A new permit requirement for gambling software introduced into Swedish gambling law
As of 1 July 2023, operators who manufacture, supply, install and/or adapt gambling software used when providing online betting and/or commercial gambling to the Swedish market will need a Swedish permit. Applications for such permits will be accepted from 1 March 2023.
The Swedish Gambling Act (SFS 2018:1138) entered into force in January 2019. Under the act a gambling operator (i.e. an entity conducting gambling operation) that directs its games toward the Swedish market is required to have a Swedish licence. The Swedish Gambling Authority (the “SGA”) (Sw. Spelinspektionen) is tasked with the responsibility of monitoring the Swedish gaming and gambling market and issuing permits to gambling operators.
In November 2022, the Swedish parliament adopted several legislative changes to the Swedish Gambling Act and several new measures are to be introduced as part of a legislative package. One significant change is the introduction of a permit requirement for manufacturing, supplying, installing and/or adapting gambling software (i.e. a gambling software operating permit). The main purpose of the permit requirement is to protect consumers from unlicensed gambling. The new requirement enters into force on 1 July 2023.
Who will need a permit?
The permit requirement will apply to operators who manufacture, supply, install and/or adapt gambling software used when providing online gambling in accordance with Chapters 7 (commercial online gambling) and 8 (betting) of the Swedish Gambling Act.
The permit requirement will cover several parts of the supply chain of gambling software. Provided that an entity handles gambling software in such a manner that qualifies it as “manufacturing”, “installing”, “adapting” and/or “supplying”, it will be subject to the permit requirement, even if the involvement could be considered as minor, or the entity is a subsidiary to a licence holder.
If one or several companies in a group are subject to the permit requirement, each company will need to possess its own separate permit. The SGA is investigating whether an “umbrella” permit should be introduced to be used in these situations.
What is “gambling software” under the Swedish Gambling Act?
No definition of the term “gambling software” will be introduced into the Swedish Gambling Act. The definition will (mainly) be established in practice and through the guidance of the SGA, guided by the preparatory works of the new regulation.
According to the preparatory works, “gambling software” could be defined as such software that is designed to be used in gambling operations. Software that affects the structure and the content of the game will likely be subject to the permit requirement. This definition may include, but is not limited to, software used in random number generators, computer-simulated gambling machines (i.e. slots), streaming-solutions or virtual event pages, etc. for online based live casino, platforms for online poker and sportsbooks for betting, virtual event control, bet capture/matching, liquidity programs, gambling records (showing detailed results of a game or that serves as the basis for bonus calculations), programs that accept and register betting transactions, or programs that determine results or credit winnings to customers’ accounts.
Software that is developed for supplementing activities is excluded from the definition. Examples of such software may be software used for analysis of results (performance analysis), marketing or affiliation activities, customer processing, administration, or parts of the operators general IT-structure or business applications.
What will the requirements be for a permit?
A permit will only be granted to those who are assessed to have the knowledge, experience and organisation required to run the planned operation, and presumably will run the operation in accordance with the law and other regulations.
Those who are granted a permit will be prohibited from manufacturing, adapting and/or installing gambling software on behalf of, or supplying gambling software to, gambling operators (B2C) operating without a necessary Swedish licence targeting the Swedish market.
It is only the applicant who needs to fulfil the requirements for a permit, i.e. the company or the person who applies for a permit, and not the management or owners, etc. thereof.
A licence holder who is a resident or established in a country outside of the European Economic Area (EEA) must have a physical representative resident in Sweden.
How will the new permit affect the gambling operators?
Gambling operators that already hold a Swedish licence for gambling operations will not be exempt from the requirement to possess a permit to manufacture, supply, install and/or adapt gambling software. Even if a licence holder only performs such activities on behalf of itself, it will be required to hold a gambling software operating permit.
Under the Swedish Gambling Act licence holders have full responsibility for ensuring that the games and betting, etc. offered by the licence holder meet the requirements in the Swedish legislation. It is the licence holder that must ensure that it has business partners, sub-contractors, etc. that meet the requirements in the Swedish legislation. The introduction of the gambling software operating permit will not change this responsibility. This implies that gambling operators holding a licence pursuant to Chapters 7 (commercial online gambling) and 8 (betting) of the Swedish Gambling Act will be required to only use gambling software that has been manufactured, supplied, installed and/or adapted by a party that holds the necessary licence. It will be the responsibility of the gambling operators to make sure that they have systems in place, before 1 July 2023, to ensure and supervise that all entities in their supply chain of gambling software hold the necessary permits.
The application process and the permit
The SGA will publish an application form and accept applications starting from 1 March 2023. The cost of application for the permit is anticipated to be SEK 120,000. The SGA has also announced that there will be an annual supervisory fee, which has not yet been determined.
The application and its appendices are to be submitted in Swedish.
A permit is granted for a specific time period and could be valid for up to five (5) years. The permit is comprehensive, and it is not possible to apply for a permit for certain types of activities or gambling software. This means that there is no need to apply for an updated permit if a permit holder’s activities or gambling software changes.
The SGA will publish a list of the entities that have been granted a permit on its website.
What happens if I ignore the requirement to obtain a permit?
Firstly, if a licence holder engages an entity that does not hold the necessary permit the licence holder will be in violation of its licence requirements. Thus, if you do not have a necessary permit, it will be hard to provide your services to a Swedish licence holder.
Secondly, non-compliance with the Swedish Gambling Act may be subject to intervention by Swedish authorities, mainly the SGA. The provision of services without a necessary permit could, among other things, be seen as promotion of participation in illegal gambling, which is penalised under the Swedish Gambling Act. The penalties vary from fines up to imprisonment for six years in cases of gross violations of the Act. Recent changes to the Swedish Gambling Act will also increase the SGA’s powers to take administrative actions in order to clamp down on promotion of participation in illegal gambling.
The scope of the permit requirement is very broad and may cover several legal entities in a supply chain. However, according to the SGA, the prerequisites for obtaining a permit are not too burdensome.
All entities that manufacture, supply, install and/or adapt gambling software should investigate whether they are subject to the new permit requirement and, if so, submit an application to the SGA well in advance of 1 July 2023 in order to receive necessary permits before 1 July 2023.
As regards gambling operators, they should also carry out the above-mentioned investigation and, additionally, well in advance of 1 July 2023, make certain that they have systems in place to supervise and monitor that their business partners (i.e. manufacturers, suppliers, etc. of gambling software) hold the necessary gambling software operating permits.
If you have any questions regarding the above, or would like assistance in filing an application, please contact Christel Rockström, firstname.lastname@example.org, or Oliver Bengtsar Sellner, email@example.com, for further information or a price quote for legal assistance.