Key Moments:
- The Swedish government has received a proposal to replace the “direction criterion” with a “participation criterion” for determining illegal gambling.
- A new statutory presumption would require payment intermediaries to block transactions for unlicensed gambling unless proof exists of a participant’s activity from abroad.
- The proposed reforms could take effect on 1 January 2027, pending parliamentary approval.
Major Shift in Legal Criteria for Gambling
The Swedish government has received a proposal for a new gambling law eliminating the “direction criterion.” Currently, gambling is illegal only if services target the Swedish market, for example by using the local language or currency. The new model would extend regulation to any gambling accessible to Swedish residents, even if operators do not specifically target them.
The “participation criterion” would close the loophole that let unlicensed platforms serve Swedish players by avoiding local features. As Luís Portela de Carvalho, partner at Lektou law firm, explained to SiGMA News: “The shift from ‘directional criterion’ to ‘participant criterion’ represents a significant tightening of Sweden’s regulatory framework. This change would criminalise virtually all unlicensed gambling involving Swedish residents, regardless of whether operators actively target Sweden. It closes the loophole where unlicensed operators could accept Swedish players simply by avoiding Swedish-specific features.”
The Ministry of Finance emphasized, “The purpose of the new regulation is to shut out unlicensed gambling in a more effective way than is possible today.” Camilla Rosenberg, director general of the Swedish Gambling Authority (Spelinspektionen), welcomed the concept: “We see positively on the investigator’s proposal, which strengthens our ability to work more effectively against unlicensed gambling”.
Payment Providers Face Increased Responsibility
The legislative package proposes a presumption rule for payment intermediaries. According to the government’s memorandum, “The one who mediates payments to or from a gambling operation that provides unlicensed gambling shall assume that persons participating in the game do so from Sweden, if the person is resident or habitually stays in Sweden. Only if it appears that the person participates in the game from abroad can the presumption be broken”.
Banks, fintechs, and other intermediaries would need to assume Swedish residents are gambling from Sweden. They must block payments by default unless they can prove the transaction is international. De Carvalho warns that this places a significant compliance burden on financial institutions: “Payment intermediaries must now assume anyone resident in Sweden is participating from Sweden unless proven otherwise. This reverses the burden of proof and requires payment providers to implement robust verification systems. They face potential liability for facilitating unlicensed gambling even when operators don’t target Swedish consumers.”
Technical Workarounds and Regulatory Standards
Questions have surfaced regarding the use of VPNs and other technical methods to bypass restrictions. Luís Portela De Carvalho, partner at Lektou law firm, argues VPNs will not persuade Swedish regulators. He said the law focuses on residency, not technical location. Regulators would demand stronger proof such as travel records, foreign accommodation, or overseas employment. VPN use alone will not meet the “clearly shown otherwise” standard.
Comparison with Other European Frameworks
A review of regulations in other European countries reveals that payment blocking is a common tool for combating unlicensed gambling. Norway, Denmark, the Czech Republic, and the UK utilize various mechanisms for limiting payments to unlicensed operators. However, Sweden’s proposed statutory presumption based on residency sets it apart, as no other system currently applies this specific principle. As de Carvalho observes: “Sweden appears to be pioneering this comprehensive presumption rule for payment providers. While other jurisdictions use geo-blocking and IP verification, placing presumptive liability specifically on payment intermediaries at this scale is relatively unprecedented in European gambling regulation.”
| Country | Payment Blocking Feature | Residency Presumption |
|---|---|---|
| Norway | Providers must block payments linked to unlicensed gambling; regulatory orders for banks | No |
| Denmark | Regulator instructs providers to block specific accounts | No |
| Czech Republic | Authorities maintain a blacklist of websites/accounts for payment blocks | No |
| UK | Enforcement based on cooperation; “cease and desist” notices for intermediaries | No |
| Sweden (proposed) | Mandatory presumption of residency for payment blocking unless proven otherwise | Yes |
EU Legal Considerations and Next Steps
The government memorandum acknowledges potential scrutiny under European Union law, given that gambling is classified as a service under EU treaties. The document notes, “The proposed change to the scope of the Gambling Act and the associated changes to criminal liability are compatible with EU law. Restrictions of the free movement must be proportionate in relation to their aim, that is, they must not go further than necessary to achieve that aim.”
The question of proportionality has been raised, especially if payment intermediaries are obliged to assume Swedish residency even for cross-border customers. According to de Carvalho, “These measures raise concerns under Article 49 of the EU Treaty regarding free movement of services. The restrictions could impact legitimate cross-border payment services and operators compliant with their home country regulations. Sweden will likely defend these on consumer protection grounds, but the proportionality test will be critical. There’s a risk of EU legal challenges if the measures are seen as disproportionate barriers to trade.”
Implementation Timeline and Industry Reaction
If passed, these legal changes would take effect on 1 January 2027 and would also update the criminal liability rules for illegal gambling and its promotion. The Swedish Trade Association for Online Gambling has voiced support for the reforms: “This is an important contribution to the possibility of strengthening the Swedish gambling license market, which is now proposed to criminalise almost all unlicensed gambling in Sweden. I foresee the government shortly submitting a bill to the Riksdag in accordance with the investigation’s proposal. Good job Mr. Investigator and with the hope of equally good job from the government and the Riksdag to now proceed with legislation on the matter. Unlicensed gambling in Sweden must be smoked out,” commented BOS Secretary General Gustaf Hoffstedt.
The legislative initiative comes amid growing concerns over the scale of Sweden’s unlicensed market. A recent government report estimated that “roughly two-thirds of Swedes’ gambling on the unlicensed market takes place on websites that are not directed at Sweden in the meaning of the law.”
- Author
Daniel Williams
