The Regulatory Approach Toward Internet Gambling in Finland

In the following article, Laiho offers a description of the principles for and provisions on operating games, as well as the regulation of Internet gambling in general.

Regulating Gambling on the Internet in General

Legislative problems relating to the use of the Internet are due to the data transfer capacity of the Net, which makes it possible to sell games and participate in gambling across state borders or different jurisdictions. In practice, it is not possible for a single state to prevent foreign supply of games to its territory via the Internet. There are no effective technical ways of restricting or preventing foreign supply of games. Moreover, some problems, for instance, related to copyright, freedom of expression and consumer protection are difficult to tackle. In addition, states are not able to effectively monitor the legality, appropriateness and quality of gambling operations. These and many other problems relating to the matter cannot be solved at national level. Even at international level, it will be very difficult to find a solution to these problems.

Some European countries gave, however, within the framework of GREF (Gaming Regulators European Forum) a Gaming Regulators European Forum Position Statement on Gambling on the Internet in Helsinki on 15 May 1998. According to this statement, each state should be able to regulate gambling, even gambling on the Internet, at the national level. Cross-border gambling should in principle be allowed only if it is based on mutual agreements between states or on the legislation of the receiving state.

It would seem that the European Commission is also in favour of the guidelines stated above. This can be deduced from the fact that the proposal for a directive to establish a coherent legal framework for the development of electronic commerce within the Single Market, 98/025 (COD) 18.11.1998, which is being prepared by the Commission, would not apply to money gaming at all. The factual content of the directive was summed up at the latter part of the Finnish presidency in December 1999.

The European court of justice has recently (21.10.1999) given a judgement in the case of Questore di Verona vs. Diego Zenatti (C-67/98). The court states that member states may restrict the distribution of betting services for socio-political reasons in order to restrict the moral and financial injury that gambling causes. In short, the court actually notes that the Internet does not entitle anyone to abandon the principles for gambling defined in connection with the Schindler case (C-275/92). In the Schindler case the court declared that the particular factors (high risk of crime or fraud and damaging individual and social consequences related to gaming misbehaviour) justify national authorities having a sufficient degree of latitude to determine what is required to protect the players and, more generally, in the light of the specific social and cultural features of each member state, to maintain order in society as regards the manner in which lotteries are operated, the size of stakes, and the allocation of profits they yield. In those circumstances, it is for them to assess not only whether it is necessary to restrict the activities of lotteries, but also whether they should be prohibited, provided that those restrictions are not discriminatory.

Regulating Gambling on the Internet in Finland

In Finland, only two associations with an exclusive right to operate money games may operate these games on the Internet. The two associations are: National Lottery of Finland or Oy Veikkaus Ab, which is engaged in money lottery, wager and betting business, and the Horse Betting Association or Suomen Hippos ry, which runs on- and off-track horse betting. The right to operate gambling is based on a licence, which the two associations have been issued separately by the Government.

The self-governing territory of Åland, which is part of Finland, has a regional gambling association, Penningautomatföreningen (PAF). PAF has started to operate the same type of games as Veikkaus does. This may cause some problems in regard to the conception of prohibition of discrimination laid down in Article 12 (earlier Article 6) of the treaty of Rome, because in fact there will be two exclusive right operators on the same market.

Oy Veikkaus Ab is a limited liability company totally owned by the State. Suomen Hippos ry is a private-law association, which, however, has some statutory duties related to horse management.

The licences mentioned above do not include any detailed provisions on operating games on the Internet. The detailed provisions are included in the money gaming associations' own rules and regulations. As regards Suomen Hippos ry, the Ministry of the Interior has not confirmed its rules yet.

As of 1 February 1996, Oy Veikkaus Ab has operated games on the Internet. Suomen Hippos ry has not started operating this kind of gambling yet, but it may also start the operations during the ongoing year.

You can view Oy Veikkaus Ab's games on the company's Web site under the following address: www.veikkaus.fi. The site with the games is only available in Finnish. (This is a conscious choice. When gambling services are provided only in Finnish, this restricts the factual access to these games outside Finland's borders.)

Provisions on Gambling on the Internet

Almost two thirds of the Finnish population (5.1 million total) have access to Internet and almost 2 million people visit there regularly. So you can realise that Finnish people really are familiar with Net, but as I mentioned earlier, we do not have any special legislation about Internet in general nor about lotteries.

On the Internet, players have access to the same games as are available in traditional ways. Thus, the Internet is not an independent form of gambling, but a participation channel among other channels. The essential thing is that the use of the Internet as a channel for operating lotteries cannot give anyone the right to operate lotteries or games in forms that are contrary to the national legislation. Neither is the Internet a legal justification for providing games across borders, from Finland to foreign countries or from foreign countries to Finland.

The essential provisions on gambling on the Internet are as follows:

1. providing money games on the Internet across state borders is, in principle, forbidden;
2. only a person who has registered as a player may participate in gambling on the Internet;
3. only a person who has a Finnish personal identity code and an account with a Finnish financial institution may register as a player. (Under certain conditions, persons who are not Finnish nationals may also be issued personal identity codes.);
4. the rules of the game state that a person who wants to register as a player has to give his or her consent for the gambling association to check the player's personal data;
5. playing on credit is not permitted;
6. once the player has registered, he or she is provided with a user name and a personal password;
7. the player may change his or her password whenever he or she wishes;
8. once the player has registered, the gambling association will open a playing account;
9. after this, the gambling association will send a bank transfer form with a reference number to the player. The player can then transfer a desired sum of money into his or her playing account. The account transfer can be made in an ordinary way at a bank, on a bill payment ATM, home computer or over the phone;
10. the player may deposit a maximum of FIM 30,000 (5,000 euros or $4,2240 into the playing account;
11. the gambling association will charge the playing account according to the stakes the player has chosen;
12. the gambling association automatically transfers the possible profit into the playing account;
13. if the balance in the playing account exceeds FIM 30,000, after the profit has been transferred into the account, the gambling association will automatically transfer the exceeding amount into the player's account with the financial institution;
14. the player may, whenever he or she wishes, ask the gambling association to transfer funds from the playing account into his bank account or to close his or her playing account.

At present, Oy Veikkaus Ab operates on the Internet several games where the winning numbers are drawn (for instance, Lotto), and wager and betting games as well. Players may also participate in the games over the phone. In principle, there are no obstacles to operating games over mobile phones by means of the WAP (Wireless Application Protocol). At the end of September 2000, over 80,000 registered players played regularly on the Internet.

Foreign Lotteries and Finnish Law

According to the section 6 of the Lottery Act, anyone who without a licence conducts lotteries for which an official license is required, sells or places on sale lots for lotteries that are conducted without a licence or abroad or in some other way promotes such lotteries shall be liable to a fine or up to six months in prison for a lottery offence. So, in short, I can tell you that Australian-run Internet gambling sites aimed to the Finnish market deliberately or only by accepting the possibility that it can be accessed from Finland, are very likely breaching the Lottery Act. And this principle exists totally in spite of the fact that relevant authorities possibly have no actual means to prevent or to supervise the gaming on the Internet, I am not able to say anything definite because we do not have any actual cases. I think that the situation is the same if we look at any other European lottery legislation. Anyway I can say that many lottery law experts in Europe share my opinion.

New Lotteries Legislation Under Preparation

New lottery legislation is under preparation in Finland. It would allow gambling on the Internet in future, too, with certain restrictions. The Internet would not be mentioned separately in the law as a channel for operating and distributing games. Neither would the law include technical provisions on the Internet or on games to be operated on the Internet. The provisions described above in section 3 would be included in statutes under law-level.

The basic principle for operating games and lotteries on the Internet would be that this business should always be run in accordance with the national legislation. This would be the best way of securing participants' legal protection, preventing irregularities and crime, and decreasing social injury caused by gambling. The same rules of game should apply to operating games on the Internet as to operating games via other channels. (These principles can be found in the present law as well, although they are not written out in the articles).

A central principle of the Lotteries Act would be a prohibition to play on credit. This prohibition would apply to all games and all means of operating games , including games on the Internet.

The legislative proposal includes a special provision on a prohibition on arranging lotteries. According to this provision, it would not be permitted to sell or provide lottery tickets to lotteries arranged abroad or to promote such lotteries by publishing or distributing advertising material, or in any other way. The provision would also apply to games operated on the Internet. Foreign games on the Internet should not be advertised in Finnish newspapers or other national media. Finnish advertisements on the Internet (advertising on Finnish Web sites) should not contain a system linking a player to foreign game operators' Web sites.

It is also proposed that a provision should be included in the Act to prevent operators from selling or distributing lottery tickets to foreign countries and from promoting such activities in a way described above, unless it is permitted according to the legislation of the State or area to which games are sold or provided.

Some Facts About GREF

GREF is a forum open to gaming regulators of all gaming regulatory organisations in all European states. It has two main objects: a) to provide a forum in which European gaming regulators can meet, exchange views and information and discuss policy on gaming matters; and b) on special occasions and with agreement of members represent the different views of European gaming regulators and also provide a central point of contact for enquiries directed at them form authorities or related organisations in Europe or elsewhere.

At the moment I am in charge as a chairman. Our administrator is Mr. Eric van Vondelen whose office is in the Netherlands. Mr. van Vondelen's address is Netherlands Gaming Control Board, 86 Lange Voorhout, 2514 EJ The Hague, The Netherlands. Phone *31(0) 70 361 44 22, Fax *31(0) 70 361 43 56 and e-mail college@wxs.nl.