Shadow Gambling Claimed To Threaten Non-Profit Revenues

January 1st, 2019 saw Sweden’s new Gambling Act come into force. The Act allowed for international operators to legally offering casino and betting services in the market pursuant to being approved for a licence.

However, the one gambling product that was set exempted from the licensing process was the lottery. The reason for this is that this niche service would be reserved for non-profit and state-owned lotteries.

Shadow Play Threatens Community Programs

Svenska Spel CEO Patrik Hofbauer made a statement highlighting their concerns regarding a phenomenon known as shadow play which is threatening the financial viability of the Swedish lottery market.

“Now that principle is being threatened by the phenomenon of shadow play: betting on the outcome of another gaming company's lottery. The shadow game players do not carry their own draws, as they do not have a license for lottery games. Instead, they utilize openings in the betting law and use their wager license.”

In practice, these shadow play companies offer fixed odds bets on the outcomes of lottery draws such as the Powerball and EuroMillions. In 2020-2021 it is expected that global shadow lottery bets will exceed the €2 billion mark. Revenue which should have been channelled to the legal lottery licence holders.

Hofbauer pointed out Swedish charity organisation could be the biggest losers in this battle with shadow betting companies because the Swedish children's and youth sports, Bris (Children's Rights in Society), the Children's Cancer Foundation and Sweden's City Missions all draw the majority of their funding from lottery revenues.

 Customer Impact of Unregulated Lottery Betting

Far from merely decrying the loss of revenue generation Hofbauer’s reports goes on to list some of the concerning underhanded actions taken by the shadow bet providers they reviewed:

• Jackpot wins are listed in the terms and condition as being paid out monthly over a period of 30 years
• Players can request this be waived in favour of a single payout, however a 40% of total win fee is charged to facilitate such a request
• At the time of drawing two of the largest advertised jackpots were reduced by 38%. The reason given was to put “the player in a similar financial situation as if it had played on the underlying lottery”

In addition to the obvious bait and switch tactic of presenting larger than reality jackpots and the practice of stealing winnings with ridiculous processing fees these brands also cause a lot of confusion for customers as these companies often pose as the real thing.