4H Materials

Court proceedings that may change the gambling industry

The news of the last few days shows that court proceedings in the national courts of Canada and Finland may change the gambling industry. On the one hand, it may change how to obtain licenses and operates in the Canadian market; on the other hand, it shows the actions of the Finnish government in taking the next steps to cancel of the gambling monopoly in Finland.

The Mohawk Council of Kahnawake ('MCK') has filed a lawsuit against iGaming Ontario ('IGO') in Canada.

Over the past 25 years, MCK has actively controlled gambling, including online and land-based casinos, in the province. MCK operates Mohawk Internet Technologies, a platform on which operators licensed by the Kahnawake Gaming Commission ('KGC') must be present. The Kahnawake license is highly regarded in the online gambling industry for its international recognition, credibility, and reliability. Operators often pursue this license as an alternative to the Curacao license. This arrangement allowed MCK to generate significant revenue and facilitated job creation. Operators with a KGC license were free to operate throughout Canada. This underlines the importance of this analysis.

In 2021, IGO began a new approach to interpreting the provisions of the Criminal Code (section 207) by concluding agreements to provide gambling services with private operators and monitoring them in Ontario. Now, in Ontario (one of the largest and most profitable provinces), only those operators who have agreed with IGO can operate. As a result, operators licensed by KGC are barred from operating in Ontario, although they may operate throughout of Canada.

In this new interpretation of the law, the MCK sees a violation of the Constitution of Canada in light of the limitations on indigenous rights. They do not share IGO’s position on allowing only "their" operators to enter the Ontario market. This decision by IGO harms indigenous people by depriving them of the same income as before.

This case resonates with a legal case West Flagler Associates, Ltd., et al. v. Debra Haaland in the U.S. Supreme Court. This case revolves around a legal dispute regarding tribal gaming compacts in Florida. West Flagler Associates, along with other parties, challenged the validity of a gaming compact negotiated between the Seminole Tribe of Florida and the state of Florida.

From our point of view, the results of this lawsuit could significantly change the regulation of gambling concerning who can operate in Canada and individual provinces, on what grounds and with what licenses. Although a decision has not yet been reached, these trends indicate possible future changes to the regulation of the gambling industry in Canada.

In Finland, Finland's National Police Board (‘NPB’) has blacklisted Betsson's BML Group (‘BML Group’) subsidiary, barring payments to its brands from Finnish players following a ruling last May.

In May 2023, where BML Group was found to have targeted Finnish players through unauthorized marketing campaigns, violating the Finnish Lotteries Act. The company was fined 2.4m EUR and prohibited from marketing its gambling services. The NPB concluded that BML Group had unlawfully targeted mainland Finnish players for a significant duration. Only Veikkaus, Finland’s gambling monopoly, is authorized to operate and market its services.

In these regulatory measures, Finland is progressing towards the cancellation the gambling monopoly. Finland government aims to reform gambling to prevent financial and social harm, intending to boost the country's legal gambling participation through a licensing model. This model would cover both online casino games and sports betting. As part of this overhaul, the government plans to split the state-owned gambling monopoly Veikkaus into several companies under the same umbrella, reversing the 2017 merger that combined Veikkaus with slot business Raha-automaattiyhdistys and horse race betting operator Fintoto. The current gambling policy is deemed ineffective, with nearly half of the gambling activity still happening outside the legal framework, contributing to ongoing issues of problem gambling.

Such government aims correlate with the results of the latest Finland's Institute of Health and Welfare (‘THL’) research, published in February 2024. The 2023 survey of 5,977 participants revealed that 4.2% were involved in moderate risk or problem gambling, equating to roughly 151,000 individuals nationwide, up from 3% in previous surveys. Despite a decline in overall gambling participation, with 70% of Finns engaging in gambling activities in the past year (65% women, 75% men), around 2,500,000 people, there's a notable decrease from the 78% prevalence rate reported in 2019/2020.

It can be concluded that the Finns are actively involved in gambling. From our point of view, the monopolisation in the gambling market contributes to the increase of offshore operations, which is seen in the court procedure described above. Based on THL research, the Finnish market is a perspective market for operators. On the one hand, the transition to a license system will provide new revenues for the state, on the other hand, operators will get clear rules for their work.

We will continue to monitor developments and update you on the next steps.

Ivan Kurochkin, Partner and Head of Eastern Europe Desk at 4H Agency.