Sweden intensifies crackdown on credit-funded gambling

Proposed new amendments to the Swedish Gambling Act will mandate gambling companies to decline all credit-based payments from consumers

Since the implementation of the Swedish Gambling Act (SFS 2018:1138) in 2019, Sweden has made several amendments to the Swedish Gambling Act to mitigate potentially harmful effects that gambling may entail. A notable addition has been the introduction of a gambling software operating permit during 2023. CMS Wistrand has previously published an article on this matter, which can be found here.

Currently, Sweden is considering further legislative amendments aimed at prohibiting the use of credit and other deferred payment methods by consumers for gambling services.

On 23 February 2024, the Ministry of Finance proposed a comprehensive ban on credit payments in gambling to curb gambling-induced indebtedness. The proposed amendment will prohibit license holders and gambling agents from accepting all forms of funds/payments from consumers for gambling that are financed via credit, e.g. with credit cards or other forms of loans.

The current credit ban

The Swedish Gambling Act already sets out a prohibition against the extension of credit for gambling purposes. Under the Swedish Gambling Act, a license holder (B2C) or a gambling agent cannot offer or provide credit for gambling. Nonetheless, exemptions may be granted to certain lotteries under specific conditions as outlined in Chapter 14, Section 8 of the Swedish Gambling Act.

Despite this prohibition, the current legal framework does not prevent consumers from utilizing credit cards or consumer loans to finance their gambling. The restriction solely applies to direct credit provisions by license holders and gambling agents. The consumer can still use credit to pay for its gambling by using credit cards or other forms of deferred payment.

Under the Swedish Gambling Act, a license holder has a duty of care. A license holder must ensure that social and health protection considerations are taken into account in the gambling operations in order to protect players from excessive gambling and help them reduce their gambling when this is called for. The duty of care involves counteracting the excessive gambling through continuous monitoring of gambling behaviour. A license holder must present in an action plan how this duty of care shall be fulfilled. (Chapter 14 Section 1 of the Swedish Gambling Act).

The Swedish Gambling Authority (the “SGA”) (Sw. Spelinspektionen) is tasked with the responsibility of monitoring the Swedish gambling market and issuing licenses to gambling operators. The SGA has previously issued a legal opinion in which the SGA has stated that it is the SGA’s opinion that the duty of care, set out in the Swedish Gambling Act, includes an obligation for the licence holder not to encourage or contribute the use of loans or credit by the consumer for gambling. In the same opinion, the SGA has stated that it considers that the use of information or links to service providers that provide deferred payment options in the form of credit or similar are not allowed on the license holders website. Moreover, facilitating payment for gambling through invoices or adding gambling costs to mobile phone bills is, according to the SGA, not allowed under the current legislation. While the SGA believes it has the authority to enforce these standards and order license holders to cease and desist from providing information or linking to companies that offers players deferred payment of gambling, it has yet to pursue supervisory actions to challenge the presence of such links of information. Consequently, the compatibility of these practices with the duty of care requirement in the Swedish Gambling Act has not been examined by a court.

Reason for the proposed amendments to the Swedish Gambling Act

The Swedish government acknowledges the risks associated with credit-based gambling for consumers. It considers the current credit ban in the Swedish Gambling Act as insufficient and that the regulation regarding the “duty of care” does not fully make up for the shortcomings of the current credit ban. Recognizing the flaws in the current legislation, the Swedish government, via the Department of Finance, is now advocating for legislative action. Consequently, the Swedish government is moving to introduce a new, more comprehensive regulation that aims to universally prohibit consumer gambling from being paid by credit. This comprehensive ban is intended to apply regardless of who provided the credit, when the credit was taken and the type of credit involved.

What is the new credit ban (Chapter 14 Section 8 Swedish Gambling Act)?

The proposed amendments regarding the credit ban is supposed to be implemented through changes in the Swedish Gambling Act. A new paragraph will be inserted in Chapter 14 Section 8 of the Swedish Gambling Act. This amendment will ban license holders and gambling agents from allowing or contributing to the payment of gambling via deferred payment methods or credit.

The definition of the term “credit” in the legislation will encompass loan agreements, overdraft facilities, deferred payments or similar arrangements, applying universally across all credit types.

Under the revised legislation, not only will offering or providing credit for gambling remain prohibited for license holders and gambling agents, but they will also be barred from accepting payments if it involves consumer credits for gambling purposes. This includes, for example, the use of credit cards, overdrafts or any other mechanisms that facilitate payment via loans or credit for gambling or effectuate a transfer of funds to a gambling account.

The licence holder or gambling agent must reject all payments that they know to be credit-financed. If it is possible for the licence holder or gambling agent to identify, without special investigative measures, that the payment is made by using credit, the gambling operator cannot accept the payment. That may be the case if the consumer is using a credit card or if the licence holder in some way knows that the consumer is using credit to finance their gambling, e.g. due to previous contacts with the gambler as part of the exercise of the duty of care.  

A key aspect whether or not a payment is covered by the new credit ban will be, as a starting point, whether or not it is possible for the recipient to notice that the payment is credit-based. As an example, it is possible to detect that a credit card is being used for a payment. This can be seen both visually on the physical card, in the case of purchases in physical stores, and electronically, when making purchases in applications or on websites. As indicated above, the prohibition will be applicable also where the technical detection of credit financing is not possible, as long as the license holder or gambling agent for some reason is aware that the consumer is financing their gambling by using borrowed funds.

Additionally, all forms of promoting credit-based payment methods for gambling will be prohibited. For example, a licence holder will be prohibited from facilitating the offer or provision of credits or loans by other operators for gambling payments. This also means that the licence holders and gambling agents will be prohibited from using account credits for payments through e-wallets.

The SGA will be granted greater supervisory powers and authority to issue regulations pertaining to the license holders’ action plans

Amendments will also be introduced in the Swedish Gambling Ordinance to allow for the SGA to issue regulations concerning the contents of the action plans that the license holders are mandated to present, as part of their duty of care obligations under Chapter 14, Section 1 of the Swedish Gambling Act.

This will strengthen the SGA’s oversight capabilities over the license holders, while simultaneously enabling the SGA to more stringent standards on the license holders.

Who will be affected by the new credit ban?

The new credit ban will exclusively target license holders and gambling agents.

The government deliberated extending the new legislation on the credit ban to include credit card issuers and payment service providers but ultimately decided against these measures.

Implementation timeline of the credit ban:

Gambling Ordinance Amendments: Proposed to enter into force on 1 September 2024, these amendments can be enacted by the Swedish Government without requiring a resolution from the Swedish parliament. Given this procedural advantage, it is likely that these amendments will be implemented according to the time plan.

The Swedish Gambling Act Amendments: The amendments regarding the new credit ban is proposed to enter into force on 1 April 2025. The changes are subject to a resolution from the Swedish Parliament. The Swedish Government has already initiated the process by remitting a memorandum with its proposed changes for comments. Cut-off date for comments is 23 May 2024. As of now, the exact timing for the Parliament's vote on these changes remains uncertain, but we anticipate that it will occur in the autumn or winter of 2024.

We continue to closely monitor the legislative process and will provide updates on significant developments.