Version: 02062004
Editor: Franka Pals
Publisher: Novamedia
Disclaimer: Novamedia disclaims all liability for information provided within the "Novamedia European Gaming and Lottery Files";.The information is supplied by independent journalistic sources. No parts of these files may be reproduced in any form by print, photo print, microfilm or otherwise, or re-distributed electronically in any form without written permission from the publisher.
The European Nordic Countries
The surface area of the Nordic region (Norway, Sweden, Finland, Denmark, Iceland and Estonia) is nearly 4 times bigger than Germany. The total population of these Nordic countries is 25.7 million which is just one third of the population of Germany. In 2000 the WLA (World Lottery Association) included Norway, Finland, Sweden, Iceland and Denmark in the top- 12-list of the countries which spend most on money games per capita in the world.
The Nordic countries have a small market by population. And a small market means for gambling low prizes since the number of players, the tax, the efficiency of the management of the operator and the distribution to beneficiaries and/or share holders determine the value and number of prizes. That is realized by the Nordic lottery directors who meet annually to discuss strategic issues, and it was according to Jean Jørgensen "during such a meeting that the idea came up to make a real economic co-operation in the form of a joint game. The idea of the game was to create a first prize pool which none of the countries could create on a Wednesday game by them-selves". The game was called 'Viking Lotto' and the first draw was held on March 17th in 1993. Now Viking Lotto is played in Norway, Sweden, Finland, Denmark, Iceland and Estonia.
Viking Lotto
The five founding partners of this multi-country Lotto are Dansk Tipstjeneste* (Denmark), Oy Veikkaus* (Finland), Islensk Getsp* (Iceland), Norsk Tipping* (Norway) and AB Tipstjanst* (Sweden). Eesti Loto* (Estonia) joined the partnership on January 19, 2000 and Estonian lotto players took part in the draw for the first time on March 22, 2000. Till 2002 exactly 460 draws have taken place.
"Regarding the organizational structure", states Jean Jørgensen, Vice President Dansk Tipstjeneste, "there were two ways to realize it. We could either set up a new company to perform all of the activities and hire its own employees or we could, as we chose, distribute the tasks among the participating lotteries. There were two major tasks. One was the organization and administration of the current business which was given to the so-called Executive Partner to take care of. The other task was to performe the draw. Since the start of the game Dansk Tipstjeneste has acted as Executive Partner whilst Norsk Tipping has taken care of the draw."
"To be as flexible as possible, we have used the principle known in the European Union as the principle of subsidiarity. This means that only matters which are performed better or has to be performed by all members, are carried out jointly. All the rest is left to each individual lottery to decide. This means that only the first prize pool is a joint pool. The remaining secondary prize pools are individually decided, as is the payback rate. Each board played pays a fee of 0.03 USD. In other words, the price for the game can be set individually by each country in its own national currency whilst the fee for the joint pool must be paid in the fixed currency where we have used the Euro."
"The promotion of the game is very individual whilst the television is a joint matter regarding the draw. However, each country can decide on its own if it wants to use the intro for the draw or just use a sign with numbers. This, of course, depends on the agreements each company is able to achieve with the national television stations."
The Viking Lotto countries and jurisdictions are the conflicting subject of this chapter.
"This then was the lot of the tribe..."
(Joshua 15:1).
Website: www.klasselotteriet.dk
In Denmark the oldest lottery is 'Klasse-lotteriet' established in the 18th century. Besides, there are two smaller lotteries: 'Varelotteriet' and 'Landbrugs-lotteriet'. These lotteries were entirely or partly run by state management, however, a few years ago 'Klasselotteriet' was given the same constitution as Dansk Tipstjeneste.
Website: www.tips.dk
Dansk Tipstjeneste is a limited liability company with a share capital of 59,284 USD and was established in 1948 according to the legislation and under the jurisdiction of the Ministry of Taxation. The state owns 80% of the shares of the company and has 5 of 15 representatives at the Board of Directors.
In 2000 Dansk Tipstjeneste became a group comprising Dansk Tipstjeneste AS, DanToto A/S and Dansk Automatspil A/S. Since Dansk Tipstjeneste took over DanToto A/S all betting on horse and dog races is handled by Dansk Tipstjeneste.
Casinos were established in Denmark in 1991. Calculated on the difference between the stake amount and the prize amount, the casinos the first 3 years paid 65% duty to the state. In 1994 the duty was made progressive, i.e. the casinos now pay 45% of gross revenues up to 475,000 USD and 75% of revenues exceeding 475,000 USD. The total gross revenue before duty amounted in 2000 to about 356,000 USD (the number of landbased casinos being 6).
The Danish Minister for Taxation established an inter-ministerial working group in December 1999 to pave the way for the modernization and unification of the existing gaming legislation. In addition, the group was to assess the possibilities for maintaining national control of the Danish gaming market on the Internet.
The working group has published on May 7th, 2001 its conclusions and recommendations in the report 'The future of gaming in Denmark - the need for unified gaming legislation.' (www.skm.dk/pub1/internet-spil/english). The report is primarily a discussion paper for a political debate.
Conclusions:
Main elements in a reform of the gaming legislation
Internet
The 'National Internet gaming strategy' (www.skat.dk/pub1/internetspil/english/kap7eng.htm) is another report of the interministerial working group which was published on June 18th, 2001. The group was to assess the possibilities for maintaining national control of the Danish gaming market on the Internet. Here follows a summary of the Danish National Internet Report.
National regulation in Europe
The large majority of European countries have issued or are expected to issue permits for Internet gaming in accordance with a policy that allows regulated (and often state-controlled) gaming that is only directed at each country's own citizens. This European unanimity is expressed, for example, in connection with cases under the European Court where the countries' governments have made statements in support of preservation of their right to regulate their own gaming markets.
A significant exception is Great Britain which has given its bookmakers unhindered access to direct their gaming business at other countries, e.g. Denmark. As mentioned earlier, the historical reason for this is that bookmakers have not been considered as gaming companies, but as ordinary businesses. Hence bookmakers are not regulated as gaming. In the gaming policy area itself, though, there is no doubt that Great Britain supports the principle of nationally regulated markets. The Gaming Board for Great Britain thus also participates actively in the meetings of the European gaming authorities' cooperation forum GREF (Gaming Regulators European Forum). GREF (www.gref.net) has served as a forum for debate and exchange of information over the past 10 years.
One of GREF's main achievements is the drawing-up of an ethical codex at its 1998 meeting in Helsinki stipulating clear norms for the future behaviour of the European states with regard to the Internet. One of the most important items in the codex states that Internet gaming should be directed solely at a country's own citizens, or alternatively only at citizens in countries with whom special international agreements have been entered into. The codex has no international legal standing, but is nevertheless a pronounced expression of the European countries' unanimity as regards the norms for regulating Internet gaming.
An internationally visible Internet gaming strategy
As mentioned earlier, the various countries' different gaming policies are starting to collide as the gaming markets begin to overlap each other because of the Internet.
In the opinion of the working group, these interstate conflicts can best be solved through negotiation on a common set of gaming regulations under the auspices of for example the OECD *) or the WTO (World Trade Organization).
In the light of European-American unanimity that the gaming market should be regulated nationally, the working group believes the development of an international consensus regarding the principle of restricted national markets as being realistic.
The working group shall therefore recommend that Denmark develops an internationally visible Internet gaming strategy with a view to promoting the establishment of a common set of norms in the international community and to contain the globalization of the Danish market that has already taken place and which will undoubtedly accelerate within a few years if the state does not take action against foreign companies illegally providing gaming to Danes via the Internet.
The Internet has placed the state in an awkward position as regards the possibilities to enforce the prohibition on the unlicensed provision of gaming in Denmark. As a result of Internet the territory in which the prohibition is to be enforced has potentially become global. This is due to the fact that if an action can be deemed to have an effect in Denmark, it falls within Danish legal jurisdiction. The problem is that it will not usually be possible to enforce the prohibition in the case of gaming providers located abroad. Thus the state will not be able to control the Internet gaming market through the threat of criminal proceedings against illegal provision of gaming.
In acknowledgement of this the working group has investigated the possibilities for developing alternative control measures. The investigation was based on the observation that the markedly decreasing transaction costs associated with Internet sales and marketing are one of the chief reasons why the Danish market increasingly risks becoming the sales and marketing target of for example Australian gaming companies.
A means of containing the increasing globalization of the gaming market, at least in the short term, could be for the state to increase the transaction costs of the foreign gaming companies who are presently easily able to offer games to Danes.
Based on the above considerations, the next section presents the working group's proposal for a four-element Internet strategy:
A) Blocking
Under certain circumstances the state may make it obligatory for private organizations to carry out special supervisory duties to ensure that gaming is not provided via premium rate subscriber numbers. The working group has considered the possibility for introducing a supervisory duty with regard to gaming on the Internet. This could apply to those Danish Internet service providers who allow access to the illegal Internet gaming homepages.The working group recommends adding the illegal provision or promotion of gaming to the list of digital crimes in Denmark.
From the technical point of view Internet communications can be blocked in two types of blocking:
Control of the payment stage
The key factor as regards the provision of Internet gaming is safe transaction of payments. The payment stage can thus be considered the illegal gaming providers' Achilles heel.
Inspired by the American political debate in the gaming area, the working group has investigated whether it is already technically feasible for the Danish financial sector to block credit card payments by Danes to illegal foreign Internet gaming providers.
The significance of this question lies in the fact that credit card payments are presently the dominant payment form on the Internet gaming market, being the only global concept for consumer-level payment transactions. What is important for the gaming providers is to find payment solutions suitable for the often rapid games.
B) Danish Internet gaming
Another important precondition for preserving a nationally regulated market is that the Danish gamblers are retained on the Danish market through the provision of regulated Danish games on the Internet. This recommendation should also be seen in the light of the long-term uncertainty of being able to block the payment to illegal gaming homepages.
In this connection the working group attaches great importance to the possibilities of the state-controlled companies "the public benefit lottery Klasselotteriet (www.klasselotteriet.dk) and the state gaming agency Dansk Tipstjeneste Group (www.tips.dk)" to pave the way in the launching of Internet gaming.
In February 2000 the state lottery 'Klasselotteriet' was the first state gaming company to launch its lottery on the Internet. The gambler can now order his lottery ticket directly over the Internet. In addition the homepage also provides the possibility to make the payment via PBS.
Dansk Tipstjeneste Group has informed the working group that it has implemented a pilot project on the Internet where some 1,000 persons are invited to participate in one of its games. Thereafter it is planned to launch all of the group's games on the Internet. The time horizon is probably within a year of positive completion of the pilot project. Dansk Tipstjeneste Group has also stated that it is participating in various working groups concerning the utilization of WAP technology, and a new advanced TV studio has been established on Dansk Tipstjeneste group's premises that will be used in connection with digital TV productions. Even though Dansk Tipstjeneste Group primarily considers the Internet as a supplement to the existing sales channels via dealers, it will give positive consideration to the possibility of developing games specifically designed for the Internet in the longer term.
The working group believes that in view of the fact that Dansk Tipstjeneste Group can provide games of all types and has a good image as a safe gaming company that distributes its profit to charitable purposes, it should have good possibilities to move into the Internet market.
A consumer survey on the general attitude of Danish gamblers to the Internet shows that there is presently widespread distrust of foreign Internet gaming providers (ACNielsen AIM, 1999 report). The survey shows that Dansk Tipstjeneste Group is ranked higher on the confidence scale than any foreign firm. The same survey shows that the fact that Dansk Tipstjeneste Group distributes its profit to charitable purposes is one of the reasons why many gamblers choose the group's games.
Fischer & Lorenz believe that from a purely commercial point of view, the optimal marketing strategy on the Internet would be to enter the market as rapidly as possible in order to ensure a dominant position as early as possible. Fischer & Lorenz also consider that Dansk Tipstjeneste Group has good chances of attracting Danish gamblers on the Internet if the group is given the possibility to take more risks on the market.
From the historical point of view, Dansk Tipstjeneste Group has previously solely had to make as much profit as possible in order to make allocations to the many public benefit activities supported. With the Internet and hence the threat of competition from abroad it becomes just as important that Dansk Tipstjeneste Group demonstrates an ability to retain Danish gamblers through the provision of attractive games with attractive prizes if the company is to continue to be able to allocate large sums to charitable purposes.
The Danish gaming providers and the fear of pathological gambling
A negative consequence of gaming providers entering the Internet market is that gambling becomes more widespread in society with the consequent risk that easy access to gaming over the Internet can increase the frequency of pathological gambling.
As mentioned earlier, however, the working group believes that prohibition of Internet gaming is neither realistic nor desirable. In contrast, the Danish providers should take the risk of pathological gambling carefully into consideration. A lack of awareness of pathological gambling can lead to criticism that Danish gaming providers help to create new pathological gamblers.
The working group does not believe that it is presently possible to impose special requirements on gaming providers through legislation. The working group justifies this by the fact that the necessary scientific basis does not exist.
C) Monitoring, information and certification
The present subdivision of the gaming legislation among several ministries has hitherto hindered the establishment of a specialized administrative unit for the whole of the gaming area. The adoption of a unified regulatory act would enable the gaming authority already established pursuant to Act No. 462 of 31 May 2000 on Gaming Machines Offering Cash Winnings to take over the administration and control of the regulation of Danish gaming.
The future central gaming authority's responsibilities with regard to the Internet should include:
D) International negotiations
As already emphasised earlier, one of the working group's clear messages is that active international efforts in the gaming area should be accorded high priority.
Gaming can no longer be exclusively considered an aspect of Danish domestic policy. Because of the Internet gaming should also be an aspect of foreign policy. As mentioned earlier, such an attitude is already expressed in the American Congress, and can be expected to be expressed in a number of countries that see their sovereignty in the gaming area threatened by other countries' policies.
Together with the other European countries and the USA, Denmark should work towards placing the topic on the agenda in the OECD and WTO, perhaps in connection with other negotiations on topics within the economic and financial areas, with the aim of placing pressure on countries who see an economic interest in a global gaming market on the Internet.
On the bilateral level, the Ministry of Foreign Affairs should communicate Denmark's attitude to those countries that refrain from hindering their gaming providers from providing gaming to Danish citizens.
The reports were submitted to a public hearing following its release. "However", explains Peter Sehestedt, head of section in the department of the Ministry of Taxation, "the report has not been debated in parliament. I may add, that it is not custom to debate a government report in parliament. Normally parliament chooses to make the report the topic of a question to the government. However this has not been the case either.
We have finalized the work on a new single regulatory act as well as a single act on taxation with regard to the Danish gambling market following the recommendations in the report. General elections however stopped the political process and the following change of government has so far meant the postponement of the bill. I expect though that the bill will be introduced in autumn 2002."
The Danish Ministry of Taxation in the meantime is trying to raise the issue of Internet Gambling within the OECD.
*) The OECD groups 30 member countries sharing a commitment to democratic government and the market economy. With active relationships with some 70 other countries, NGO's and civil society, it has a global reach. Best known for its publications and its statistics, its work covers economic and social issues from macroeconomics, to trade, education, development and science and innovation. The member countries are: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom and the United States.
In August, 2001 Denmark's Minister of Taxes Mr. Froze Sorensen declared that anyone owning and running a Danish web site which shows a banner from a foreign bookmaker linking to the site, could run the risk of going to jail and facing charges from the ministry of taxes. One of the Danish newspapers has been charged for posting a link to a foreign bookmaker. The editor is now facing a possible jail term. The news web site will also lose 12,000 USD as a result of running the linked ad.
Counter attack
The Danish Government strives for a strict state controlled gambling legislation, with a strong administration and harsh authority of the regulations. And when the pressure cooker is on the fire, steam has to come out somewhere, somehow...
Bet 24
Therefore it is not strange that in October, 2000 Bet24 (www.bet24.com) a new internet betting company operating from the UK, started its services. Site languages are Danish, Swedish, Norwegian, Finnish, English, German and French. Bet24 was founded by the Dane Holger Kristiansen. Kristiansen is no novice in the betting and 'football' trade. He was the man behind the Oddset concept introduced by the Danish pool services in 1994 - a betting concept that had a turnover of 100 million USD in 2000.
Holger Kristiansen: "Bet24 believes that our product-developments (increasing odds, superior systembets and what will follow) combined with our knowledge on the different local betting markets and many years experience in this business will give us an unique position on the internet sportsbetting market. We will try to attract the 'combination-punters' - and let all the rest fight for the 'single-punters'. Every week we increase our number of customers with 10%. Although we - at this point - are the biggest in Denmark, we, of course, have international strategies and plans. We are currently having customers in 44 different countries. Our plan is to 'take' one country at a time - next in line are countries as Norway, Sweden, Germany and Finland. Of course, our biggest advantage towards the Monopolists is our higher odds: when a year is through, we should ideally have paid out 82% to the customers while Dansk Tipstjeneste's aim are 52-55%. But being in a market where things - and especially the IT - is changing very fast, it is a big advantage to have a small and flexible organization. To get a decision through the State owned companies can literally take years."
Globelot
Another Danish initiative was the launch of Globelot (www.globelot.com) on December 13th, 2001. The Globelot Charity Foundation launched 'Everyone Wins,' an Internet lottery based in Liechtenstein. The lottery is operated by the Lottery Concept Company, a privately owned Danish group founded in 2000, and supplied by the International Lottery of Liechtenstein Foundation (ILLF), a government-approved and licensed lottery distributor.
The Globelot lotteries are authorized and controlled by the government of Liechtenstein, a tiny sovereign state in the heart of Europe. The tickets, which are sold exclusively through servers located in Liechtenstein, are distributed within the European Economic Area under the EU rule of Free Movement of Services.
Globelot is an European Internet lottery initiative and its promotion is focused on European countries. The group has stated through its press material that it will "use all technical means possible to exclude participants from countries and states where lotteries are banned by law."
The Dane Steen W. Hamburger, the managing director of the Lottery Concept Company, founded the Globelot project in April 2000.
New jurisdictions within Denmark? The Faroe Islands has a similar gambling regulation as Denmark even though they have an independent jurisdiction. The Faroe Islands with a population of 44 thousand have an area of 1,399 km 2 . The islands have had a self-governing home rule since 1948 and have never been a member of the European Community. A working group started preparations in order to renovate the national games and the regulations. The working group will come up with suggestions on how to regulate internet gambling. And there is a fair chance that another 'off shore' Internet jurisdiction will vary the Danish Landscape.
Also Greenland which is a self-governing overseas administrative division of Denmark (since 1979) could become a 'gambling haven'. Only foreign affairs are the responsibility of Denmark. Greenland has an ice-free area of 342,000 km2 or eight times the size of Denmark. Greenland's population is 56 thousand. Greenland joined the European Community together with Denmark but withdrew on February 1st, 1985 after the referendum in 1982.
*) Source: Pro Active International BV, The Internet Monitor
The State owns 100% of the shares of Veikkaus (www.veikkaus.fi). The Council of State grants the licence to Veikkaus and the Ministry of the Interior supervises its activities.Veikkaus was founded by Finnish sports organizations under the name of Oy Tippaustoimisto Ab in the spring of 1941. The company was finally given its present name Oy Veikkaus Ab in 1971. At the end of 1975 the shares of the company were sold to the Finnish State. Veikkaus is now a state-owned limited company. The number of registered OnNet-players was 107,641 at the end of 2000 (the respective number at the end of 1999 was 57,498). It started to offer Internet games from December 1996 and Veikkaus claims in their Year Report 2000 that they are 'the first national internet lottery in the world' *).
*) PLUS Lotto, national lottery of Liechtenstein, claims to be the world's first Internet lottery. The first draw took place on the 3rd October,1995, at 12:04, to be precise (www.pluslotto.com).
And according to Cynthia R. Janower in 'Gambling on the Internet': "The world's first virtual online casinos, Inc. (ICI) opened its doors on August 18, 1995 with 18 different casino games, online access to the National Indian Lottery..." (www.casino.org)
Fintoto Oy (www.fintoto.fi), a Finnish nonproft joint-stock, commenced horse betting operations in the beginning of 2001. It is a fully owned subsidiary of Suomen Hippos Oy, the Finnish Trotting and Breeding Association.
There is a monopoly system in Finland in slot machine operations under which exclusive right is given to the Slot Machine Association, which is commonly known as 'RAY' (www.ray.fi) according to the abbreviated form of its Finnish name. Founded in 1938, the purpose of RAY's gaming activities is to procure funds to support the work of voluntary health and welfare organizations.
In a judgment 21 September 1999 the European Court of Justice stated that RAY's exclusive right to operate slot machines in Finland is not in contravention of EU legislation and does not violate the freedom to supply services. The Community provisions relating to freedom to provide services do not preclude national legislation which grants to a single public body exclusive rights to operate slot machines, in view of the public interest objectives which justify it.
The Court's view is that the Finnish legislation involves no discrimination on grounds of nationality, in as much as it applies without distinction to all economic operators, whether they are established in Finland or in another Member State. The Court also considers that it is for each Member State to assess whether it is necessary to adopt regulations imposing a code of conduct on the economic operators concerned or, alternatively, to grant an exclusive operating right to a licensed public body. Whichever option is chosen, it must, if it is to comply with Community law, be proportionate to the aim pursued.
In Finland gambling and lotteries are illegal to operate for private purposes. Only the Government can permit a license and one licence is only valid at the time for each type of 'gaming'. At this moment only three organizations hold a licence. The National Lottery of Finland, Oy Veikkaus Ab, which is totally owned by the State, may operate lotteries. Toto games may only be organised by Fintoto Oy, which is owned by the central organization of trotting and horse breeding in Finland (Suomen Hippos Oy). Casinos are operated by Rahaautomaattiyhdistys, the Slot Machine Association which is a public company better known as RAY.
The basic statute governing money games is the Lottery Act (491/65) which came into force on January 1, 1966. According to legislation also bingo, casino or slot machines offering money and commodities as prizes are classified as lotteries.
In Finland money games have a prominent role in funding non-profit activities. The Lottery Act prescribes how the proceeds of all three game operators arranging money games are to be used. It also stipulates the basis of lottery activities whereas details are stipulated by decrees.
The law reform has been prepared since 1993 and in 2000 the proposal was introduced at Parliament. The new proposal is based on the current tripartite monopoly system. On September 6, 2001 the Finnish government has decided to retract its proposal for the president to approve the so-called Lottery Law. The retraction which was confirmed on this date also includes seven other laws that are connected to the lottery law.
If the president chooses not to approve the laws they will automatically be returned to the parliament under the Finnish constitution and will have to be dealt with in due course. If the parliament approves the laws without changes, they will come into force without the approval of the president.
The law was presented to President Tarja Halonen on 13 July, 2001 but the approval was postponed as the president wanted the Supreme Court to review the proposal. The law which bans Finnish mainlanders from gambling at the Internet site maintained by the Ålandic slot machine association, has been criticised as being against the Ålandic autonomy law. The president asked the Court to investigate whether the law would be in conflict with the autonomy of the Åland Islands.
The Finnish Supreme court has ruled that parts of the law were not legal according to the distribution of power between Finland and the autonomous Åland Islands as described in the Home Rule legislation for the Åland Islands.
On October 26, 2001 the Finnish parliament has approved the new lottery law after the parts that were seen as illegal according to the Åland Islands autonomy law were removed. It was the second time the parliament had considered the law proposal and it was approved by a vote of 174-2. And finally on November 23rd, 2001 the Finnish President Tarja Halonen signed the new lottery law which is in force from January 1st, 2002.
In Finland Internet gambling was launched in 1996. The National Lottery of Finland, Oy Veikkaus Ab was then given a licence by the Government to operate its games on Internet. Fintoto has also a licence to operate games on Internet and launched its tote-operations in January 2001 under the name Fintoto Oy. Internet betting is launched in May 2002.
The important precondition for receiving a licence for operating Internet games was to arrange game operations so that those games could not be sold cross-border and that playing with credits was not permitted. The purpose was to make sure that the principle of the national treatment established by the EC Court of Justice in connection with the Schindler case in 1994 will work and that the injuries caused by gambling will not increase.
The National Lottery of Finland personal identity code and an account with a Finnish financial institution may register as a player. This is a way to restrict the group of players to persons living in Finland or having other ties to Finland.
Playing on credit is prohibited by opening an account for the registered player in the National Lottery of Finland. The player may deposit a maximum of about 4,700 USD into the account. The lottery company charges the playing account according to the stakes the player has chosen. If the player wins, the company transfers the profit into the playing account. If the balance in the playing account exceeds 4,444 USD the exceeding amount is automatically transferred into the player's account with the financial institution.
The Åland Islands is a group of more than 6,500 islands in the eastern part of the Baltic Sea between Sweden and Finland, east of Stockholm. The total area is about 1500 km2 and there are living approximately 26,000 inhabitants. Their official language is Swedish. Although the islands have a certain form of autonomy they still form a province in Finland.
For centuries the Åland Islands belonged to the crown of Sweden, as was the case with Finland as a whole. Finland - and the Åland islands - came in the possession of Russia in 1809. During the Chrimean War (1853-1856) the islands of Åland were of great strategical importance for Russia, but after this the islands were demilitarised. To quiet a strong movement on the islands for Sweden the islands got a form of autonomy, but the Finnish sovereignity over the islands was confirmed in 1921 by a decision of the League of Nations.
In 1951 the autonomy of the islands was renounced by the Finnish parliament but the inhabitants got special rights including their own flag. Since 1984 the Islands have their own postage stamps. And since April 2001 the islands have their own internet gambling site: www.paf.fi. The gaming company PAF was, however, established as early as 1967.
In December 1999 PAF launched its first sportsbetting games for online gaming and the casino opened in June 2000. In April 2001 PAF added lotteries to their game portfolio. The Finnish Ministry of the Interior questioned the permit of the Internet games granted to PAF by the Åland Provincial Government. Mid April 2001 The Finnish Supreme court decided that PAF, the Åland Islands Slot Machine Association, is allowed to set up an online gambling site. The site was (re)launched on 12 April 2001, after the affirmative decision the day before. "However," adds Lars Porko, PAF's CEO, "we never stopped our internet gambling operations since we started at 3rd December 1999."
The case was taken to court again when the Ålandic government gave PAF the right to operate the site, interpreting the law as saying that Internet gambling takes place where the gaming license, game administration and server where the site is stored, is located and not at the player's location. The Finnish government and the gambling monopoly Veikkaus did not agree with this interpretation, but the Supreme Court decided that the Åland Islands were right.
On July 18th, 2001 the Finnish President Tarja Halonen decided not to ratify a disputed new Finnish gambling law. The law, which bans Finnish moneylenders from gambling at the Internet site maintained by the Ålandic slot machine association, has been criticized as being against the Ålandic autonomy law.
The president has apparently asked the Finnish Supreme Court to investigate whether the law would be in conflict with the autonomy of the Åland Islands and on August 30th, 2001, the Supreme Court, with an unanimous decision, decided the Finnish Law was not in conjunction with the Finnish constitution.
However, on November 6th, 2001 the Finnish court in Mariehamn, the capital of the autonomous Åland Islands, ruled that PAF is not allowed to market its online betting in mainland Finland. And three Board members were sentenced to pay fines for breaking the law by actively marketing the site in mainland Finland. In mainland Finland, the law states that RAY, the Finnish slot-machine association, has the monopoly on gambling. PAF's spokesman, Stefan Pettersson, expressed that the online gambling was set up with the approval of the Åland Islands authorities, which views that Internet gambling takes place where the server is located, which is the Åland Islands. Karl Gustaf Pietilä, vice president of PAF, said: "We appealed the decision that was made by the Finnish court. He called the ruling a disappointment, but said PAF would take the matter to a higher court in Turku. Contesting the decision means that PAF is in for a David-versus-Goliath battle versus the Finnish government and the monopolistic Finnish betting operator Veikkaus. It is believed that independently the decision in this middle court, the ruling will be brought in the end to the supreme court, either by PAF or by the finish pros ecutors". Stefan Pettersson, on the legal feud in Finland: "The high court in Finland twice declared that the licence allowing PAF to operate internet gaming is valid and fully legal. This is very good news for PAF although we all the time understood that other interpretations about the lottery laws where impossible. However the district court in Mariehamn in September, 2001 found that PAF had conducted too heavy marketing in Finland and we have therefore during the further legal process decided not to market our brand in main Finland. This although the Finish state owned company Veikkaus does so in the Åland Islands!"
PAF as a regional government licensed gaming company has developed internet gaming further during the year 2001. The customer level has increased so that it soon will be 40.000 registered internet users. More than 50% of these customers play actively.
From the beginning PAF Online (the internet gaming service) was a sportsbetting service but during 2001 focus has been on casino (black jack) and especially lotteries. PAF introduced in April lotto (7/39) and Joker. Main price in Lotto is about 1 million dollars. In November PAF launched a scratchticket lottery on the internet.
Also in Finland, the land of Nokia, opinions between at one side the State and the monopolistic state operator and at the other side the non-commercial operator PAF, are sharply divided.
*) Iceland Statistics
**) The Icelandic Internet Survey for the Information Society Task Force conducted by PriceWaterhouse-Coopers in March and April 2001 shows that roughly 81% of respondents have access to or own a computer and roughly 77% have access to a computer connected to the Internet:
"those who spend time on the Internet spend on average 5,44 hours a week on the net. Men spend on average more time on the Internet than women and people aged 21-24 spend the most time on the net a week or 6,43 hours on average.
"roughly eight out of ten Icelanders use GSM mobile phones and more than half use SMS text messages. The sample size was 1200 and the response rate 774 or 65,6%. Age 16-75 years."
Lotteries and lottery legislation in Iceland.
The term 'lottery' is not defined in Icelandic law. The general interpretation, however, is that a lottery is an activity in which a group of participants take part, on payment of a fee, in a draw for one or more prizes, i.e. their hope of winning depends on chance. The term does not cover instances in which, on the one hand, the payment of a fee is not a condition for participation, and, on the other, when participation requires a certain amount of skill with the result that the probability of winning does not rest solely on chance.
Under Articles 183 and 184 of the Criminal Code, No. 19/1940 (cf. the Act No. 82/ 1998), it is a punishable offence to engage in gambling and betting on a professional basis and to encourage others to participate in these activities, and also to derive direct or indirect income from having the activities take place on one's premises. Gambling is illegal in Iceland whereas lotteries are not.
Operation of lotteries in Iceland is governed by general laws, on the one hand, and by special laws on lotteries held by particular parties on the other.
The ordinary legislation applying to lotteries and raffles is the Act No. 6/1926. Under this act the lotteries of all types are forbidden except under license from the Ministry of Justice and raffles are forbidden without the permission of a police commissioner. Under the act the lotteries with cash prizes may not be established without authorisation in law. It is also forbidden under the act to trade in, or sell, shares in foreign lotteries or to engage in any work connected with them.
The Ministry of Justice grants 50-75 licences under the act each year for various ordinary lotteries. Licences are granted for lotteries that are in aid of charities and philanthropic causes, sports clubs and political parties. The range covers many small-scale lotteries, both local and national.
In addition to the general legislation on lotteries, special legislation has been enacted covering the largest lotteries which operates in Iceland. Separate legislation applies to each of these six lotteries which are operated by the same number of separate parties and constitute by far the large part of the lottery market in the country. Various types of lottery are represented including sports pools. Pools have not in fact been regarded as being covered by the term 'lottery' since the chance of winning a prize depends to some extent on knowledge or skill. Nevertheless, pools are closely related to lotteries. Most of the lotteries involve cash prizes.
Website: www.hhi.is
The University of Iceland Lottery (UIL) which is state-owned is the oldest statutory lottery in Iceland and was established in 1933. The University has an exclusive licence to run cash lotteries in the form of class lotteries, instant-ticket lotteries and video lottery machines. Video lottery machines appear to be the most popular of these forms at present. The University pays 20% of the net profits of these lotteries as a license fee to the Treasury.
Websites:
Two other organizations run class lotteries which are non-cash lotteries (i.e. the prizes consist of goods or services). The Association of Icelandic Heart and Chest Patients (SÍBS) has been licensed to run a lottery to support its activities since 1959, and the Retired Seamen's Home (DAS) since 1973. The popularity of these lotteries has declined; class lotteries seem no longer to be very popular in addition to which these lotteries are not cash-prize lotteries.
Under legislation passed in 1972 Icelandic Football Pools (Íslenskar Getraunar) has had an exclusive license to run sports pools. The prizes are cash. The company is stateowned. Profits go towards supporting sports enterprises. Football pools are the largest pools category.
Under legislation passed in 1986 Icelandic Number Lotteries, Lotto (Íslensk getspá) which is owned by the Icelandic Sports Federation, the Icelandic Youth Association and the Icelandic Federation of the Handicapped, has held an exclusive licence to operate number lotteries in the form of Lottó, Joker and Viking Lottó. The prizes are cash, and profits go to the sports organizations and the handicapped.
Website: www.toto.is
The Sports Betting and Lotto have merged in 2001 in one company, Íslensk getspágetraunir; successor to Íslenskar Getraunir and Íslensk Getspá established 1968 and 1986, respectively.
Websites: www.isk.is and www.hhi.is
Under legislation passed in 1994 the company Icelandic Gaming Fundraising (Íslenskir söfnunarkassar) which is owned by the Icelandic Red Cross, Organization of Rescue Squads and Organization for Rehabilitation for Alcohol and Drugs Abuse, is licensed to run video betting machines ('fruit machines' or 'one-armed bandits') for fund-raising purposes.
Before that date, the individual organizations had each operated similar machines under licences from the Ministry of Justice since 1972. The machines involved are very similar to those operated by the UIL, the main difference being that the University's video machines are interconnected and so accumulate large jackpot prizes, while the betting machines may not be interconnected and the prizes are far smaller, the maximum being 150 USD. These betting machines are generally located in refreshment shops and small restaurants while the University's gambling machines are located in special gambling saloons and restaurants.
All lotteries were banned in Iceland by legislation in 1926. This was primarily decided to stop Icelandic funds from running to foreign lotteries (mainly the Danish 'det Kongelige Köbenhavnske Klasselotteri') and to stop private parties running small scale lotteries mainly in marketing purposes. In 1933 the Icelandic parliament (Althingi) granted the University of Iceland (UIL) the monopoly right to run a lottery in Iceland with monetary based prizes. All profits should run the University, except for a 20% license fee, for the monopoly rights.
The legislation is largely based on the Danish law about the Klasselotteri (which is understandably chosen as the model since Iceland was a Danish colony).
Since then other lotteries have been established. The first two (SÍBS Class lottery in 1949 and DAS class lottery in 1954) were also classlotteries but had to give prizes out as some non-monetary objects (i.e. houses, boats, cars, etc.).
Sports Betting was introduced in 1972, Lotto in 1986 and legislation for slots machines was passed in 1994 although they had been operated in the market for more than a decade in another organizational form than the law defined. The Sports Betting and Lotto have now merged in one company Íslensk getspá-getraunir, Reykjavík; successor, in 2001, to Íslenskar Getraunir and Íslensk Getspá, established 1968 and 1986 respectively. The products of Islendic Getspa are a.o. Lotto, Joker, Lotto Askrift and Vikinga Lotto.
Each lottery operator has a right to provide a particular form of lottery except for the UIL which has a more general permit to run a monetary based lottery. On that basis the UIL runs a class lottery, instant tickets and Video Lottery terminals. According to the law regarding to the Lotto, no other party is permitted to run a Lotto in Iceland. No other party is permitted to run slot machines as the operation is defined in the legislation.
All operators do in fact have a monopoly right except for the two smallest product based class lotteries. The only party to pay a licensing fee is the UIL. The logic behind that lies in legal terminology. The slot machines are fundraising machines (with small stakes and low prizes) but not a lottery.
The Lotto is not a lottery but a numbers game according to Icelandic law. In that manner the Icelandic parliament was able to permit new lottery licenses in Iceland from 1949 without breaching the UIL's monopoly right for running a monetary based lottery in Iceland. Other lotteries do not pay a licensing fee or any proportion of profits to another cause other than the good causes that they are legally bound to support.
Ownership and regulation.
The four lottery operators in Iceland are:
The Icelandic Gaming Fundraising (runs the slot machines) is in fact also an operator on the lottery market. The difference of their operations (slot machines) and UIL's Video Lottery is mainly that the Icelandic Gaming Fundraising (IGF) operates standalone machines. They are fundraisers, as their name suggests, but are usually included in the list of lottery operators. The owner/ holder of license of Icelandic Gaming Fundraising is: Icelandic Red Cross, organization of Rescue Squads, and organization for Rehabilitation for Alcohol and Drugs Abuse.
It is possible to take part in a large number of lotteries and games of foreign origin on Internet, in addition to the Icelandic purchase-incentive lotteries mentioned above.
Participation in sports pools on the Internet has been authorized but the activities on which the lotteries themselves are based do not take place on the Internet. Many parties have contacted the Ministry and requested permission to set up lotteries on the internet and the statutory lotteries have also sought to expand their activities to include the Internet. Up to now, no licences have been granted to hold traditional lotteries on the Internet such as number lotteries, betting machines, etc. in which participation in the lottery would actually take place on the Internet. Consideration is being given to the question of whether such lotteries should be permitted and, if so, then in what form. It is likely that legislation would have to be passed covering such activities. Permitting Icelandic parties to operate lotteries on the Internet may be a better way of preventing participation in foreign Internet lotteries.
Internet has been used by the sports betting (odd set) for a few years to sell their product and give information. The UIL class lottery has sold tickets on the internet since January 1997. You can also purchase Lotto on the internet in Iceland.
A common feature in those operations is that all operators are selling an existing product on Internet. The Icelandic Justice department does not intend to permit an Internet based lottery at this time. The issue of Icelanders participating in offshore lotteries and casinos has not been issued formally by the Justice department or the industry in Iceland.
"As you can see from the above text," writes Fanney Óskarsdóttir, Legal Expert of the Icelandic Ministry of Justice, "Internet gaming is forbidden in Iceland at the moment, while it is not allowed directly by law. Yet we don't have any law about Internet gaming so we consider that it is forbidden. The largest lotteries that are operated in Iceland by special law can sell tickets via Internet but that is not what we call a real Internet game where the game itself is played on the Internet."
The UIL Internet sales require the participant to give an Icelandic social security number so participation is restricted to Icelandic citizens, at home or abroad. The same applies to the other two operators that are mentioned.
The Icelandic model is based on the following rationale. The state (law making body and regulator) controls which causes deserve the rent of the lottery market by issuing exclusive rights to operate specific forms of lotteries to specific good causes (represented by organizations). There is competition on the market but within the constraint that each has a monopoly right to supply specific product attributes (i.e. Lotto, betting). *)
*) The two product based class lotteries are an exemption. They were permitted when there was presumably no other feasible way to differentiate therefore the same product to both.
Iceland's economic intelligentsia met November 2nd, 2001 to consider making the country a tax haven. The specialists the Institute of Economic Studies at the University of Iceland and the International Policy Network invited economists, lawyers and public policy analysts to examine how
countries like the two Channel Islands, the Isle of Man, (both promoting free Internet gambling), Switzerland and Luxembourg have become wealthy by offering business-friendly laws and tax rates to individuals and corporations.
Iceland is not a member of the EU *) although she has access to the common European market through the EEA (European Economic Area) agreement. She is also protected by a defence agreement with the US. Iceland - with her stable political situation, a location in the middle of the North Atlantic Ocean, daily flights to the major financial centres of the World, sophisticated telecommunications system, well-educated population and well-developed financial sector - may at present have a unique opportunity to join countries which offer low tax rates to individuals and corporations. Tax Free 'Off shore' Internet gambling will also be considered.
* The European Union (EU) is the result of a process of cooperation and integration which began in 1951 between six countries (Belgium, Germany, France, Italy, Luxembourg and the Netherlands). After nearly fifty years with four waves of accessions (1973: Denmark, Ireland and the United Kingdom; 1981: Greece; 1986: Spain and Portugal; 1995: Austria, Finland and Sweden), the EU today has fifteen Member States and is preparing for its fifth enlargement, this time towards Eastern and Southern Europe.
Will this be another litmus test for a small country, choosing for a small intrinsic lottery market or for globalization via regulated, low tax internet gambling and generating income for the State by selling global internet gambling licenses? Only future will tell.
*Source: NetValue Audience Report, May 2001.
The Norwegian Gaming Board (www.lotteritilsynet.no) was established January 1, 2001 and has taken over many functions formerly shared between 54 different police districts nationwide and the Ministry of Justice. Beside being responsible for control and supervision of private and public gambling, the Gaming Board also is a directorate with responsibility to evaluate legislation and give advice to the authorities about gambling issues.
In March 2001 the Norwegian Ministry of Cultural Affairs set up a Specialist Committee *) to report on a number of aspects relating to the current and future market for money games in Norway. Among other things the committee was asked to consider how Norway should respond to the technological developments and foreign competition in the gaming market, and to present their recommendations.
The report entitled "Norwegian money games in a digital future" was submitted to the Ministry of Cultural Affairs on 3rd December 2001. Below is a summary of the Specialist Committee's conclusions and recommendations.
New Technology, new Challenges There is every reason to expect that income from money games will change due to technological developments and changes in consumer behaviour. The international money games market will increasingly become a threat to the national money games unless the national games are awarded competitive conditions.
Norwegian money games operators must be allowed to fully exploit the digital distribution channels and make the appropriate changes to their products and product range. Long term, electronic distribution channels may well become a more cost-effective form of distribution, which will provide a higher income for good causes.
Debit cards and new methods of payment represent a challenge for the small-scale local lotteries if money notes and coins are no longer easily accessible to people. Cordless mobile card swipers etc. may represent an alternative.
Regulation of games and lotteries on the Internet must be prioritized in the time ahead. There must be a joint control policy for the entire Norwegian gaming market, and companies and holding companies must be subject to specific ownership requirements.
There is a risk that organized crime may set up gaming sites on the Internet. Games should therefore be subject to controls coordinated by the Criminal Investigation Department/the National Authority for Investigation and Prosecution of Economic and Environmental Crime.
The lottery market should continue to afford scope for private lotteries as well as state-run games. It is important to develop a set of Norwegian gaming regulations through good government regulation and control. Government control shall ensure that the revenue is sourced to charitable and humanitarian work.
New guidelines should be drawn up for so-called free lotteries and quiz games in order to clarify what will be subject to regulation in the future gaming legislation.
Challenges From Abroad
Competition from foreign games and lotteries is increasing considerably. In order to respond to this competition in the Nor-wegian games market, the most important Specialist Committee recommendations are:
Who Ought To Organize Lotteries In The Future?
In order to gain access to the lottery market, associations and societies currently need to have an objects clause which can be de-scribed as either charitable or humanitar-ian. This allows for a high degree of discre-tion, and in order to clarify the rules for access to the lottery market in the future, the The most important recommendations of the Specialist Committee are:
*) The Specialist Committee was chaired by Director Atle Hamar of the Norwegian Gaming Board (Lotteritilsynet). Other committee members were: Jon Langballe (10H), Jonny Haugseth (Norsk Rikstoto), Jon Olrud (Norsk Tipping), Anne-Kari Holm (Health and Rehabilitation), Bernt G. Apeland (SUNHA), Ivar Egeberg (the Norwegian Sports Federation) and Bjørn Tore Østeraas.
One of the most interesting remarks the Specialist Committee made was: "Turnovers for state-run games and private lotteries are on a similar scale, but the surplus available for good causes is twice as high in state-run games as in private lotteries."
The turnover in the legal Norwegian gaming industry passed approximately 2.5 billion USD in 2000. In addition, Internet gaming is growing rapidly in Norway. Norsk Tip-ping estimates that Norwegians in the year 2000 spent 44.5 million USD on Internet gaming-increasing from an estimated 16.7 million the year before. Internet gaming is in general forbidden in Norway but three organizations have been given permission to test time limited gaming in a smaller scale on the Internet.
The Gaming Board has given a one-year temporary license to arrange lottery on mobile telephones. This so called "SMS lottery" is only based upon the GSM mobile platform. And according to Cee.tv AS spokesman Steinar Brændeland (COO sales and marketing), there will be several other SMS lottery operators, but only three on the Internet. The lottery will also be avail-able on mobile devices, when the GPRS mobile platform is launched later this autumn. This is also the case when Interac-tive TV with internet browser will start in 2002.
Additionally, three temporary Internet gaming licenses have been issued in Nor-way:
Norsk Tipping's e-business project, known internally as 'Hermes,' has required consid-erable resources. Total investments will amount to nearly 11.1 USD million over two years. Thirty of Norsk Tipping's employees are directly involved, in addition to external expertise within specific areas. The site is only available in the Norwegian language.
*) This corresponds to approximately 344.8 USD per capita. The Swedes spend slightly more than 3 percent of their disposable income on gaming.
Folkspel is a joint organization run by and for voluntary associations and clubs, which arranges a.o., the BingoLotto game. In April, 2001, Dutch Novamedia (www.nova-media.nl), the operator of both the Dutch National Postcode Lottery (www.postcode-loterij.nl) and the Dutch Sponsor Lottery (www.sponsorloterij.nl), took over Swedish IGS BingoLotto Sweden AB (www.bingo-lotto.se).
Lotteri Inspektionen is the Swedish Na-tional Gaming Board. In Sweden the lotteries and horse racing are regulated in the Lotteries Act (1994:1000) and the Casino Act (1999:335). There have been two major changes to the act, in 1997 and 1999 (1996:1168 and 1999:358), mainly concerning gambling machines. International casinos were allowed in 1999 and are separately regulated in the Casino Act.
In July 2000 a commission in an official report proposed amendments of the Lotter-ies Act. One of the report's main issues is the regulation of Internet gaming. Accord-ing to the present Lotteries Act the author-ity to grant licenses for Internet is reserved for the government. As of today, the government has granted test licenses to Svenska Spel, ATG and A-lotterierna. (A-lotterierna is a non-profit organization, which has as a principal aim to promote a public interest. They sell lotteries for the Swedish social democratic party.)
The commission proposed that the new Act should authorize the Swedish Gaming Board to grant licenses for operating Swed-ish Internet lotteries. According to the report, this possibility is reserved for Swed-ish legal entities that are non-profit associa-tions, and the licenses shall be limited to traditional lotteries and betting.
In 1997 and in 1999 there were changes in the in the lotteries' gaming machines. In January 2001 the National Board of Trade came to the conclusion that the changes should have been notified according to the EC-directive 8/34/EC. Two Swedish courts of appeal have come to the conclusion that the changes ought to have been notified. In accordance with community case law (C194/94), the courts stated that the changes in question were inapplicable to individuals. The court decisions have the effect that certain gaming machines fall outside the scope of the Lotteries Act. The conflict between Swedish law and the EC law led to an increase in the number of unregulated gaming machines. New legislation is planned to set aside these problems and came into force in the beginning of 2002.
The main problem for Svenska Spel is the challenge from foreign Internet operators attracting the punters interested in sports bookmaking. Svenska Spel estimates that more than 96 million USD per year is spent in Sweden on gaming on these foreign websites.
Svenska Spel offered in 2000 six games via the Internet: Stryktipset (Soccer Pools), Italienska Stryktipset, Joker, the Oddset game Lången, Lotto and Kåeno. Weekly net sales for the company's 'direct channel' have doubled since the introduction of Lången. Some 25,000 customers played during the year for 3.8 million USD, i.e., 0.3 percent of total net sales.
ATG's betting over the Internet increased during the year; 25,500 customers ac-counted for a turnover of almost 33.5 million USD (3.3 percent of ATG's turno-ver). ATG also conducted a trial of betting via WAP telephones in collaboration with Ericsson and Telia.
It is striking that so many betting operators and gambling supporting companies origin from Sweden. Especially when you compare Sweden with neighbouring Norway. To mention a few of those Swedish companies:
Solna Leisure AB (www.solnaleisure.com) has been serving the casino and leisure industry since 1992. They specialize in providing management and con-sulting services. Solna Leisure is cur-rently actively involved in projects around the world in Eastern Europe, Russia, South America and Africa. Ericsson (www.ericsson.com) is the world's leading supplier in telecommunications with the largest customer base, including the world's top 10 operators. Ericsson provides total solutions covering everything from systems and applications to mobile phones and other communications tools. Mobile betting is one of the activities of Ericsson.*)
QLot Consulting (www.QLot.com) is a Swedish corporation with offices in Europe and in North America. The Group was established in 1998 and has rapidly become one of the leading international lottery consulting compa-nies, providing supplier-independent consulting to lotteries, governments, investors and lottery suppliers world-wide. QLot currently has clients on four continents, where business analysis, lottery start-ups, technology procure-ment and staff search have been some of the main activities. QLot's president, Ales Kulich, with his famous sense of humour, believes there are several factors that may have contributed to Sweden's strong position in the gaming industry:
Sweden has a long history in gaming. Svenska Spel, then Tipstjänst, was created already in the 30's, so the Swedes have a long history of legal and public gaming, in particular sportsbetting. To some extent Sweden do allow competition which fosters more gaming-related jobs than in a monopoly market-place. For a long time, we had 3 gaming companies; Tipstjänst,Penninglotteriet and ATG.
"Sweden is a small country forcing talented people to look outside our borders for business opportunities. This applies to industry as well as gaming. A majority of our products are exported." "Sweden is a high tech country and we are trying to put the technology to use maybe more than many other coun-tries. Sweden has among the world highest usage of Internet, mobile phones (previously telephones) and PC's. We like to drink and gamble and the booze is too expensive in Sweden. It is so cold that there is not much else to do."
(The two last ones may require a grain of salt...).
Another topexpert of the international gaming market is the International Director of AB Svenska Spel and he explains the market leadership of Sweden as follows: "I suppose that when it comes to services offered Svenska Spel would rank number 1 among the lotteries in WLA. Last year we started with focus groups among the Internet players we were awarded the tp prize for the best website in Sweden and we have just launched a very special and already popular chat service. Last year we also opened our two first casinos and the topselling game in Sweden is now our VLT games Jack Vegas and Miss Vegas. Why are we so active and progressive when it comes to gaming and gambling? I don't know the answer, but just three weeks ago opened the first gaming development training in the world at university level at the University College of Gotland. The Gotland Art and Media Education (GAME) is operated in cooperation with the Interactive Insti-tute and is sponsored by Svenska Spel. There are 40 students enrolled for the first 4-year academic course."
*) Mobile Betting: the 'anytime, anywhere' capacity of mobile communications is going to revolutionize the gambling sector. In the highly competitive gambling industry, virtually all of the major established betting organizations already have online betting facilities.
The potential exists to place bets on anything, from sports events to political developments and weather reports, as well as dedicated games of chance. Data-monitor has forecast that the worldwide Internet betting market will be worth $4.9 billion by 2004.
There is significant existing technology uptake from consumers, with players already familiar with placing bets by telephone and over the internet. This makes the introduction of mobile gambling services not so much a case of developing new markets but penetrating further into an existing one.
For consumers, mobile gambling offers a simpler, cheaper way to place bets from any location at any time. They no longer have to travel to a betting shop, nor do they have to pay the service costs associated with placing a bet in a shop. The technology also facilitates last-minute or "impulse" bets, even as customers are walking into a sports stadium.
For service providers mobile gambling provides a dynamic new customer channel that doesn't conflict with their existing 'bricks-and-mortar' business. Casino-style games such as blackjack and roulette delivered to mobiles is another area of potential, individual country legislation permitting.
Swedish company ATG launched a complete WAP-based gaming service in December 2000 for a limited amount of customers and they are now in the final stages of their trial. A full-scale launch is due this year. The company has an existing Internet betting service, which comprised 3.2 percent of its total revenues-over $36 million in 2000, a figure that's expected to rise to 5 percent this year.
Targeted at its existing Internet betting demographic-mainly men between 20 and 35 - the service allows players to use their WAP phones to place bets on coming races. Ericsson has been supplying infrastruc-ture and consultancy services to ATG since the trial began in 1999. Users start by opening an ATG account and paying a sum into it that acts as a pool from which betting funds are drawn. Users can then access ATG's Internet site via their WAP phone and select what they want to bet on.
Winnings are paid directly into the player's personal ATG account. With security being a major concern, access to the service is via an encrypted login procedure and users have to be Swedish residents, over 18 with a clean credit rating.
* Source: EU statistical office Eurostat.
The operation of lotteries in Republic of Estonia is regulated by the Lottery Law approved in 1994. A lottery is a game of chance following the rules established by a lottery operator. The winning of a person participating in a lottery depends on numbers, symbols or pictures determined by a draw or by some other act based on chance.
Further to the law in force, the second attribute of a lottery is that a lottery can be operated only with a charitable purpose and with an operating licence issued by Ministry of Finances or by regional authorities. Lotteries with a prize fund exceeding 15,000 USD can be operated only by bodies author-ized by Government of the Republic or by public-legitimate bodies authorized by a nominal special act.
The Ministry of Finances having superior control over lotteries has the right to con-sider any game as a lottery if the game corresponds to the lottery concept.
The Law determines following categories:
As given above the big lotteries, i.e. lotteries with a prize fund exceeding 15,000 USD can be operated by bodies authorized by Gov-ernment of the Republic. At present the Government has authorized the state-owned company AS Eesti Loto and the following non-profit organizations:
Charitable, cultural, environmental and other similar projects receive support from lotteries through the special tax required from the operators - the Gaming Tax. The Tax payment and distribution are regulated by the Gaming Tax Law approved in 1995. This law establishes the tax rate 11% of turnover of number lotter-ies and 16% of turnover of the other lottery categories.
The gaming tax is distributed by a commission appointed by Parliament and consisting of representatives of Ministry of Finances, of Culture, of Environment, of Education and of Social Affairs. Also, regarding an individual game, it is possible to determine special purposes for using the tax amount to be received by its operation.
Unlike many European countries, the Lottery Law currently in force in Estonia does not establish the state lottery monopoly. In accordance of the Bill, the state has the authority to operate lotteries. The state can delegate this authority to the operators mentioned in the Law.
To secure the legal guarantees for participants in a lottery, the Bill establishes more effective requirements for the operators; restricts the circle of persons qualified to operate lotteries and establishes the minimal capital stock required from the bodies applying for an operation licence and also of guaranteed prize money. A lottery is to be operated on the basis of one-time and fixed-term licence issued by the Minister of Finances.
The Bill also defines the concept 'Lottery operation' involving one or more of the following activities: having lottery tickets manufactured, lottery tickets sales, lottery drawings, payout of prizes and lottery advertizing. The defined concept of 'Lottery operation' allows to require the obeisance to the Law also from the bodies, who are involved at least with one of the above-mentioned activities, i.e. retailers and agents and so keep the lottery operation under government control.
As the different lottery games subjected to the Law in addition to classical lottery, number and instant games toto (sports betting) and commercial lottery are to be included.
The Bill regulates more precisely the operation of commercial lottery keeping in view both consumer and lottery market protection. The operation of a commercial lottery requires a licence, with fixed minimum capital stock for the operator and limited prize money. The operator of a commercial lottery is to guarantee his existence and maintaining to be able to pay out the prize money.
In order to enhance the security of the lottery business, the Bill establishes a restriction for the persons connected with the operator regarding their participation in a lottery.
The revised Bill regulates more precisely the control over lottery operation and differentiates penalties regarding separate offences.
The Gaming Tax Bill regulates also tax payment on commercial and entertaining lotteries. Until now, the lack of an adequate regulated taxation has caused also the lack of control over commercial lotteries, as the State does not earn any profit on it.
Looking back Eesti Loto sales results both for number and instant lotteries have varied a lot. Now, together with the state economy also the lottery market has stabilized.
| Financial highlights | 2000 (mln. kroons) | 1999 (mln. Kroons) |
|---|---|---|
| Share capital | 3.5 | 3.5 |
| Sales turnover | 115.4 | 102.0 |
| Sales per person | 82.45 | 70.6 |
| Paid out in prizes | 57.7 | 50.2 |
| Gambling tax | 13.736.6 | 12.452.0 |
| Income Statement | 2000 | 1999 |
|---|---|---|
| Net sales | 115,439,485 | 102,038,250 |
| Other reveneue | 5,686,306 | 2,747,347 |
| Total reveneue | 121,125,791 | 104,785,597 |
| Goods | 1,469,257 | 1,471,493 |
| Prize payout expenses | 57,674,952 | 51,142,485 |
| Other operating expenses | 40,489,772 | 36,000,336 |
| Incl.gambling tax | 13,736,645 | 12,452,046 |
| Personnel expenses | 40,489,772 | 36,000,336 |
| Depreciation of fixed assets | 3,872,333 | 3,129,209 |
| Other expenses | 1,936,909 | 1,940,340 |
| Total expenses | 117,696,386 | 106,677,733 |
| Financial income | 806,815 | 141,500 |
| Financial expenses | 3,071,910 | - 3,270,441 |
| Net profit for the period | 1,164,310 | - 4,612,265 |
| Balance Sheet | 2000 | 1999 |
|---|---|---|
| Total current assets | 7,591,515 | 8,063,306 |
| Total non-current assets | 27,413,790 | 21,911,386 |
| Total assets | 35,005,305 | 29,974,691 |
| Total current liabilities | 21,439,017 | 24,924,762 |
| Total long-term liabilities | 10,327,363 | 5,709,660 |
| Total liabilities | 31,766,380 | 30,634,422 |
| Owner's equity | 3,238,925 | - 659,731 |
| Incl. profit for the period | 1,164,310 | - 4,612,265 |
| Total liabilities and owner's | 35,005,305 | 29,974,691 |
2001
The profit of Eesti Loto for the 1st half-year 2001 amounts to 3.7 million kroons. In the first half-year 2001 the turnover of AS Eesti Loto amounted to 66.4 million kroons and the profit was 3.7 million kroons. Eesti Loto estimates that increase of turnover will be 13% when compared to the previous year i.e. 130 million kroons.
"In the first half-year we earned three times the entire profit of the previous year," said Monika Salu, Chairman of the Management Board of Eesti Loto. "The increase of the profit was primarily due to the substantial retrenchment in operating expenses which occurred on account of the reduction of the personnel by 30% and the structural changes that took place in the course of reassignment of duties the rates of taxes imposed on gambling have remained the same."
In the first half-year 2001 the turnover amounted to 66.4 million kroons and the profit was 3.7 million kroons. The estimated turnover for this year will be 130 million kroons. The turnover for year 2000 was 115.43 million kroons and the profit amounted to 1.16 million kroons. Within the first six months of year 2001 Eesti Loto disbursed prizes to the amount of 33 million kroons and paid the gambling tax to the amount of 7.9 million kroons. Thus, Eesti Loto paid to the state total 17.5% of its turnover for the first half-year (the gambling tax + profit).
When compared to the previous year the average profitability of Eesti Loto per one employee has increased by more than four times in the first half-year 2001 17,100 kroons in year 2000 and 72,400 kroons in the first six months of year 2001. At present 52 people work for Eesti Loto.
According to Mart Siimann, Member of the Parliament and Chairman of the Gambling Tax Committee, the boom in the business environment creates better possibilities for contributing to the balanced development of Estonia with the spheres that are being supported social care, science, education, culture, sport, and environmental protection.
In 2000 Eesti Loto paid the gambling tax to the amount of 13,736,600 kroons half of which were used for supporting the activity of the Estonian Olympic Committee. The other half of the amount was used to support various projects in the spheres of sport, culture and ducation. The remaining amount is used to cover the operating expenses of Eesti Loto whereas the profit is transferred into state revenues.
In 2000 Eesti Loto disbursed prizes to the amount of 57.7 million kroons. According to the projections, approximately 70 million kroons will be disbursed as prizes in year 2001. Over a year Eesti Loto would disburse prizes over 1.6 million times which means that on an average each resident of Estonia has a chance to win once a year.
Eesti Loto turnover 2001 by games is following:
Eesti Loto is the only online lottery operator in Estonia. Regarding the instants Eesti Loto share of the market is 80%. The latter is due to the extended sales network, attractive tickets, the trustworthiness of the Eesti Loto brand. The number lotteries give 80% of the Eesti Loto total turnover. The share of instants is small but stable. Currently, there are 3...4 on-line products in the market. The biggest share belongs to Bingo Loto, the Nordic Viking Lotto being a good second.
Estonia is a part of the Baltic together with Lithunia and Latvia. All three countries were annexed by the USSR in 1940. Lithuania became the first of the Soviet republics to declare its independence on March 11th, 1990. And in 1991 all three countries were recognized as an independent state. The Baltic countries share a long and common history and therefore it is very surprising that Eesti Loto has such a professional lead on the other national lottery organizations in the Baltic. Above that among the thirteen Eastern and Central European countries that are seeking membership into the
European Union (EU), Latvia and Lithuania ranked among the last in terms of internet users. They accounted for only 6.1 per cent internet penetration of the countries' population in 2000. And 26.3 per cent is the significant higher percentage for Estonia. So, also the internet gambling future of the Baltic countries will be sharply divided. And again another sharp contrast within the Nordic region.
Looking at overall sales in 2000, so is written in the Annual Report, a new maximum was reached with a total sale of EUR 333.6 million. This represents an increase of 9.4% in comparison to 1999. Due to currency fluctuations during the year it is also relevant to measure the number of boards. The total number of boards in Viking Lotto 2000 amounted to 936 million and represented an increase of almost 8% in comparison to 1999.
In Norway the total sales increased by 14.4% and total sales amounted to EUR 157 million or almost 50% of the total Viking Lotto sales. In Denmark the sales decreased some 5.1% and Denmark was actually the only country in which the sales decreased some 5.1% in 2000. In Iceland, a fantastic increase of 32.4% was experienced, bringing the total sales up to almost EUR 5 million. Finland showed an impressive increase of 14.5% bringing their total sales to some EUR 58 million.
In Sweden Viking Lotto increased about 1/ 2% but maintained its share at the Swedish gaming market dispite of tough competition. This position together with the market and political circumstances in Sweden means that Svenska Spel will stay in the Viking Lotto alliance. As mentioned in the Annual Report for 1999 there were discussions in Svenska Spel about a possible withdrawal from the alliance. Every body is pleased that Sweden now stays and finally that the alliance was able to include Estonia with their total sales of almost EUR 2 million in year 2000. Everyone was also very happy on behalf of Eesti Loto when the lottery won its first prize in Viking Lotto on the 13th December 2000. The winner from Estonia won 1/3 of the total prizepool of EUR 550,273.
Will the wild Vikings strike back?
The successful increase of the Viking Lotto alliance, a.o. the inclusion of Eesti Loto, lead to an increased (9.4%) overall sales in 2000 (300 million USD) and triple Jackpot. And Meg Tivéus, Chairman of the Board of Directors of Viking Lotto, hit the nail on the head, when she wrote in the last sentence of the Annual Report for Viking Lotto 2000: "Having worked intensively with such an alliance for eight years now, we are, of course, willing to engage ourselves in the work of creating new alliances among stateregulated or state-owned gaming companies at a European level."
As different in direction as can be there is also a gap between the Nordic countries and the rest of Europe. The European state-regulated and/or state-owned lotteries missed a great chance to launch an EU- or EURO-multi-national-lottery. The Vikings were ready willing to enlarge their alliances. Already 1000 years ago the Vikings were great travellers both raiding, trading and settling in other lands. They conquered the European countries as far as Costantinobel (Istanbul) and they were the first Europeans to discover and explore North America. Will the Vikings strike back once again by overtaking Europe and North America with their gambling operations? Then the question is: will it be executed by the state-owned and state-regulated operators or by the 'wild' Viking offshore internet gambling entrepreneurs. Or will the extremes do meet in the North, once again?