Free Market or State Monopoly: Which is Better for the Gambling Industry?

Photo of author

( — January 23, 2020) — What does state monopoly mean in gambling? A kindhearted attempt to regulate the vice or a harsh lockdown of free entrepreneurship? Even though the majority of European countries have already switched to the open market, some governments control all gambling activities single-handedly. Both approaches have their costs and benefits, yet we will try to figure out the best operating model in the modern gambling industry. 

What is State Monopoly in Gambling? 

Gambling state monopoly means exclusive control and possession of all services somehow related to gambling. Any activities of that kind can’t be run or promoted by a party other than the national gambling organization. International operators can’t legally enter the market and start making profits from their business in the country with a powerful gambling monopoly. 

In 2019, there are official state monopolies on all or several forms of gambling in Finland, Norway, France, Greece, Austria, and some other countries. Let’s explore a few of cases to identify the effects of gambling monopoly on the economic growth and citizen gambling behavior. 

Finland Case 

European Commission emphasizes that state monopolies can be encouraged if they are better at handling adverse effects of gambling. This exactly was the justification for fostering monopoly in Finland, as the government says that they do this for the common good of their citizens. Notably, they claim to minimize harms caused by competition such as gambling addiction. 

Finnish people indeed love to gamble. According to this report, 3 out of 4 Finns older than 15 play casino games or take part in a lottery regularly. 63% of surveyed citizens agree that gambling addiction is a statewide issue, while 56% of them say that the problem escalated over recent years. Does this mean that Finnish monopoly is inefficient? Do state’s authorities only aim for sky-high revenues, hiding behind the pledges of using this money for the common good? 

The monopoly of Finland consists of three bodies: RAY (the slot machine association), Veikkaus (national lottery company), and Fintoto (national horse betting company). The combined revenue of the three is €3.2B per year. The Finnish government earns a boatload of cash from gambling, but this doesn’t mean they don’t invest it in problem gambling treatment. In 2008, €2M was the sum allocated to addressing the issues. Charity remains the main argument for defending the monopoly in Finland. 

Interesting fact: Online gambling is not prevalent in Finland. Only 12% of problem gamblers play games exclusively online. However, 29% of problem and 43% of occasional gamblers regularly visit land-based venues. 

Summing up, the state-owned monopoly is the only completely legal online gambling operator in the country. Most of the international gaming companies don’t quite appreciate this fact and blame Finland for restricting free entrepreneurship in the country. 

De-facto, it’s not true that the state is the only provider of casino games. If you look at online casino databases such as Casino Guru, you will see that many offshore online gambling operators accept players from Finland. Helsinki Times confirms that Finns lost €300M to foreign casinos due to the growing popularity of online gambling. 

France Case 

Known for its strict regulation of the online gambling market, France is especially notable for its national lottery monopoly, FDJ. It is ranked 5th among the richest lotteries worldwide, having more than €16B in revenue each year. 

Interesting fact: Invented in France in the 17th century, roulette is a game that can’t be officially played online within the country today. 

In 2010, France was pressed by the EU to open the market, and since then, the government doesn’t fully control the online gaming niche, which includes only sports and horse betting. By contrast, online casinos with slots and card games are prohibited. As for the monopoly, it’s not going to be open to competition in the nearest time.

Instead of charitable arguments, France authorities have another justification for maintaining a lottery monopoly. It’s the prevention of crime in the industry: gambling ventures are vulnerable to fraud and money laundering. FDJ, in their opinion, has all the chances to prevent illegal market blossoming. 

Norway Case  

Norwegian gambling legislation is two-sided. There is an established monopoly on gambling services belonging to Norsk Tipping and Norsk Rikstoto. In theory, commercial operators should apply for their permission to offer restricted activities and still don’t get licensed. Moreover, those companies should pay 35% of their profits to Norsk Tipping and allocate another 30% on good cases. 

Interesting fact: Norway is the only Nordic country whose citizens don’t have an affinity for lotteries. However, they love scratch cards and horse racing, just like everyone else in this group. 

In practice, nobody punishes Norwegian people for choosing the operator outside the monopoly. Citizens can get involved in any gambling activity online or land-based, including illegal ones, which has never been explicitly prohibited by Norwegian gambling laws. Even though the government has all means to curtail this freedom, they are currently not focused on this and deal with more burning issues in other sectors of the economy. 

Moving from Monopoly to the New Licensing System: Sweden Case 

Sweden has maintained its monopoly on gambling for a long time. To be precise, since 1934. All legal gambling activities in the country were united under the national gaming provider Svenska Spel. But just like in Norway, many people still preferred to gamble online on foreign websites. 

This led to Swedish authorities changing the course and abandoning the absolute monopoly on gambling. Starting from the 1st January 2019, the state began to give out licenses to online gambling operators, retaining full control over brick-and-mortar casinos, lotteries, and gaming machines located in land-based venues. 

Interesting fact: In the first quarter of 2019, former gaming monopoly Svenska Spel and horse racing monopoly ATG still claimed nearly 50% of total gambling revenue, despite having around 60 competitors. Those include such big brands as 888 Casino and Betfair. 

Online gambling operators should pay 18% tax to the government, which is way less than in Norway and even in freely operating states like Italy. 

Freely Operating Markets in Europe and Their Edge 

As opposed to monopoly, where the state or one company corner the whole operation, the free market model implies many smaller ventures offering their services across the country. The best example of such is the UK gambling market, whose laws are acknowledged as organized in the best possible way. 

The free licensing doesn’t mean that UK officials act loosely on doubtful providers. To obtain a license, operators need to meet the stringent requirements, which provide a high degree of safety and prevent illegals from entering the market. 

You could expect that addiction may be more prevalent in the country where gambling is treated just like any other industry. In fact, it’s not. Only 0.7% of Brits experience problems with casino games or betting, while in monopolistic Finland this percent reaches 2.7%. 

Final Words 

So, what is more suitable for today’s industry? Full freedom or a safer environment? 

Even though a monopoly helps to track cases of problem gambling, the major motivator of maintaining this model is revenue. Nor European Commission, nor actual players, nor gaming operators support the system, which is genuinely profitable only for the government. In the well-organized open market, the level of customer protection is equal or even higher than in a state-controlled delusion of scrutiny. 

Moreover, healthy competition leads to better customer service and faster technology improvement: everyone strives to do their best to retain the client. Due to this, a free market model can be considered the best one in the current gambling environment.