.

M&A opportunities

If implemented, these changes will create interesting M&A opportunities for companies already active in the Swedish market or for new entrants to the market. Roschier has significant experience with the gambling industry, including regulatory, M&A and capital markets matters.

The committee's report will now be submitted to relevant stakeholders for comments. After that, if deemed appropriate, work on drafting a Bill will begin—and the government aims to present a Bill in the autumn of 2018 and for the changes to take effect from 1 January 2019.