Pioneering Swedish law widens scope of illegal gambling
In Sweden, a new gambling law proposal presented to the government this week would scrap the existing “direction criterion” and replace it with a new test: if people in Sweden can take part in a game, then Swedish law applies.
Until now, the law on illegal gambling has only applied when a website was deemed to be “directed” at the Swedish market, for instance, by using the Swedish language or offering play in kronor. Under the new rules, foreign operators would no longer be able to claim they fall outside Swedish jurisdiction simply by presenting their sites in English or avoiding Swedish currency.
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 purpose of the new regulation is to shut out unlicensed gambling in a more effective way than is possible today,” the Ministry of Finance memorandum said.
Camilla Rosenberg, director general of the Swedish Gambling Authority (Spelinspektionen), welcomed the idea: “We see positively on the investigator’s proposal, which strengthens our ability to work more effectively against unlicensed gambling”.
New presumption rule targets payment providers
Alongside the shift to a participation criterion, lawmakers want to introduce a presumption rule that directly affects payment providers.
The memorandum explains: “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”.
That wording places far heavier obligations on banks, fintech companies, and other intermediaries. They would have to treat Swedish residents as Swedish gamblers by default, cutting off transactions to unlicensed operators unless clear proof shows otherwise.
Officials say the aim is to “stop payment flows between Swedish consumers and unlicensed gambling”. But the burden of proof now lies with intermediaries, who must actively establish that a transaction is foreign if they wish to process it.
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.”
VPN usage and rebutting the presumption
The proposed law also raises questions about how individuals might attempt to bypass restrictions, such as through VPN use. Luís Portela De Carvalho, partner at Lektou law firm, stresses that this is unlikely to hold up against regulators: “VPN use alone would likely be insufficient to rebut the presumption. Since the legislation focuses on residency status rather than technical location, regulators would require stronger evidence such as travel documentation, foreign accommodation receipts, employment records abroad, or foreign transaction records. Technical circumvention through VPNs would likely not meet the ‘clearly shown otherwise’ standard.”
Is Sweden going first?
International comparisons in the government’s memorandum show that other European countries also try to curb unlicensed gambling, often through payment blocking.
Norway requires payment providers to stop transactions if they know they are linked to unlicensed gambling, and regulators can order banks to reject payments. Denmark’s system relies on its regulator informing payment providers of accounts that must be blocked. In the Czech Republic, authorities maintain a blacklist of websites and related accounts, and providers are banned from processing those payments. In the UK, enforcement is largely based on cooperation, with operators expected to block British users and regulators pressuring intermediaries through “cease and desist” notices.
None of these systems include a statutory presumption based on residency. That makes Sweden’s plan distinctive, and potentially pioneering. As de Carvalho points out: “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.”
Tension with EU rules
The government acknowledges that the reform could attract scrutiny under European Union law. Gambling is considered a service under EU treaties, meaning restrictions may interfere with the free movement of services.
The memorandum notes that such restrictions may face legal challenge but can also be justified, and emphasises that their compatibility with EU law has been considered: “The proposed change to the scope of the Gambling Act and the associated changes to criminal liability are compatible with EU law,” the memorandum reads. “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.”
That balancing act, however, could become contentious. For example, if payment providers are forced to assume Swedish residency even for cross-border customers, foreign operators might argue that Sweden is imposing restrictions that go beyond what is necessary.
Still, questions remain about proportionality. 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.”
What happens next
The changes are due to come into force on 1 January 2027, if parliament approves. They would also be accompanied by adjusted criminal liability rules for illegal gambling and for those who promote unlicensed play.
In the meantime, the Swedish Trade Association for Online Gambling has already welcomed the proposed changes: “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 proposals arrive amid growing concern over the size of Sweden’s unlicensed market. A government report earlier this year 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”.
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